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CIA Annual Meeting 2015 - Middle Market Gap

CIA Annual Meeting 2015 - Middle Market Gap

There is an unmet need of $1T in Canada - a failure of traditional distribution and processes. A new approach to online distribution could be the answer.

Kevin Pledge

June 17, 2015
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  1. How much personal protection life insurance (by policy count) will

    be sold online 5 years from now? 1.  0 – 9% 2.  10 – 19% 3.  20 – 29% 4.  30 – 39% 5.  40 – 49% 6.  50 – 59% 7.  60 – 69% 8.  70 – 79% 9.  80 – 89% 10.  90 – 100% 2  
  2. Agenda 1.  Digital Disruption 2.  Online Life Insurance in North

    America 3.  What is happening elsewhere? 4.  Can this be applied here? 3  
  3. Digital Disruption 5   10 years ago you would not

    dream of banking online – “it’s not safe” 5 years ago few people would buy groceries online 15 years ago Travel Agents would claim that you cannot book vacations online – “it needs a personal touch and experience”
  4. Life Insurance Industry - Barriers to Entry Highly Regulated } 

    Prudential oversight of insurance companies }  Capital adequacy }  Policyholder protection Complex Infrastructure }  Systems }  Processes Brand Reputation LIFE INSURANCE IS SOLD NOT BOUGHT 6  
  5. Trend - Agents }  85% of consumers research insurance online

    }  Most consumers happy doing business online }  Disconnect to consumers – average age of agents now 57 7   }  Insurance Gap - $20T in US, 1T in Canada }  57% of families with children will have immediate financial trouble if the primary wage earner died }  50% of households believe they are underinsured
  6. Our  Research   8   }  Agents are not the

    first source for information }  Not a positive view of agents or insurance companies “The broker is needed to make the sale. They push you (to buy) because they will make the commission.” “Life insurance companies want to sell you more than what you need.” “First place I would go to is Google.” “What are you getting? What are you really covered for? What are your options? No one tells you.” “I would go on the internet and research companies through forums.”
  7. Industry Performance Key Metrics: Time to Issue 47 days* (including

    appointment) Cost $500 - $747** + commission Capacity Depends on number of agents Sources: * 2009 LOMA Service Turnaround Times Survey – Term Products: 47 days **SOA 2010 Expense Study Average Per Policy $500 weighted, $747 unweighted 9  
  8. Life Insurance Industry - Barriers to Entry Highly Regulated } 

    Prudential oversight of insurance companies }  Capital adequacy }  Policyholder protection Complex Infrastructure }  Systems }  Processes Brand Reputation LIFE INSURANCE IS SOLD NOT BOUGHT innovation The myth that 10  
  9. Online Life Insurance in North America The Problem : The

    traditional new business process is not customer friendly Indicative Quote Underwrite Issue Offer Add’l Q’s Modify Application Apply Underwrite evidence Further Questions multiple hand-offs lack overall process control 11  
  10. Simplified Issue Indicative Quote Apply UW at claim ! 12

      }  Customer  pays  for  convenience  –  speed  of  issue   }  An.-­‐selec.on  risk    
  11. Quick Issue Indicative Quote Underwrite Issue Offer Add’l Q’s Modify

    Application Apply Underwrite evidence Further Questions Indicative Quote Apply 15   OR }  Answer a few questions and we may issue immediately (but the chances are we won’t) }  Refer to agent otherwise
  12. Good (at least to industry insiders) …but not great Accelerate

     exis.ng  processes   70% will take more than a week More than half will take more than two weeks 16  
  13. Is  there  a  beQer  solu.on?   17   Simplified Issue

    - Quick Issue – Accelerate existing processes }  All have issues }  Why do you want to sell online? }  You can’t just do what you do today online
  14. Beagle Street UK New entrant – not really an insurance

    company Not encumbered by existing distribution Online only No advertising for first two years 19  
  15. The Beagle Street Approach 20   Indicative Quote Buy Apply

    and UW Fully Underwritten No fluids or additional evidence Cover up to £750k Better lapse experience Ave issue time 12 minutes }  5,000x faster }  1/10 of the cost }  ∞ scalable (85% of the time)
  16. What about barriers to entry? Not an insurance company } 

    Focus on distribution }  Partnerships – Reinsurer, Traditional Insurer, Software No complex systems }  Focus on distribution – outsource the rest Fresh approach to branding… 21  
  17. Can this be applied in North America? Market research tested

    “Almost half of participants found the value proposition [to buy directly online] very appealing (rating of 8 or more out of 10); these results are encouraging. Years ago, when evaluating consumer interest in the ING Direct value proposition, our goal was to find interest in only half as many target group members (who we defined as innovators).” 23  
  18. Survey  results   24   0 5 10 15 20

    25 30 35 40 0 - 9% 10 - 19% 20 - 29% 30 - 39% 40 - 49% 50 - 59% 60 - 69% 70 - 79% 80 - 89% 90 - 100% Percentage of votes Percentage of life insurance sold online 5 years from now ASNA (ave 43%) CRC 1 (ave 36%) CRC 2 (ave 35%) LAS (38%)
  19. }  10 – 30 year term insurance, up to $500k

    }  Coverage age range 18 - 70 }  Applied UK experience and P&C lessons }  Simpler, yet more flexible than current products }  No medical evidence referrals }  Online, with offline support if needed }  On cover in 15 minutes or less Full UW + Lower cost = Lower premium 25  
  20. T10 - $13.42 T20 - $21.08 Online Quote, Application and

    Buy Automated underwriting immediate decision including rating if applicable T10 - $18.65 T20 - $24.80 Online Quote and Application Simplified and Manual Underwriting T10 - $20.00 T20 - $26.04 Online Quote and Application Basic auto and Manual Underwriting T10 - $20.10 Online Quote and Application Basic auto and Manual Underwriting T10 - $20.30 T20 - $30.69 Online Quote Manual Application and Underwriting Where did this put Teachers Life? Insurance 26