By Linda Koco
Contributing Editor, InsuranceNewsNet
LAS VEGAS, April 13, 2011 – A new type of simplified issue life insurance may enable agents to sell more life policies but it may also cause those agents to take a haircut in their compensation percentage.
“That’s not an easy conversation to have with agents,” said G. Michael Vaughan, associate vice president-individual protection, business development at Nationwide Financial, Columbus, Ohio. “People who make a certain compensation don’t like to talk about a lower percent.”
But since the new simplified issue approaches will result in more sales and in less time, agents “will end up making the same income or perhaps a little bit higher on the higher close rate,” he said.
The initial sale may be for smaller face amounts, he allowed. But after the agent makes the sale, the agent can go back later on to talk with the customer about other insurance needs and increasing the amount of life insurance.
Vaughn was one of two speakers who discussed the new simplified issue approach here during a breakout session at the annual life insurance conference sponsored by LIMRA, LOMA, Society of Actuaries and American Council of Life Insurers.
In the new model, simplified issue products are not just a matter of offering life products using simplified underwriting based on answers to very few health questions, the speakers indicated. Rather, it is becoming an entire simplified issue process.
This process uses technology to simplify the sale at each step in the transaction process from initial needs analysis through post-issue policy administration.
Vaughn showed a graphic outlining a model for this process that he said Nationwide is exploring. Because it automates processes throughout the sale, agents can complete transactions in as few as 10 minutes, he said.
Once agents see how easy it is to make a sale using the system, they like it, he said.
This is a good strategy to use to reach the middle-market, he pointed out. “We want those ownership numbers to go up,” he said, pointing to LIMRA research indicating that life insurance ownership in 2010 lower now than at any time in the past 60 years.
Greg Marion, vice president-protection products for USAA Life Insurance Company, San Antonio, said traditional simplified issue programs tend to be fragmented into niches. Many of the products are being sold to meet burial, mortgage and youth insurance needs, he noted.
Mass market future
But the future of simplified issue life is the mass market, he said, and the products will appeal to “anyone, anywhere, any time.”
USAA sells to people in the military services, whom it calls “members.” Roughly 80 percent of interactions with members are digital and the remaining 20 percent are handled via call centers. “Simplified issue is important for our model,” Marion said. “And it is imperative for where we want to go on the digital side.”
One appeal is that the process makes for ease of business, he said. In addition, it fits in with the company’s “event-driven” approach (selling to members when they are experiencing key life events that trigger a life insurance need such as marriage or taking out a mortgage).
“A product we can sell in 10 minutes really helps us,” Marion says. His company offers three such products.
For simplified issue to be effective, the carrier needs a competitive process, he added. He said it needs to be competitive not just in pricing but also in products and features. “It must have competitive value so that the customer is not giving up anything by going to a simplified issue product.”
Also, the carrier has to be able to talk to the member or customer at the right time, when they have a need for life insurance, plus “the technology to support fast underwriting and policy issue,” Marion said.
His view is that simplified issue products should be simple — that is, easy to sell and to understand. “We want to be sure the product makes sense.”
Nationwide’s Vaughn said his company is looking at issuing products without bells and whistles, even without spouse riders and paid-up additions riders.
The pricing can be about twice as high as that for an underwritten life policy, he said. “But it is being sold in places where it wasn’t before. And people who wouldn’t have bought before now have coverage. It may be only a $5,000. $10,000 or $20,000 policy—but they are going to cover their funerals at least.”
Linda Koco, MBA, is a contributing editor to InsuranceNewsNet, specializing in life insurance, annuities and income planning. Linda can be reached at firstname.lastname@example.org.
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