These days, ‘“business as usual” seems to be anything but. Across different industries, people are having to adapt quickly. While much may seem up in the air right now, many of the recent changes faced by the insurance industry are moving it forward into a better future.
Here are five of the biggest trends I’ve seen lately in the insurance industry and how they’re impacting insurance companies, financial professionals and consumers.
1. Electronic Applications
Until recently most carriers didn’t have e-applications, and those that did weren’t requiring their use. Due in large part to the coronavirus crisis, the majority of carriers Brokers International does business with now have e-apps — and a few of them require producers to use them.
But even without such a requirement in place, producers should be running toward e-apps. These digital tools reduce errors and ensure applications are in good order. When an application that is not in good order is submitted to the insurance company, it has to be returned and updated. And if the financial professional does not already have all of the information needed to correct the application, it has to go back to the client, which not only slows the process down but also creates a poor customer experience.
Paper applications are more expensive (because they take more work) and have a longer processing period. If a financial professional can ensure up front that an application is in good order, it makes the process better for everyone involved. Applications can be submitted and processed faster, which lets customers get their policies issued faster.
I have seen apprehension from a lot of independent financial professionals we work with at Brokers, in part due to a lack of familiarity with new technology. It may seem easier to keep doing what’s familiar, but in a case like this where a new tool is more efficient and beneficial for all parties, it’s worth investing the time to learn it. We’re still at the beginning of the e-app trend, but I foresee more carriers requiring electronic applications at some point — and probably soon.
Insurance is a very highly-regulated industry, for good reason. Most of the regulation in insurance is put in place for consumer protection, which benefits everyone. It’s always important for financial professionals to stay educated on current regulations, but there are times when special attention is necessary, like when a new regulation goes into effect.
We’re approaching one such time right now.
In June of 2019, the SEC adopted Regulation Best Interest (or Reg BI), which went into effect as of June 30, 2020. The purpose of Reg BI is to establish a best interest standard of conduct for broker-dealers and financial professionals making recommendations for consumers.
It will require greater transparency and record-keeping, but in addition to giving consumers greater protection, Reg BI can also protect finance professionals. If you keep notes and track relevant factors in your recommendation process, you can easily demonstrate your rationale and confidently stand by your recommendations.
Regulation is always evolving. Financial professionals must be ready for more regulation, oversight and scrutiny of transactions. But in the long run, it benefits both our industry and the customers we serve.
Although the maximum lifespan seems to be holding steady around 120 years, we are seeing an increase in average life expectancy, with a large number of people living longer than previous generations. And generally speaking, they’re living healthier lives.
This impacts insurance in a few main ways.
- As the average lifespan increases, pricing should go down. For a 30-year-old customer with an expected lifespan of 70 years, there might be a premium that spreads out the company’s risk and the consumer’s cost over a longer timeframe. Companies are able to re-price their products, a clear benefit for consumers.
- Annuities become more important as part of a retirement strategy. When your life expectancy is longer, you either need more upfront money in your retirement strategy or you need to work longer in order to fund your retirement. Starting to think about and plan for a retirement strategy at a younger age becomes much more important, with durable, reliable vehicles a critical component.
- Other kinds of insurance, such as long-term care, have tended to go up in price. As the average individual lives longer, there is a greater likelihood of some level of care being required. As morbidity and mortality are extended, on average, across the population, insurance companies pay attention to that and adjust their prices accordingly, knowing that people live in long-term care situations for longer than they used to.
The bottom line: The cost of life insurance should trend downward, but the cost of long-term care insurance may go up.
4. Holistic Planning
Holistic planning is something I encourage most financial professionals to adopt. In this model a financial professional and a client discuss the client’s wants, needs, aspirations and goals, then decide together what types of strategies will best address those.
The opposite of that is selling a customer one insurance policy, when it may not actually address what that customer wants the policy to do.
Holistic planning is usually not about one specific thing, such as an investment account, bank account, life insurance, and so on. It’s about looking at the whole picture — taxes, health, investments, savings, etc. — to find the best possible solution.
You wouldn’t go to a shoe store and take the first pair of running shoes the salesperson pointed out to you — you’d want that person to ask what you do while on your feet and find the shoes that best suit your specific needs. So why shouldn’t someone expect that same level of service with their financial strategies?
For consumers, holistic planning is fantastic. Their financial professionals are concerned with everything they need. They don’t get a salesperson who offers a fix for one problem, but rather they find a partner who’s looking to address their needs holistically.
For agents, holistic planning is a more involved process. If you’ve previously only sold life insurance, you’ll need new licensing, additional continuing education, and affiliation with new entities. An insurance agent doesn’t need to be licensed with a broker-dealer, but if you want to sell equities, you will need that licensing. And there is a financial investment on the part of the financial professional to add those to your practice.
Clearly, I don’t want to downplay the greater requirements financial professionals will encounter to expand a practice to be holistic. But it diversifies a sales portfolio, and it’s more appealing to the consumer.
The trend is gathering speed, especially for consumers.
And holistic planning is happening from the securities side, too. You should take steps now to insulate your client base so they don’t feel compelled to go to someone else for insurance — and then switch to them for all of their needs down the road.
5. New Channels for Prospecting and Outreach
In the last three months, the adoption of technology has accelerated due to the coronavirus crisis. But the truth is that this is a trend that has been in the making for a long time.
Technology is playing a bigger role in planning and visiting with clients. And I don’t think the age of digital appointments will end when we move beyond social distancing. Many agents have found video conferencing to be a huge benefit: Someone who was unable to come into the office for a meeting is often willing to have a 20-minute video conference. Across generations, financial professionals are adopting it quickly, and the same is true for clients because of the convenience and time savings such technology offers.
When it comes to prospecting for customers, the days of cold calling are over. Instead, it’s happening through Facebook, LinkedIn, video and other tools. Younger people tend not to use the phone as much as their parents’ generation, and they usually don’t want to meet in person. If you want to connect with those people, you have to connect with them via new technology.
Adapting in a Changing Insurance Industry
It’s important for financial professionals to stay on top of current and upcoming trends in the insurance industry. Rather than worry about how a changing landscape can upend traditional or comfortable models, it’s crucial to lean into change and learn how to benefit from it.
Technology is a great example. I believe a robo-assisted model is the best path forward. Through this model, you can use some automated technology tools to provide prospects more upfront information and education on the products you can offer them. But after a certain point, it’s most effective to switch to more personal interaction, because an automated tool can’t engage with prospects or clients on an emotional level.
If you have questions on trends you’ve seen or want to talk through how to adapt your practice to changes in the industry, connect with me or send me a direct message. There’s a lot of change to navigate these days, and I want to help independent financial professionals have the best footing possible to move forward.