2018 Insurance Round Table Discussion: Life Insurance Reinvented (Part 1)
AFRM Claims Advocacy (ACA) was invited to participate in an industry round table discussion, with the theme of Life Insurance Reinvented.
The panel included:
Ryan Watson: CEO, Tribeca Financial
Russell Hannah: General Manager – Retail Insurance Distribution, MLC Life Insurance
Peter Sobels: Publisher, Riskinfo
Phil Anderson: General Manager Policy and Professionalism, Association of Financial Advice
David Spiteri: Life Insurance Specialist, Technical Support, Centrepoint Alliance
Sean McCormack: Chief Retail Insurance Officer, MLC Life Insurance
Peter Stathis: National Sales Specialist – IOOF Insurance Solutions
Bruno Muraca: CEO AFRM Claims Advocacy
The key talking points included:
How do Life Insurers stay relevant in a fast-changing industry?
How are advisers adjusting in the Life Insurance Framework transition period and how important is the need for greater business efficiencies within this context?
The need for innovation within life insurance businesses: – life companies, licensees, advice practices. Can innovation help ‘reinvent’ the Australian life insurance proposition?
Will new minimum adviser education and training standards help serve to reinvent the nature of life insurance advice and rebuild consumer trust?
Issue 1: How do Life Insurers stay relevant in a fast-changing industry?
MLC Life Insurance’s Chief Retail Insurance Officer, Sean McCormack, spoke of the need to be “…intensely focused on your customers” in order to maintain relevance in today’s world of high consumer expectations of service. He made this observation in what he said was the broadest sense possible, including his firm’s relationship with the adviser, the policy holder, the licensee, the superannuation trustee or the corporate client: “What I observe about the industry is that we’ve got an opportunity to be far, far closer to what’s going on with our policy holders and in their lives, and staying relevant for them,” he said. “We’re absolutely fantastic as an industry at doing that at claims time, I think, and we’re pretty good at doing that at the policy inception stage, when it’s first introduced to us.”
In an honest assessment of the current state of play, however, Sean balanced this assessment of life company service standards with, “And then I would say we’re pretty ordinary as an industry at doing that on an ongoing basis.”
Sean singled out policy holder correspondence, especially the renewal letter and the broader renewal process for special attention, remarking that as an insurer and as an industry, “…we need to be much better at that.”
He said, “We’ve got to do that in the right way, partnering with advisers to make sure that we’re reinforcing the relationship that you’ve got, as well.“
Sean referenced MLC Life Insurance’s OnTrack Program, which offers its policy holders the opportunity to use smart watches to track their step targets and receive a discount on insurance premiums. He said this data-gathering exercise serves multiple purposes: “…to understand customer needs better because we think we can innovate in how we underwrite. But also, it’s a daily reminder to a customer of the fact that the reason they’ve got the watch is because they’ve sought some advice and they’ve got an insurance policy, and that’s [so that we can] …try to remain relevant.”
Old Business, Old Processes
Referring to the new owners of MLC Life Insurance, its existing book of business and the need for transitioning to more updated, digital service solutions, Sean continued: “I think there’s a big opportunity there. …You need to be a digital insurer, because the cost of doing that in a non-digital way is just too substantial.” He added, though, that MLC Life Insurance was in a fortunate position, thanks to its Japanese owner, Nippon Life, which has invested hundreds of millions of dollars, according to Sean, into upgrading all the insurer’s technology platforms:
“Not right now, but within the next two years, we’ll have moved off all of our legacy systems and we’ll be on one policy admin system with a new digital front end, supported by modern communication platforms, and I think it’s only with that sort of investment that you can truly understand customer needs and actually have the ability to respond.”
Challenged on why neither MLC Life Insurance nor their competitors have satisfactorily addressed this issue already, Sean acknowledged it was a fair question: “It’s really difficult to get close to your customers when you’re dealing on a mainframe admin system that might be 20, 30, 40 years old. And these are reasons. I’m not saying it’s an excuse, because I don’t think it’s acceptable anymore for us to be in that paradigm… what’s happened over the course of the last month [the Banking Royal Commission Insurance Round of hearings] has shone a really bright light on some of the things that have been going on in the industry, and that’ll be a catalyst for the industry to say it’s no longer acceptable and therefore we must simply have a much, much greater focus on [this area].”
Centrepoint Alliance’s Life Insurance Specialist, Technical Support, David Spiteri, took up Sean’s comment about legacy business: “I think legacy business creates confusion – creates a lot of confusion,” said David, who offered the example of different series of business where automatic updates to definitions have not historically been passed back, culminating in two claims for the same condition where one of the claims under a later series is accepted but the other, claimed under an earlier series, is rejected: “And that creates confusion,” he said, to which Sean added, “And it erodes trust.”
Advocating a single book of business, in order to avoid such confusion, David added, “I think the best thing that happened at MLC is that Nippon Life have acquired it.”
MLC Life Insurance GM Retail Insurance Distribution, Russell Hannah, commented that the consumer of today is less likely to be accepting of the traditional type of approach employed by life companies towards delivering their product and service propositions.
“The challenge that we have in terms of remaining relevant is understanding that the expectations of a consumer today and tomorrow are very different from the blueprint that we, as an industry, have used for the last 30 years.
