Life Insurance
Making the Jump

• Terrence Dopp
• July 2020
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Key Points

• Issue: The COVID-19 lockdown has rendered nearly impossible some traditional aspects of the life insurance industry such as paramedical exams and face-to-face sales.
• People: Technology officers are left to roll out products with a yearlong launch calendar in months and chart a new course that encompasses new methods with old-fashioned underwriting.
• The Path: Accelerated underwriting, digital sales processes and even simple things like all-digital applications and signatures are moving the ball forward on initiatives the insurance industry has already begun.

As the COVID-19 reality took hold in March, Massachusetts Mutual Life Insurance Co. began planning a new program offering free policies to front-line health care workers and volunteers in a process completely done online.

The company rolled out that product in mid-April by offering $3 billion in coverage to people in Massachusetts and Connecticut. On May 20, it was expanded to workers in five other states.

For the traditionally slow-moving life insurance industry, that rollout may be indicative of the biggest change arising from a pandemic that's rocked governments, nations and economies. In that case, MassMutual conceived of the program, built it, went through the actuarial process and launched in near-real time.

“We did all of that within three weeks, which is unprecedented. Normally a product rollout would take from six to 12 months,” Gareth Ross, head of enterprise technology and experience at MassMutual, said. “I can't imagine once we've launched a product in three weeks that we ever extend launching a product to a year. I think that becomes the new normal and I think that's a positive for us.”

The HealthBridge program provides no-cost, three-year term life policies to all qualifying active employees and volunteers of licensed hospitals, urgent care centers, emergency medical services providers, nursing homes, assisted living, inpatient hospice and cancer facilities, as well as Federally Qualified Health Centers and temporary COVID-19 treatment facilities with benefits of as much as $25,000. In order to sign up, customers fill out online applications and upload all required documents.

Ross said COVID-19 was a boost to the digital framework his company had been readying for years. MassMutual also raised to $1 million the threshold for policies written without traditional health exams, increased digital options such as billing payments and saw digital applications more than double as the pandemic took root.

“What that road map looked like was a road map stretching out over the next 12 to 24 months,” he said. “The need for the speed of accelerating that digital road map could not be overstated. I hesitate to say we're doing massively different things, but what we're doing is that things we anticipated doing 12 months out, we've brought out almost immediately.”

In its 2020 Insurance Barometer released in early June, industry group LIMRA found the sentiment toward a digital life insurance experience had flipped: Traditionally, in-person sales through an agent or adviser was the preferred method but no longer. In 2011, 64% of consumers said they preferred the face-to-face route, while in 2020 just 41% reported that preference.

Crucially, the report also found that half of Americans are more likely to buy life insurance if simplified underwriting is used. Two-thirds of people tallied said doing so is fast and easy, and unbiased. Notably, 55% also said they would consider it because it avoids seeing a doctor. 

Lasting Effect

Strip away short-term sales fluctuations.

Overlook momentary shifts in whether consumers want term life policies or universal products.

When looking at how the current pandemic will alter the life insurance industry, one can modify an old political catchphrase: It's the technology, stupid.

Dozens of life insurers in recent years had been creeping toward so-called accelerated underwriting—relying on nontraditional data sources as an end run around medical tests without sacrificing risk assessment and fraud detection. Even MassMutual, through its wholly-owned Haven Life insurtech company, had been moving this way at a slower pace.

But what happens when a global health emergency renders it virtually impossible to send paramedical testers to peoples' homes to collect the blood and urine samples that are part of the traditional underwriting process? Answer: You hasten those baby steps to an all-out trot. In many cases, that's meant applicants give insurers permission to access recent medical records as a speedier alternative—the vaunted “fluidless underwriting.”

Chris Behling, chief underwriter of life & health, Americas, for Swiss Re, has a phrase he uses these days: the acceleration of the inevitable. He sees the expanded role for technology in life insurance as having three aspects—supporting face-to-face sales, growing fluidless underwriting, and using alternative data streams to streamline the process for both consumers and carriers.

“At the end of this, I think that what we've been flirting with as an industry we're going to marry,” he said. “We're going to just make it a part of our business as usual going forward.”

