How is technology helping insurance providers reach the uninsured? originally appeared on Quora: the place to gain and share knowledge, empowering people to learn from others and better understand the world.
Answer by Phil Murphy, VP of Insurance at Ethos Life, on Quora:
Life insurance is plagued by 150 years of regulatory layers, sales-incentivized agents, and a tedious and often invasive application process. It’s a $145 billion market, but given its unique complexity and fragmentation, the industry hasn’t experienced meaningful innovation in over a century. We’ve seen modest innovation with movement to hybrid products and use of data, but most of the innovation has come from tweaks and market twists to core products and processes. Until recently, from an underwriting perspective, the last major change was the widespread use of blood testing in the late 80s.
The life insurance industry needs to get to the underinsured and uninsured markets more effectively. Innovative insurers today are committed to democratizing insurance and growing the market for everyone. We’ve been talking about closing the nationwide coverage gap for years, and, with emerging technologies, we’re right on the doorstep of doing it. There’s a lot of work to be done – particularly in Middle America, which represents a large percentage of uninsured niches – because today’s processes make it expensive to sell smaller and or less expensive policies. In fact, 40 percent of US consumers feel intimidated by the life insurance application process. Many drastically overestimate its cost and feel uncertain about how much or which type of policy to buy.
Data and cloud technology are helping us usher in a new era of access. Technology is removing the barriers typically in the way of getting a life insurance policy – namely cost and a historically time-consuming, invasive, and sometimes biased application process. In turn, we’re able to usher in a new era of efficiency that allows us to reach new customer segments and materially tackle the $16 trillion nationwide coverage gap, as stated by LIMRA in 2015.
The application process used to take 10 weeks on average and require a nurse’s visit to your home (with a blood draw). Further, the aggregate data life insurers have historically depended on for underwriting is often incomplete and siloed. Today, the application process is often entirely online. Sales agents for certain markets have been replaced by self-serve mobile and desktop products. In the era of life insurance APIs, we have a faster and more accurate underwriting process. You can get a personalized policy in minutes. No unnecessary medical exams, no sales agents incentivized to over-sell you a policy, no paper checks for your monthly payments. Think: it’s what TurboTax did for taxes, but for life insurance.
Machine learning has played an especially big role in reducing costs because it enables personalization at scale. In March 2019, Ethos built a tool called Right Sizer, which uses machine learning to analyze customer data and ensure families never pay more than necessary for the coverage they need. Roughly 50 percent of the customers who have right-sized policies end up with a smaller monthly premium, aligned with the coverage they actually need to protect their family.
By democratizing access to ethical life insurance for consumers nationwide, new technologies are helping modern insurers enable more families to have financial security and peace of mind for generations to come.