Embracing e-apps

It has been a ‘silicon’ spring and summer for the Australian life insurance market over the past six months, with computer microchips moving aggressively from the back-office to the front.

For financial advisers and those planning to get into the life insurance market, the developments could mean a total change to the way they do business, new opportunities or, for the time being, not much change at all. It all depends, say some companies, on an adviser’s present and future business models.

At the product supply end, the industry seems to have grabbed hold of electronic technology as a way of marketing and selling life insurance.

However, this shift has been a relatively long time coming.

Some companies claim to be leaders in the field while others are waiting to see where technological developments might go.

However, there is no doubt that the future is here and it is electronic.

Not all life companies are mentioned here (due to space and time), but you can be pretty certain that if they aren’t ‘switched on’ now they are closely watching developments and may soon be.

In the past, life companies mainly used electronics as a back-office tool to deal with the vast amounts of information flowing into and out of the company each day.

Electronic applications (e-apps) have been offered for some time by most companies to advisers as the first step towards reducing the paper flow back and forth.

But e-apps have not been useful in addressing the key problems confronting the life insurance market: how to get more customers on the books more quickly.

Front-end solutions

So-called ‘electronic solutions’ are firmly being installed at the front-end of the chain, although there does appear to be a clear divergence of opinion about how they should be used and offered.

It is clear, however, that e-apps can be used to drive efficiency in the market.

E-apps can potentially save time and money from the receipt of an application to its completion. Electronic solutions allow both the company and the adviser to get more business on the books more quickly and more cheaply than previously. It helps maintain cash flow for both parties.

AXA head of individual life insurance Stephen Rosengren told Money Management that the company’s recent launch of e-apps had been well received by its customers.

“The take-up of that has been fantastic; I think something like 15 per cent in two or three weeks, which has been great,” he said.

“What it has done is take away a lot of the administration errors because it standardises the process, [showing] there are some real benefits in the way technology can drive efficiencies.”

E-apps may also make it simpler and easier for the consumer to get life insurance either directly or through an adviser.

The industry will say this is all about closing the ‘underinsurance’ gap.

In the past, it has often been hard for the consumer to get cover, resulting in higher costs through delays and people simply walking away.

Processing hold-ups often caused by underwriting and medicals are said to be the big consumer turn-offs and a brake on market growth.

One estimate is that the cost to an adviser in delays and lost business by relying on the old processes can be more than $300K per year. This figure will be disputed, but it does give an indication of what is at stake.

Multiple models

However, the past six months has seen the development of three different approaches to putting new technologies to work.

The first is the ‘direct’ approach, where the consumer is encouraged to buy online without the help of financial advisers. This relies purely on the general advice model.

The second is a development of the front-end attachment, where electronic application and processing is smoothed out in a form of straight through processing (STP).

Here the adviser retains a key role but the application and approval process can be sped up using technology. It is also often backed by simpler underwriting rules and tele-underwriting and is an electronic refinement of many existing methods.

The third is the clean-sheet approach, where a whole new process and product is offered with electronic interfaces and handling along with sophisticated electronic underwriting rules.

Of course, there are likely to be variations and hybrids of the above and each major company is likely to dispute into which of these categories they fall.

Ultimately, it will take time to see which application works best and there may be more models under development right now. Many of the companies contacted were naturally cautious about their future plans.

Evolution is likely and while all systems will co-exist for some time, it is possible that one will fall by the wayside as the market makes its final decision. There are some big dollar bets by the life companies here.

AXA is on record spending $30 million updating its life protection offering, including some forthcoming electronic solutions.

However, for AXA, the challenge is not just getting the technology but making it easily accessible for users.

“There are some people who think that technology will be the saviour of all things, but we believe it’s just one element of the overall offer we have as insurers,” AXA’s Rosengren said.

First-mover advantage

The possible success of ‘first mover’ advantage must be weighed against the risk of not getting it right.

As said, the first or direct approach is probably not of great interest to the independent financial adviser channel. If you firmly believe that life insurance is ‘sold’ and not bought then you may not see much of a future for this option.

Overall, the objective of the direct channel appears to be to grow the market and not fight for market share with the existing adviser channel.

For example, Allianz and OnceLife both offer the consumer direct online buying options. No advice is given and the consumer is to be attracted to resolving their individual life insurance needs online after advertising and promotion.

Allianz sees great opportunities in this space having watched developments overseas.

According to Meredith Barnes, national manager of business development, the company saw a gap in the market where it could offer a quality product without taking business away from the existing adviser model.