The World Health Organization first reported a pneumonia case of unknown origin in China on Dec. 31, 2019 and by March declared the novel coronavirus—the virus that causes the disease COVID-19—as a global pandemic. By early April, the abrupt closures order by governments throughout the U.S. and globally brought commerce to a standstill and prompted AM Best in a market segment report to revise to negative its outlook for the U.S. life sector, citing economic volatility.

While it may still be too early to have precise data on the economic effects, no economist, insurance executive or broker could argue there won't be fallout. 

Scaling Up

Prudential Financial, based in Newark, New Jersey, quickly moved to expand the steps it was already taking with fluidless underwriting. Salene Hitchcock-Gear, president of individual life insurance, points to the company's SimplyTerm life product as an example of where the company had been taking digital steps that out of necessity grew by leaps and bounds amid the global lockdown.

At Prudential, Hitchcock-Gear said increased digital efforts now mean that in cases without major medical issues the company can issue new policies at times in just one day -- something that was unimaginable in the past. The use of the company's digital underwriting tools grew by 10% amid the pandemic, she said.

While the company saw an increase in traffic on its website since the pandemic struck, direct electronic-based sales haven't replaced the traditional broker-based model. The digital efforts have so far sought to bridge that gap and assist those professionals in ushering their clients through the full process, she said. Those efforts include everything from digital applications and underwriting, to the final stages of policy delivery.

“We've had that on our road map the last couple of years, but our adoption of those tools as you might suspect right now, when all these things are happening, is much stronger,” she said. “We have moved from about 20% of our business coming this way through our accelerated underwriting process at the end of the year, to over 30% in April and we do expect that as a trend.”

For a large multinational carrier with multiple lines of business, all sorts of thorny jurisdictional issues popped up when charting a new business path amid the lockdowns.

Greg Baxter, executive vice president and chief digital officer at MetLife, said some jurisdictions that still required old-fashioned, wet signatures presented a challenge. Accepting forms that were scanned, not hand-delivered, and with online notarization also proved a challenge, he said.

“All of a sudden those things became either impossible or regulators would be prepared to change protocols and regulations around it,” he said.

Baxter said MetLife also found growing existing digital efforts was the speediest and safest bet. As an example, he said the company was able to migrate the application process for one of its life products in China onto the WeChat social media platform in two weeks, giving customers a seamless experience conducted via social media. Last November, MetLife started a pilot program with accelerated underwriting and is on track to expand it in the fourth quarter, he said.

But the horizon of life insurance is long. In fact, one estimate is that 85% of the companies have closed blocks—policies that were issued but no longer sold—making the issue of discontinued products a very real one in the industry.

“Sometimes, we're a little slower moving because our liabilities live for a long time and so decisions you make now are decisions you have to live with for decades,” Baxter said. “Making sure you protect the balance sheet is fundamental to the future of the company.” 

Will It Last?

Across the United States, the debate around the novel coronavirus has shifted in recent weeks. States are in various stages of lifting the lockdowns and people are now debating the speed and logistics of returning to a more normal pattern. Hitchcock-Gear said the push to digital has been building steam for too long and insurers are too invested in meeting a market-driven need to see much in the way of backsliding.

“Post-pandemic, I'm sure that relevance of insurance sort of goes back to normal if you will,” she said. “Right now I think there's heightened awareness, but I do believe we can get back to business as usual in our normal lives but keep some of the benefits of these protocols in place.”

Behling, of Swiss Re, also speaks of the new relevance life insurance is enjoying. He likens the modern insurance environment to buying a new television.

People can do research online and read reviews, and still want to pop into their local electronics store to actually see it. Whether they eventually opt to buy it in person or online, he said, is a personal choice and the larger business world has made room for both options. That's the model he sees the life insurance industry moving toward.

“We're a 150-year-old industry and we haven't been the most innovative industry throughout our history and this pandemic is forcing us to embrace innovations,” he said.

“The consumer has spoken. They want an omnichannel experience. What I mean by that is consumers want to interact with their insurers through a variety of channels and they don't want to be stuck in one.”