We're kicking off our fresh 2019 content with a question: Why is life insurance one of the last industries to be disrupted, and why hasn't it happened earlier?
We asked prominent members of the life insurance industry weight in.
The two big factors that are generally noted are that the insurance industry is highly regulated and capital intensive. I think another big reason is that insurance is typically a transactional product and not something that people are excited about buying or using. Making it easier to take vacations, access entertainment, or shop has a bit more appeal to the average person than insurance!
- Pat Renzi, Principal of Life Technology Solutions, Milliman
I don’t think this statement is true. The types of covers offered, the ways premiums are charged, the distribution channels that are available, the way medical information is obtained, the digitization of work-flows, the regulatory requirements – all of these things are unrecognizable from what was considered normal less than two decades ago. What hasn’t changed is the permanence of the products offered meaning once sold, the client’s policy needs to be administered in accordance with their policy terms and conditions for as long as they keep the policy. As soon as a new policy is issued, it becomes an existing policy in respect of the system required to administer it. This means life insurers have very large, sometimes very old books of existing policies which are just as important for them to focus on as new sales. The systems required to administer these policies are complex, and extremely expensive to replace or upgrade. This means the disruption has not been as technology driven as in other industries – rather it has been focused on delivering more specific, tailored, modular and effective products as opposed to apps.
- Naomi Ballantyne, Chief Executive, Partner's Life
Life insurance isn't sexy. It just isn't. It's a complex and confusing product, the sales conversation is challenging, companies need access to large amounts of capital, the marketplace is competitive, and it takes a lot of work and a long time to grow an at-scale business. While each one of those facets may be appealing to the disruptors of the world (whether Amazon or Private Equity), their combination leads many to take pause. That said, I do think the floodgates have started to open in the past couple years, and even more disruption is likely on its way. At Haven Life, the unique complexities of disrupting the life insurance industry is what excites us. If it were easy, we wouldn't be doing it :)
It probably just hasn't been particularly low hanging fruit. Complexity (lengthy value chains, complex and varied legislation, capital requirements, customer acquisition and retention challenges, etc), downside risk, and margins that are relatively low compared with technology ventures combine to form substantial barriers compared with industries that were disrupted quickly.
- Conor Sligo, Consultant, Sligo Consulting
Keep an eye out for the next installment, where we ask another burning question to our brilliant panel. Feel free to get in touch if you have an alternate view point, if you have a question you'd like included, or you're interested in participating in the next iteration of The Question.