Dror Katzav is the CEO and founder of Atidot, a cloud-based, SaaS platform tailored specifically to the needs of the life insurance industry. Dror was interviewed
by Michael Fiedel, a Managing Director at Insurtech Ohio and Co-Founder at PolicyFly, Inc.
Dror, what are some interesting challenges that you see with life insurance, particularly from a US perspective?
“The key challenge the life insurance industry has been facing in the last few years is that customer expectation has dramatically changed. We've learned with Apple, Amazon and all of the various new services, that our providers could provide us with a completely different level of service, and we're expecting it from our providers: banks, mobile carriers, and insurance companies included. That's the pinnacle of the challenge that they're trying to deal with. On one hand, Gen Z-er's purchasing behavior is completely different. On the other hand, Millennials and Gen X-ers have changing needs, and all of this is happening in a very rapidly changing economy.
Before, during and after Covid the economy was booming and busting. Everything was changing very quickly. For many insurance companies, that was the first time they had seen something like that happen in their lifetime. For example, interest rates going up is something executives in the industry have never seen; definitely not from the C-suite. What does that mean to an insurance company? A change like going full digital during Covid is a change, and changing the whole stack of technology is something they never experienced from their position. Those changes create a lot of challenges for the companies adapting to new expectations from the customer, new technology and a new environment. Additionally, this comes in a generation where most policyholders buy their policies from agents, and the agency business is dramatically shifting and decreasing in many industries.
Service providers everywhere are being squeezed, insurance agents included. So, you find yourself in a situation where most people used to buy their policies from a distributor who is no longer part of the economy or has a very quick turnover. Additionally, the population is aging. Millennials don't want to buy from a person, they want to buy online. The insurance company was never built to provide that type of service; certainly not at the scale of a company like Amazon, so everything started cracking. Interest rates were rising, the markets were tanking, Covid was hitting… all those things were happening while nobody was there to provide the proper infrastructure to support it.”
Can you share with us a current example of how a policyholder's insurance experience can be improved through better communication from insurers and any overlap where you see Atidot trying to achieve those goals?
“To me, the communication challenge is at the core. What I have experienced is that most people end up buying policies from agents, the agents disappear, and they end up owning a very complex financial product that they don't understand and an insurance company that was never built to provide service. People end up in a situation where their needs are changing, but their mental mindset is that they already own their policy. It's probably there to protect them, but it doesn't necessarily do the things they need it to do because nobody ever came back to check it. For example, in the last few quarters when the interest rate changed, everybody was looking at their mortgage interest. When the market tanked, everybody looked at their markets. Even though life insurance policies have interest guarantees and investment vehicles, nobody went back and checked what their life insurance policy did in light of this economy.
On the same note, customers do end up buying more policies, but they aren’t buying from the same carrier. People are retiring with nine life insurance policies and only 1.05 to 1.1 are from the same provider. So, they do end up buying more, just not from you. Insurance companies could be more proactive about being in front of their customer.
Usually, you (the policyholder) will get a letter in the mail from your insurance company. It’s 500 pages written in very small print that nobody reads or understands. It just states the amount you owe in red, bold letters. You're not sure what you're paying it for, which creates a disconnect. Unsurprisingly, we’ve discovered if you put the right message and content in front of the customer, it's very easy to engage them. If you provide the information about why it is a good idea to invest more or less because of a variety of changing conditions in the market it's easy for the customer. But to do that, you have to have more sophisticated technology and data to analyze to know what challenges and opportunities you have with your policies and how to frame that in the right context for a client.
Instead of that 500-page letter that you never open, I can just send you a message (email, app message or an ad) with a note that says why you have the policy, the value in plain English and what it’s worth. Then, if you’re interested, there is a link to book an appointment. It's very easy to engage the customer, but that level of communication is currently missing and it's part of what we provide to carriers. To achieve that level of communication, you have to have sophisticated AI and data science. To an extent, that is the core of our technology.”
How do you track the performance of the workflows and processes that you are improving?
“There are a few ways in which we measure. First and foremost, we make sure that our models are accurate. What we find when we work with the carriers is that our models are 10 to 15 times more predictive than the carrier’s internal models. That's not to say that their internal data teams aren't effective, their internal data teams are doing a great job, but we see broader data and hone in on very specific models and challenges that allow us to be more predictive and accurate.
The second thing is for this insight to have a business impact. We have found that we can help you identify people with potential challenges or issues with their policies at a super high (60-80%) accuracy. We can also predict behavior at a very credible rate. When you can provide these types of insights, agents working on the platform can grow their productivity by up to 3x. So they are selling three times more because now instead of going and mining their country club, they can get insights on who needs what, when, place those meetings, and then book the policies. It's so much easier for them.
From the consumer perspective, we can retain people at a much higher rate which is good because it means that they have the coverage they need when they need it. Additionally, we find that people are dramatically underinsured. On average, people need to buy additional coverage every three to four years. But also on average, people have somewhere between 50-25% of the insurance they should have. So, there is a huge issue in the market today where there are both people who don’t have any insurance and those who do, but are underinsured because they never re-evaluated their coverage. By addressing those issues, people have more protection, better coverage, and their coverage is better suited to their financial goals and family needs. The carrier, producer, agent and consumer all benefit from having better data and better predictability.”
Looking ahead, what are some of the future-forward gains that you believe will come to fruition through these improvements in customer communication and experience?
“Essentially, I believe that what people want is to not re-think their life insurance every month, quarter, or year. People think about it almost like self-driving cars. What you want is to get from point A to point B. You want to keep this lifestyle when you retire, or your family to keep this lifestyle if something happens to you. Most people don't understand and don’t want to understand the economy. What they want is to give their money to somebody who will ensure them that they will be able to go on as many vacations, own as many cars and live in a big house when they retire or if something happens. Eventually, when the industry gets more sophisticated (and we’re on the way), we'll get to the point where I'll just prompt you when you need to take action or make a decision to make sure that I give you the best product and advice based on your current situation.
In Israel, where I grew up, it is mandated that every year you sit with an agent to review and re-evaluate your policy regarding investment returns, fees, coverage and more. There are challenges with that system as well, but it's way more common for people in Israel to know how much money they have with their pension, life insurance, annuities, savings account, et cetera. Providing this level of service here would change the industry completely and would be pivotal because the expectation from the provider would be higher. They're trying to provide you with better financial services while you are getting better products and coverage over time. That's our aim. At that point, people would have the right coverage so, regardless of what happens to them, they have the right protection to maintain their livelihood.”
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