“We clearly see opportunities in the direct channel, otherwise we wouldn’t have gone that way,” she said.

“However, there will always be a role for the adviser in dealing with high-net-worth individuals who often have complicated life insurance needs.”

OnceLife went live only recently and is also a direct model life insurer.

All direct models are general advice only and are primarily designed for ‘cleanskins’ of younger ages with relatively low levels of cover required and in the expectation of few underwriting issues arising. It is definitely targeted at the D (digital) generation — the so-called Gen X and Ys who are used to doing business online.

For ING Australia, the future is definitely electronic.

Robert Liong has recently been given the role as head of eBusiness for ING and has been working on a number of strategies he feels will keep the company ahead of its competitors.

Part of that will be to bring the direct and adviser channels closer electronically in a complementary way to build on the market’s increasing use and awareness of technology.

However, both the direct and adviser channels are seen as separate.

“It is about easy navigation with a simple look and feel for the adviser, and for the direct customer — a similar experience to online banking,” he said.

“The experience should suit the customer’s needs.”

According to Liong, ING has held a leadership position in the Australian market when it comes to putting technology to work and he is determined to see the company retain that position.

“ING is a global business, so we’ve been able to get technological leverage from overseas and throughout the Asia Pacific region, but we have adapted things for the local market — a hybrid if you will,” he said.

“For the adviser channel, putting it in simple terms, if the products and processes are easy to use and easy to find then the adviser will be more productive.”

Last year, ING launched its OneCare Express online model, which it claims can see applications submitted by advisers approved in up to 15 minutes.

Its broader OneCare range is designed for more complex situations. For the direct customer, quotes and applications can be taken online.

Not all companies want to go down the direct distribution route, as there is a fear that some advisers may not like that happening and it doesn’t suit their overall distribution objectives.

Watch-and-see approach

Remaining highly focused on the adviser space while perhaps taking a more ‘watch-and-see’ approach to different technology systems is Zurich.

Andrew McKee sees the starting point as providing both technology and non-technology based solutions to give advisers options.

“There has been increasing demand for e-apps and in the future there will be a higher take-up of technology by both consumers and advisers,” he said.

He feels that the majority of business still use paper-based applications, but this will change over time as advisers choose and adjust their business models.

“In five years time I can’t say what the take-up rate will be, but it will be significant,” he said.

“Electronic applications in life insurance clearly have the potential to streamline processes and that should make everything quicker and easier, which would be a good thing for the market and the consumer.”

Online applications

Sean Potter, group protection manager with Aviva, has seen a fast take-up of online applications, and he sees this as only gathering pace.

“We have only been out there with our online system for around six months and to have an approximately 30 per cent take-up rate in that time is fantastic,” he said.

“There is still a lot of room for growth as a flexible system is developed that fits within an adviser’s practice.”

Potter believes Aviva will stay with the independent adviser channel, as the company sees it as very important to the process when products and consumer needs are often complex.

Aviva now offers an online application process to advisers for its full suite of life protection products backed by full underwriting capabilities.

Like others in the industry, Potter sees the utilisation of electronic systems as a way to grow the market by making it quicker and easier for clients and advisers.

“It can be more cost effective for advisers to write the business and more financially viable for advisers to write protection for lower sums insured.”

Accelerating take-up

Going the ‘whole hog’ so to speak has been Tower Australia.

Continuing to focus on the adviser channel, Tower has opted for a totally new process and product range, which it has called Accelerate.

Accelerate will not take paper-based applications, leaving that to the traditional Tower products, which can be accessed either through e-apps or paper. The traditional Tower range is also available for meeting more complex customer needs and situations.

The Accelerate process contains online underwriting rules and other electronic processes that it claims allows it to deliver “85 per cent of underwriting decisions in three working days for customers 45 years and under”.

According to the head of alliance business for Tower, Brett Yardley, the company went for an end-to-end process starting with a blank sheet of paper.

“We felt that an approach based on modifying existing products and processes would inevitably result in compromises,” he said.

“We didn’t want to compromise the next generation solution with old-world challenges, so the product was specifically designed to integrate seamlessly with the process and to deliver on the service proposition.”

Overall, the challenges for advisers going forward is to choose the best system offered by suppliers; one that suits their business needs and offers the best outcome for their clients.

Not all advisers are ready just yet to take the technological advances being offered while others are grasping at the opportunities with both hands.

Like the rest of Australia, the life industry comprises three distinct groups: the innovators; the early adopters; and those who wait and learn from the others.

There doesn’t appear to be any room in the future for those who say ‘no’.