By , Chief Administrative Officer, Farm Bureau Financial Services
“The pace of change has never been this fast before and it’ll never be this slow again.”
This quote nails the impact technology is having in all industries as the digital revolution matures. Technological impacts and the pace of change do vary from one industry to another and many single out insurance for being slower and behind. Where is insurance innovation during this revolution?
A 50% Increase in Population and a 0% Increase in Life Insurance Policies
In 1975 the New York Times published an article titled “Year of No Growth For Life Insurance.”
The article opens with this:
“The sale of life insurance to individuals, traditionally considered immune to the ups and downs of the nation’s economy, is expected to show virtually no growth this year  for the first time in 25 years. The impact of the nation’s economy was cited as the principal reason.”
In February of this year , Bloomberg published an article titled “The Decline of Life Insurance Is a Mystery.”
This author describes how in 1965, Americans purchased 27 million life insurance policies. In 2016, the population was 50 percent larger than in 1965, yet Americans still only bought 27 million policies. There may be dozens of logical reasons for this, but no matter how one slices it, there is an opportunity to expand our products to those that desperately need our coverage; an opportunity to create innovation within insurance.
In 1965 Americans purchased 27 million life insurance policies.
In 2016, the population was 50% larger than in 1965.
Yet Americans still only bought 27 million policies.
Life Insurance carriers are in a tough spot to say the least. Actuarially speaking, the greater risk for many people is longevity over pre-mature death. Thankfully, the life insurance industry is well positioned to protect people against longevity, but the industry needs to clearly articulate the value proposition.
Today we are all endlessly distracted, and every carrier is jockeying for attention and working tirelessly to demonstrate importance and relevance to our customers and prospective customers. Life insurance is a unique business. We seek the attention of people that do not want to think about what we do: protection from premature death. No one wants to think about their own mortality, yet it is paramount to plan properly and ensure your loved ones can financially continue even when you are gone.
The Rebirth of the Life Insurance Industry and The Rise of Insurance Innovation
The articles quoted above demonstrate the difficulty in getting our message out when one focuses on passing on wealth to your loved ones or providing much-needed liquidity to pay for burial expenses and mortgage payments. Getting people excited about life insurance is no easy task, yet the health of the industry depends greatly on getting people to act and see the critical importance of life insurance in their overall financial plan.
That’s why this industry needs a “rebirth” so to speak. A focus on improving life and furthering customer experience for instance. A shift toward lifestyle benefits and customized products that meet the needs of the customers that so badly need our products.
At Farm Bureau Financial Services, I spend a lot of time reviewing industry trends and new ideas, learning about insurance innovation in the industry, and evaluating life insurance startup firms. Startup firms do not have the historical information and perspective incumbent carriers have, but many of them focus greatly on lessening friction in the sales process, improving efficiency, and incorporating digital strategies to do so.
Many of them believe that consumers are looking for a different experience and may want to go through a different process when they purchase insurance. They have committed greatly to a digital-first platform that focuses on ease of doing business, mobility, and less friction (think about non-fluid underwriting for life insurance for instance). Some are looking to revamp life insurance by rewarding certain healthy behaviors and habits. All told, this transformation is occurring in real-time and could have large implications for the industry.
You might be thinking “Okay, well it’s easy for small insurance startups to innovate and change, but what about the old incumbent firms?” Can an established insurance carrier truly innovate?
Yes, yes, yes!
I would even say incumbent carriers are at a greater advantage because they have a bigger pool of human capital to pull from. They also have years and years of data to deploy. Finally, they understand the sanctity of the life insurance business, the importance it plays in our society, and all the regulatory requirements and compliance issues. I would argue many incumbent firms are in a phenomenal position to compete, win, and increase relevancy in insurance innovation over the coming years.
The Best Way to Innovate Insurance is From Within
The most valuable resource we have are the incredibly talented, dedicated, creative, and smart people that work at our company.
I suspect most carriers would feel the same way. That is why it is so important to tap into the people we have within our four walls. We are all consumers of products we love (sometimes hate) outside of our day job and when you combine that with the amazing insurance knowledge we all possess there is definitely a winning combination.
