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The Product Development Section Presents
Underwriting Issues & Innovation Seminar July 31-August 1, 2017 | The Westin O’Hare | Chicago, IL
Due Diligence for InsurTech Companies
Moderator:
Donna Christine Megregian, FSA, MAAA
Presenters: Anthony C. Laudato, FSA, MAAA
The Future of InsuranceFinding the Right Partners
Society of ActuariesUnderwriting Issues and Innovation SeminarJuly 2017
Agenda
Market Trends
Emergence of InsurTech
InsurTech Company Analysis
Conclusions
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Market Trends
The Life Insurance Challenge
People want more life insurance, but don’t buy it:
40% of Americans who HAVE life insurance
don’t think they have enough.
70% of households with children under 18 say
they do not have enough life insurance.
Yet they insure their cell phones!
LIMRA estimates the unmet life insurance
need at over $15 trillion.
83% say they don’t buy life insurance
because they believe it is too expensive.
But they overestimate the cost by 3 times
US Population and Number of Life Policies
Closing the Coverage Gap
100
150
200
250
300
350
1945 1980 2013
US Population (in millions)
Number of Life Insurance Policies
LIMRA 2015
4
More and More Households UninsuredAnd increasingly turning online for information
55%
50%
28%
25%
28%
40%
20%
22%
32%
2016
1998
1960
Household Individual Life Coverage
No Members Covered All Members Covered
Some Members Covered
5
Customers and distribution Roughly half of US agents are set to retire in
the next few years
Shifting household demographics dilute the life insurance value proposition
Three-quarters of new customers under age 55, and 4 in 10 life insurance policies are purchased by buyers between 25 and 451
GenXers & Millenials prefer digital and mobile buying
By 2017, there will be 200 million smartphones in the US – the need for 24/7 access will become pervasive
Today’s younger consumers expect a seamless, high-tech buying experience
Latent demand & underserved middle market
Disruptive technology & new data Vast amounts of new data sources – Rx,
electronic medical records, wearables, social media, genetics, etc.
Analytics that enable targeted marketingtowards less risky applicants by
providing a more personalized and meaningful digital experience
Predictive analytics & algorithms to streamline and accelerate the application process and underwriting
New technology platforms to engage consumers post-issue
Advanced medical research and testing leads to less invasive underwriting methods
Key external trends in the life insurance industry
1) Source: LIMRA.com
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US Life Insurance Industry Today
Ownership of individual life insurance continues to decline• Including many households with a clear need AND the means to buy
Majority of business distributed through some form of human intermediary• Most carriers products and processes built around catering to distribution
Rising generation that is self directed and expects seamless mobile engagement• Buying via face to face interaction is foreign
Majority of business has been fluid tested• Driven prices low and creates anti-selection concerns to reducing UW requirements
Many products have significant guarantees or considerable complexity – or both• Further challenges the buying experience and risk profile to carrier
U.S. regulatory environment creates some challenges• State by state – 50+ sets of rules• Significant compliance complexity• 2 year contestability period adds to challenges of reducing underwriting evidence
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What's on our Clients Minds?
NMG Survey 2015
8
Managing Change is Critical to Successsful Growth
0% 10% 20% 30% 40% 50% 60%
Product Innovation
Adapt to Transaction Based Sales
Adapt to New Buyer Dynamics
Adapt Existing Distribution
Accelerated Underwriting Models
Issues to grow business effectively
NMG Survey
9
Risk Assessment and Underwriting
Increasing Underwriting Agility
• Not the same process for everyone• Will need to deal with having different types of information for each applicants• Demands some degree of automation
Data Elements Will Change – Not Just How We Access Them
• Some historical Underwriting data elements will continue• But - some will stop being utilized• New data elements and metrics will replace them• Will require a great deal of R&D and analysis
No One Company Can “Do it All”
• Partnerships and alliances will increase in importance• Data is a valuable currency
Products and Ratings Will Evolve
• Movement from discrete rate classes to a continuum• Not locked into initial assessment based upon a point in time• Health and lifestyle over time will drive product performance
What is the Road Ahead?
10
Pace of Change in Life Picking UpMore Change in the Past 18 Months Than the Prior 10 Years
• Focus on Predictive Analytics• LexisNexis, TransUnion, Deloitte, Home Grown
New Data and Models
• No longer for specific products…• …but as part of underwriting process in general
Focus on Automated and Accelerated Underwriting
• Different underwriting paths based upon risk profile• Puts predictive models & automation to work
Underwriting Triage
• Including bringing in data streams from wearables, etc.• John Hancock – Vitality / Life Rewards
Increasing Focus on Lifestyle and Other Factors
• New platforms launching• Driving a focus on end customer experience
Explosion of InsurTech
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Emergence of InsurTech
32
InsurTech Characteristics
LifestyleEngagementValue over PriceCustomer First
SimplicityExperiencePersonalizationConvenience
InsurTechCharacteristics
InsurTech Market Snapshot
14
InsurTech
Distribution • Focused on generating quality digital leads
• MGA, MGU models
Blockchain• Potential game changer for life insurance
Customer Engagement / Customer Journey• Relentlessly focused on the customer experience
• Want to control all aspects of customer engagement
New Sources of Data • Structured health data available at the point of sale from
multitude of sources
• Social, financial and other sources of data for marketing and triage purposes
Focused on Disruption
15
InsurTech Company Analysis
InsurTech Company Analysis
Given the state of technology in the insurance industry, InsurTech companies are providing a way forward to Insurance 2.0
Multiple ways to assess partnerships• Investment
• Strategic
How to Find the Right Partner
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InsurTech Company Analysis
Investment• Companies are asking for your money to
support them; no questions are off limits
• What is the company bringing to the market and how is it different from what others are doing?
• What is their growth strategy? Will they be able to attract customers? Do they have a basic understanding of the complexities of the insurance market?
• How will they get to scale? And over what period of time?
How to Find the Right Partner
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InsurTech Company Analysis
Strategic• What type of partners do you need to make
a transition to Insurance 2.0? Technology, Distribution, Data Analytics?
• How will the partner increases your effectiveness?
• How will the partner help you grow in the new market?
• How will the partner help you provide a better experience for your customers?
How to Find the Right Partner
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Conclusions
Conclusions
Given the trends in the life and annuity markets, new strategies are required to spur top and bottom line growth
More customers are comfortable engaging digitally on their own schedule with a shorter attention span than in the past (3 second rule)
While new underwriting techniques and paradigms are important and “hot”, we need to make sure that we are continually monitoring, analyzing and adjusting to properly be assessing risks
The future is about Product. Customer engagement and experience are crucial to success going forward
No one company can “do it all” and Partnerships will rule the day
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Questions?
Tony Laudato, FSA, MAAAHannover Re
Vice PresidentPartnership Solutions
200 South Orange Avenue, Suite 1900 Orlando, Florida 32801
Phone: (407) 996-2450Mobile: (413) 695-2386
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