Sherry Chan is the Chief Strategy Officer of Atidot, an AI cloud-based platform, tailored specifically to the needs of the life insurance industry, enabling insurers to grow their customer's Life Time Value and create new revenues. Sherry was interviewed by Michael Fiedel, a Managing Director at InsurTech Ohio and Co-Founder at PolicyFly, Inc.
Sherry, why has innovation in property and casualty insurance been a more predominant topic of conversation versus innovation in life?
“It's the structure of property and casualty (P&C) insurance versus life insurance. If you think about the property and casualty timeline for its customers, it’s an annual renewable process, so for example, when you buy your car or homeowners insurance, it gets renewed every year. By nature of that, the P&C agents get to re-engage with the policyholders on an annual basis, which provides them more opportunity to touch base with them, see what their insurance needs are, and be on the forefront of their minds. Whereas, if you think about life insurance, it has a much longer timeline because once you issue a policy and go through the underwriting process, usually it's decades before a life event triggers a payout and re-engagement with the insurance company.
If you think about P&C, many parts of the country, if not all, do require it as part of a purchase. For example, in Ohio, you can't walk off the lot without car insurance. By nature of that, P&C is top of mind for many folks. On the other hand, it is not required by law that you own a life insurance policy.
If you take this all into account, then it makes sense that when the insurtech startups came into the space, they started with P&C because it's generally less involved than life insurance.”
Where are the gaps in life insurance that need innovation?
“There's been two very big trends. One is customization. If you go into your Hulu or Netflix, recommendations automatically pop up based on your prior preferences. Same with Spotify and even groceries. We're moving into a very customized world. The other is most things are becoming digital. If you think about these trends in the world and you think about life insurance, you see that there's a lot more opportunity for life insurance to grow with customization and digitalization.
We should be asking ourselves, ‘Why isn't there customization for life insurance?’ Life insurance is so complex. People oftentimes are overwhelmed with the information, so why isn't there a platform to recommend a certain policy to cover your specific insurance needs?
Also, the life insurance process for the policyholder is high touch – from knowing your insurance agent to going through the underwriting process and beyond. A lot of it can be enhanced with digitalization. For example, you no longer have to go seek an agent, you can be browsing Google and an agent could be recommended to you based on the AI that's behind the algorithm for your lifestyle. You can even give authorization to allow the insurance company to have access to medical records, so you don't have to get your blood drawn or go get additional medical tests because that information already exists. Addition to efficiency, another advantage of this approach is it provides data points throughout a time period, allowing trends to be observed, as opposed to just taking a snapshot of your health at a single point in time. Accelerated and perhaps continuous underwriting is just one area, but overall, there is a lot of opportunity for technology and innovation within the life space when you think about the entire value chain.”
What is the customer's current perception of life insurance?
“Many studies have shown that financial literacy is an issue in the country, but within the financial literacy umbrella, there's also insurance literacy, which is even less understood than financial literacy. A good amount of people don't know the various types of insurance out there. If you break insurance literacy down, there's group health insurance, car and homeowner's insurance, life insurance, pensions, etc. People tend to be most familiar with group health insurance because it’s often offered through their jobs. Life insurance, however, is not as commonly owned by individuals, relatively speaking, so life insurance literacy is even lower.
Coupled with a low understanding of the products is a perception of the cost being high. There's many solutions to combat that. One is letting them know there are different types of life insurance policies, where some products fit certain needs better than others. There are various opportunities to decrease the cost of insurance by utilizing AI tools to best match customer needs with the proper product offerings as well as lowering overhead expenses for insurance companies.
Another perception of life insurance is that it's not customer centric. Insurance products are often designed and then customers choose from what is presented to them. Keeping in mind the customization that we talked about, there are countless variations in insurance products that can make it a better match for policyholders. The lack of this customization has oftentimes left policyholders underserved or even underinsured because they don't have the right insurance policy for their needs.”
What are some of the realistic and immediate improvements that can be made in terms of the customer experience?
“If you look at the compensation structure of insurance agents, it’s weighted much more heavily on new business premiums than the annual premium policyholders pay. Their commission is only a small percentage in the ongoing years, so it's natural that the agents would try to sell more new business than try to retain the policies. However, the in-force period that can be decades-long, offers a very big opportunity for insurance companies to prevent revenue leakage. In the in-force stage, there are various things that insurance companies and agents can do.
One is to understand that because these policies span such a long period of time, a policy that was sold to somebody in their twenties, for example, might not be the right policy for when they’re in their thirties. If you reflect on your own life, a lot of life changes probably happened between your twenties and thirties, including maybe starting a family and purchasing a house. Evaluating the policyholders' needs throughout their lifetime can provide upsell opportunities for insurance companies.
Also, we focus on just initial underwriting when one buys a life insurance policy, but why not have continuous underwriting where it can provide opportunities for the policyholders to adjust their premiums and products so their insurance coverage properly matches their current lifestyle?
Additionally, in any policy, insurance companies are dealing with the potential that the customer may lapse. It could be due to a variety of reasons such as a life circumstance change like losing a job or getting a divorce, which can affect one’s income and their ability to pay their premiums. If agents are better equipped with data to know who may be imminently lapsing, they can engage with those policyholders to offer various solutions to retain them.
These are just some of the solutions Atidot works on to help carriers better manage their in-force book of business.”