For the Life Insurance Industry the Future May be Yesterday

It’s a Legitimate Question: How Long Will the Insurance Industry Remain in the Technological Dark Ages?

There is no greater truth than this: Time does not stand still. The future is only the future till it is the present and then it quickly becomes the past. It’s not possible to live in the present, because it has already become the past. And the only way to remain vital in the present is to be prepared for the future.

It may not be possible to hold off the future, but by building on our past experiences, opening our minds to what can be and taking actions in the present, it is possible to prepare for and even influence the shape of the future.

Think about it. The institutions and individuals who achieve the most success and respect in the present are those who, in the past,were considered to be “ahead of the times.” The curse of failure and distain is reserved for those who are now looked upon as “behind the times.” So, the question of the day is: When was the last time you heard the life insurance industry described as being, “ahead of the times”?

The real shame in this situation is that the onrushing future offers the life insurance industry a unique opportunity not just to survive and compete in financial services, but to actually dominate. However, this industry has an embedded proclivity to rest on its past success as a way to prepare for a future, a future that is quickly passing it by. There are a number of important areas – product and distribution – that have been caught in a 1950s time warp. But the best example of the industry’s unwillingness to be prepared for the future is the industry’s lagging acceptance to use technology to improve its business model.

Back to the Future?

There is no argument that in comparison to other sectors of financial services – banks and investment firms – the insurance industry, especially life companies, are in the dark ages when it comes to using technology for processing, marketing and customer services. This situation not only hampers the industry’s ability to provide competitive customer service; it impedes productivity and increases costs (both for the company and the consumer) to the point of making the industry non-competitive. The cruel incongruity here is that 50 years ago (when that pix at right was taken) the life insurance industry was on the forefront of technology by being the first major industry to incorporate computer technology into its business systems and as a result, the industry was considered “ahead of the times.” The use of technology allowed the insurance industry to significantly improve productivity, reduce costs and launched a period of exceptional growth and profitability. That was yesterday.

Today, the life insurance industry is clearly behind the times in the use of technology. And, we are not talking about some esoteric, futuristic concept of technology, but technology that is proven and readily available. In fact, it is technology being used effectively by competitors of the life insurance industry to dramatically outstrip the insurance industry in ease of doing business, productivity and lower costs; resulting in more rapid growth and profitability.

Take banks for example. Never considered the paragons of innovation and creativity, banks have embraced technology in a way that has allowed them to change their business model from the highly expensive and inefficient system of “brick and mortar” branches to a virtual online business system. This has allowed banks to significantly reduce costs, improve productivity and actually enhance customer service. Virtually every transaction a customer needs to complete with a bank can be accomplished either online or via the ubiquitous ATM network. We live in an age when you can deposit a check into your bank account with a snapshot by your iPhone. And, even though customers perform virtually all the “processing” themselves (doing the bank’s job while reducing bank costs), consumer surveys now rank bank customer service among the highest. (If you ever need proof that the insurance companies lag behind the times in the use of technology, just take note that they are well behind the banks, which should be an insult in and of itself.)

Remember, not too long ago, when stockbroker firms had offices on virtually every corner? Business could only be done with a broker and highly paper-intensive transactions took seven days to complete. Today, technology not only allows customers to control their investments, it provides them with instant access to the crucial trading information they need to make intelligent decisions.  All transactions can be completed online with an ever-expanding array of electronic devices from anywhere in the world and confirmed in milliseconds. All accomplished with reduced costs for both the investment firm and the consumers.

Another example of the power of technology is the airline industry. Do you remember, not too many years ago, the time consuming and frustrating experience of waiting in a long, slow line to check-in and receive a boarding pass? This process was inefficient and costly for the airline while fraying on the nerves of the traveler. Today, thanks to technology, the airline ticket counter is virtually an anachronism. Need flight info? Just check your smartphone. There’s an app for that (and hundreds of thousands of other uses).

The modern consumer, raised on video games, computers and the Internet, has become conditioned, trained and indeed has reached the point of demanding that interaction with the companies they do business with be completed on an almost instantaneous, interactive online basis.

And yet, despite the availability of proven technology that increases productivity, reduces costs and enhances customer satisfaction, the life insurance industry remains mired in the “legacy” of outdated processing. The life insurance industry processes and services it policies and customer service in much the same manner it did 50 years ago. It’s as if the industry was still operating with a roomful of IBM 360s.

A Case in Point

A microcosm of this hidebound mentality comes from a friend of mine who recently purchased a health-care supplement policy from UnitedHealth Care – one of the largest carriers in the industry. After completing the time-consuming and arduous paperwork necessary to have the policy issued, the company sent him a “coupon book” to make his premium payments. The company till this day does not have the technology that will allow him to pay his premium online; requiring that he remember the due date and send the premium in by check. How can any company be prepared for the future with systems such as this?

The life insurance industry could take advantage of available technology that uses the Internet as its mainframe: desktops, laptops, netbooks, tablets, smartphones, online interactive software and Social Networking (if Facebook and Twitter can be used to drive revolution, you might think they could be used to communicate with customers and agents) to create a “virtual” insurance company.

The Results Could be Stunning

Insurance companies could use existing technology to recruit, contract, educate, train and supervise agents. The technology allows for most applications for coverage to be completed and submitted instantaneously online. They could then be processed, reviewed and underwritten automatically by the computer. Once approved, policies could be issued and digitally downloaded to the customer. With iPads or laptops the agents could virtually carry all the resources of the company where ever they go, using the technology to prospect for customers, analyze options available, assist in the sales process (showing sales videos produced and approved by the company) complete the application process and once the policy is issued maintain contact with the customer. Much as the customer now takes the lead in reviewing and managing their accounts with banks and investment firms online 24/7, an investment in technology by the insurance company would allow customers to could keep current with their insurance coverage, policy values, make incidental changes and pay premiums.

While all parties to the insurance transaction would benefit from the implementation of existing technology, it’s the company that would benefit the most. By creating a “virtual company” almost all the paper, manual processing and snail-mail would then be eliminated; productivity would expand by quantum levels and costs drastically reduced (allowing companies to increase profits and offer better products) and, maybe most important of all the credibility with the customer would be significantly improved.

Despite these obvious and proven benefits, just who among us is willing to volunteer to hold our breath till the insurance industry implements existing technology that allows it to compete in the present; God forbid try to get ahead of the times?

And the Moral of the Story …

From a business standpoint, the real value of technology is that it encourages and empowers the customers to do for themselves what the company did in the past, and feel good about it. The result for the company is increased productivity, reduced costs, improved customer satisfaction and higher profits.

For business, technology is the most effective tool available to prepare for the future. When an entire industry rejects this simple proposition – especially when it is right in front of them – is it any wonder that some might be bearish on its future?

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