Recognizing this, we committed to an innovation fund at Farm Bureau Financial Services (FBFS). We are not investing directly in companies to take an equity position. We are using this as our opportunity to try new things, manage new ideas, and see what insurance innovations and ideas we want to take forward into our operations someday.
This fund exists to spend and is supported by a cross-functional team of emerging leaders within the company. Other FBFS associates advise this group and work within the business to advise and assist. The team will try to support up to 15 new ideas each year and act as a true test kitchen for these new ideas.
FBFS may be unique in the fact that our company offers many other lines of insurance outside of life insurance, but any organization can find and evaluate a large number of new ideas. In fact, nearly every week I receive numerous ideas from colleagues and articles about what others are seeing occurring in the industry as it pertains to emerging trends and new insurance innovations.
Innovation is really nothing more than collaboration and there are really only a few reasons to undertake this endeavor. A company should only undertake this process to grow and serve customers better. Creating the future now is critical and making sure our customers and prospective customers know the value of life insurance and why they need this protection is important.
It is hard to measure the ROI today on our efforts or any efforts like this. However, as this process evolves, it leads to new ideas, helps focus on customer eccentricity, and plows the road for the future. These efforts energize people and provide a creative outlet for those involved.
These efforts also help agents in the field do what they do best, which is offer top-flight service and expertise to customers. Insurance is a business that demands humanity and often times when people are filing a claim it may be the worst day of their life. Having an expert on your side to navigate this and set up the right plan is key. Insurance, whether life or otherwise, is not a commodity, and aligning technology with a great agent is another key toward success.
The industry’s largest threat may be ourselves, but I also believe therein lies our biggest opportunities.
Doing things differently is not human nature. Many people want to do what they did yesterday, and as the articles above demonstrate, we are facing similar issues 50+ years apart. The industry is ripe to transform and continue to meet the needs of existing and new customers.
Life insurance is a long-tail product that is so critical to families that one should never discount the need to partner with strong well-run companies when they purchase life insurance. However, working today to transform will help meet the needs of future customers for decades to come. Customers need our products now more than ever and now is the time to transform and use creative ways to compete and win.
I have been around the life insurance industry since 2003, and the way I see it, the industry’s largest threat may be ourselves, but I also believe therein lies our biggest opportunities. It is easy and tempting to remain complacent because, to be honest, what we did yesterday is good enough today, but it could be so much better.
Additionally, our industry has done a commendable job protecting people’s financial futures for decades. However, as the Bloomberg article demonstrates, what was good enough in 1965 may not work today and into the future.
Meeting the demands of consumers today and the generations that are coming later is critical for our industry to succeed and remain relevant. Our mission and purpose as an industry is simply too important to not do so. The need for mortality and longevity products has never been greater, but it is our challenge to meet the customer where they are and with the products they need in this ever-evolving world we are all living in.
Insurance innovation can be a full-contact sport. As Governor Branstad repeatedly told me, “People hate change but they love progress.”
That could not be truer.
Seeing outcomes that drive efficiency, enhance customer experience, and even make products more precise and customized will delight employees, agents, and customers. Everyone I know that works in the insurance space does it because they believe in the value of the products we offer and deliver to everyday Americans.
We are their peace of mind.
Transforming to continue to meet these needs and doing it on the terms the customer demands will be challenging but rewarding for all. I remain bullish on the life insurance industry and do believe companies like Farm Bureau Financial Services will win and continue to deliver on the promises we make to customers, just like we have for over 75 years. The path to victory will have detours and wrong turns, but with intentionality, and a relentless focus on the customer, we will get to the winner’s circle.
Chief Administrative Officer
About the Author: As Chief Administrative Officer I am responsible for Human Resources, enterprise strategy, health services, and government affairs at Farm Bureau. I work with the executive management team and business leaders on strategic initiatives that enhance consumer experience and improve operational efficiencies. I spend considerable time evaluating new startup companies and innovative ideas that will one day transform and improve the industry and our company. Outside of work I spend time with my wife and four children, I am active in the Des Moines community and serve on non-profit boards of directors. I like to read, fish, and am trying to get back into playing tennis.