“So, the challenge around relevance is understanding how we invest and where we invest in order to make sure that we’re running a contemporary business, whether it be through advice delivery, the management and delivery of product solutions, and every aspect in between.”
Russell spoke of the need for the industry to recognise that the consumer is looking for something different in the way they are provided with life insurance advice and product solutions and that “…we need to be more agile and responsive compared with how we have operated historically and we need to consider the way today’s consumer is actually looking to receive either advice or the products underpinning this advice.”
Asked whether he agrees the consumer world is changing around the traditional life insurance industry and that it’s struggling to keep pace, Russell offered: “Absolutely, because the reality is we’ve probably been a laggard [as an industry], particularly around the investment in systems and technology that allows the capability necessary to serve and meet today’s consumer expectations.
“And that’s where, if you look at some of those advice practices who are bullish around what the future holds, a lot of those will have taken steps themselves to invest quite heavily in their digital and technology base on which they operate their businesses. The same challenge sits firmly with manufacturers like ourselves, to continue to have access to ongoing investment so that we evolve sufficiently to remain relevant and contemporary. From an MLC Life Insurance perspective this is highlighted by our move onto one policy administration system as part of our technology transformation program.”
Changing the Narrative
The AFA’s well-respected General Manager Policy and Professionalism, Phil Anderson, agreed the entire industry needs to change, including how it talks about life insurance: “The question’s about relevance in a fast-changing world, and I think we actually do have a bit of a challenge there. I just reflect upon the words of someone quite recently on an important stage where she described life insurance as a grudge purchase. We hear other people talk about life insurance as a product that is sold, not bought.
“It strikes me that maybe there’s a better way of describing it, there’s a better language to use, and we’ve got to start to think about how we engage with consumers in a way that they really understand it and they really value it.”
Asked to clarify who ‘we’ is, Phil said “The entire industry… I think it’s at all levels. We all have a stake in the game here – to ensure we have a strong, vibrant, ongoing industry, but particularly the advice channel. So, you know it’s a character purchase. It’s something about what the client is actually saying about how much they value their family, and we’ve somehow got to get that message across to people so that it’s not considered a grudge purchase. It’s something that the Australian consumer base actually understands it’s important they have it, and that they value it.”
In the reality of the 2018 Australian life insurance market, AFRM Claims Advocacy CEO, Bruno Muraca, reminded his peers that there currently exists a consumer trust deficit. Bruno believes that “…the insurers need a different storyteller.” He says a new storyteller is needed because “…at the moment there’s a lot of good in what we do – what we do in terms of claims and what we do in terms of addressing consumers’ advice needs. But invariably, as Australians, we’re still underinsured.
“You need a new storyteller,” Bruno stressed. “You need an independent third party telling that story because there’s a lot of good to tell.”
As to who that third party might be, Bruno raised his hand as a claims advocate. “Our vision as a business it to really start to tell the story about what good claims do for people. And we’ve all got stories. We could talk about it for hours. But if [that message] is coming from the insurer, it’s often seen as self-serving, given the current Industry trust deficit.”
Phil Anderson added “I think there’s a bigger issue about how we actually communicate with Australians about the need for insurance – that too much of the advertising at the moment is brand advertising.” He suggested there needed to be more advertising that explains in simple terms the need for insurance “…so that we no longer talk about it as a grudge purchase.”
Tribeca Financial CEO, Ryan Watson, agreed with Phil, and that the narrative about life insurance to the consumer needs to be about ‘what it does’, rather than ‘what it is.’
National Sales Specialist – IOOF Insurance Solutions, Peter Stathis, stressed the importance also of sending a united message to the public: “One thing we just don’t do is we don’t speak as one. And that I think is the biggest challenge for us,” said Peter.
Russell wholeheartedly agreed: “The reality is this industry doesn’t operate in isolation where you’ve got manufacturers removed from advice, removed from licensees, removed from association, removed from regulators. This needs to be an industry-wide response to ensure that our industry is relevant, and where each of us plays a part in the value chain.
Sean was also strongly on-board with the emerging consensus that the industry needs a new, or at least, different voice: “We are all in this together… and [the industry’s] far too ‘interconnected’ for us to think that one person can push ahead without the others. I really resonate to this concept of telling a different narrative out there to the Australian public about the good that we do.
It’s Not Just About Claims, But is the Message Getting Out?
While the payment of claims is, in many ways, the entire purpose of life insurance, Sean raised another point that doesn’t often see the light of day – a point around the value of insurance to an individual or a family:
“What we do is truly good, and we have to get the message out there. But we also have to illustrate stories of the benefits of insurance outside of claim time, I think, because the reality is that whilst it’s a large dollar amount that gets paid out every year, it’s [paid to] a relatively smaller proportion of our customer base.”
Challenged on how the industry can do a better job of ‘getting the message out there’, Sean agreed with Russell’s point about the need for a combined effort: “I think we all need to come together. That’s the first step,” he said, adding “… I think it can’t just be manufacturers telling that story. Every part of the value chain’s got to contribute.”
Bruno responded, however, that “…there’s still a perception out there that clients don’t trust the insurer,” adding that the recent Banking Royal Commission has only heightened that perception.
While Phil agreed with Bruno’s point, he also acknowledged that the industry – historically – hasn’t succeeded in getting the message to the public: “We haven’t done enough ourselves [as an industry] to defend the value of life insurance,” he commented.