The online life insurance application is being jumpstarted by small niche players. Assumption Life launched its platform slightly more than five years ago, and Equitable Life entered the fray before Labour Day. Humania Assurance’s marketing vice-president explained to The Insurance and Investment Journal why his firm also took the plunge in July.
Humania Assurance usually seeks out roads less travelled, even a “marketing vacuum,” Stéphane Rochon, vice-president, sales and marketing at the Quebec-based insurer, told The Insurance and Investment Journal. Life insurance policies or living benefits procured by filing an electronic application are among the light volume markets that Humania aims to occupy. “We are taking a very aggressive stance in the simplified market,” he confirms.
The hurdles that have deterred the large insurers from going the online app route (data format and electronic signature, for example) have not daunted these small insurers, who launched their own solutions without seeking to create an industry-wide Canadian standard.
The system on which No Medical Exam Insurance is based lets representatives enter an era that Rochon describes as “Advisor 2.0.” This term refers to advisors who embrace cyberspace.
Rochon stresses that speed is one of the main advantages when advisors operate online. Like the other niche players in this market, issue times are shortened significantly. Humania sends customers their policy by mail within 24 to 72 hours of approval. “It’s very different from the old process, which took between 14 and 20 days,” Rochon points out. Humania issues the policy at midnight on the day of the application.
A second advantage that can draw advisors to the Internet is that this method eases compliance. For advisors, it’s a paperless process that is well suited to today’s compliance requirements, Rochon adds. “There are steps to follow and a series of authorizations to obtain. It all has to be authenticated by the customer, who answers questions in each step, which are then recorded online.”
Many hazards associated with paper applications are eliminated with the electronic version, Rochon comments, such as backtracking or changing things after the fact.
Insurers are using this product to rival the banks, who currently dominate online insurance sales. Giving the public access to an Internet product targets a clientele “who is used to shopping online,” Rochon says, particularly when dealing with banks and insurance.”
No Medical Exam Insurance has triggered a mostly positive response among advisors. After only one month of operations, the site has received many requests for insurance. “20% of my brokers, mainly in their 60s and computer-illiterate, tell me that we are veering off-track, but 80% are enthusiastic about the execution efficiency. Travel and P&C insurance have been sold this way for years. We can do it too because the product is simple,” Rochon says.
In line with its philosophy, the insurer is targeting another nearly deserted market: hard-to-insure. In its first 28 days, Humania says the site, launched July 2, received over 9,500 visits, including 6,800 unique visitors. “Over 29,000 pages were visited during this period, and the average visit lasted longer than 3 minutes, which is considered excellent for the Web,” Rochon explains.
He is wary of setting sales objectives for No Medical Exam Insurance, but admits that early signs are very encouraging. “Within 30 days of the launch, 150 unique brokers have dealt with the new system, which issued 200 policies, Rochon says. He thinks he can rack up at least $2 million in premiums in the first year.
The product targets customers who have difficulty buying one of the three forms of insurance offered: life, disability and critical illness. “It’s an innovation to counter declines. You answer yes to two questions, no to four others, and you are automatically covered,” Rochon says. Answering the other questions “wrong,” which would normally lead to a decline, can still result in acceptance for a simplified Humania product, “even if it’s not at a discount rate,” he explains.
As an example, a 32-year-old male non-smoker experiencing several problems or limitations but who answered the basic questions correctly can purchase critical illness insurance coverage of $50,000 for slightly more than $66 per month. A customer who answers the other questions correctly will receive a more aggressive premium. However, some traditional products may be cheaper. “The advisor can offer the product to a healthy client,” Rochon says, “but it is mainly aimed at people who find it hard to get insurance.”
The insurer can offer its product at a lower price because it avoids double data entry. “We don’t need a clerk to enter data received on paper. The product structure produces efficiency gains for the broker, their firm and us. The system easily lets us achieve marginal cost savings of $200,” Rochon explains. The Internet halves the cost, at least.
The cost of developing the Internet platform is eating into those savings for now, but it will soon produce a net gain, Rochon adds.
Long-term care on the Internet
Humania is preparing to introduce a long-term care product on the Internet platform some time in 2014. Here again, the insurer wants to fill the breach. “When insurers bow out of the market, it’s our turn to enter it, Rochon says. “We also want to stand out from traditional products and emphasize home care, because people really want to stay home if they lose their autonomy. Lastly, it is possible to design a cheaper product by systematically selling it with a 90-day waiting period before benefits are paid, rather than 30 days.”
For now, Humania is negotiating with reinsurers, Rochon said, without disclosing any names. The most difficult part of these negotiations will be to convince the reinsurer to accept its changes to the methods of underwriting risk of functional decline. “The current cognitive tests are inappropriate,” he says. “People in their 70s and older must undergo one-hour interviews in person (two hours for a couple). Advisors who already have a well-established relationship with their customers aren’t interested in putting them through that.”
The Humania Web platform favors evolved products that baby boomers will need, Rochon points out. “The idea is to protect them with more complete coverage. For now, they can hardly buy life insurance beyond age 65. For example, group insurance offerings become very marginal after this age. At the same time, we have a new generation of old people who will live longer, and carry debt. In this context, a disability product for seniors will become very attractive.”