Life cover in the time of Covid
Analog to digital in 3 months
Sitting on the grass of the Arniston Hotel on New Year’s Eve, watching the fireworks usher in 2020, I could never in my wildest dreams have imagined how different life would be just 4 months later. Little did I know.
I co-founded Simply, a digital life insurance business, about 4 years ago. Our goal was simple – to protect the financial futures of millions. Our plan was to use digital marketing capabilities, behavioral science principles and a slick digital platform to disrupt the South African life insurance market; to make it easy for the average South African to buy and pay for benefits that made sense for them. It sounded simple.
The vast majority of low- and even middle-income earners were massively under-insured. Lots had funeral or credit life insurance policies – in many cases more than one of each – but few had life insurance, and even fewer had disability cover. In general, cover was expensive and churn was high. For years, big insurance companies had advertised these products on TV and sold them via field agents or call centres. They were super profitable and had no incentive to change.
Meanwhile the world was changing fast. Smartphones were proliferating, social media was exploding, consumers were increasingly confident online and reviews were trumping brand-strength in the purchase process. It seemed obvious the time had come for digital life insurance. We launched to market in late 2016 with a well-priced, flexible, fully-online offering comprised of life, disability and funeral benefits. We were confident word of mouth would catch fire and consumers would flock to us in droves.
While we have made good progress – we now offer 3 innovative products and have sold nearly 22,000 policies – it’s been far harder than we expected it to be.
Firstly, while the big incumbent insurers (largely) don’t have digital products, they spend hundreds of millions on digital as part of their overall marketing mix, driving up digital costs and crowding out startups.
Human nature has also played a role. The ‘status quo bias’, the preference for keeping things the same by doing nothing, has slowed digital adoption by consumers, brokers and insurers, largely because their outdated methods of operating have not been broken enough to justify a change. And the ‘optimism bias’, the belief that bad things happen to other people, has led life insurance to be seen as a nice-to-have, a luxury. In a choice between life cover and DSTV, DSTV wins most of the time.
Our anaemic economy hasn’t helped either. Not only has it aggravated the costly digital scrap for market share, it’s also led to a deterioration in collections and a reduction in the economic value of the average policy.
But that was then. A full 4 months ago. Things have changed. Dramatically.
Suddenly, traditional life insurers and brokers are on ice. Their agent and broker forces are sitting at home. Their sales call centres are largely closed. They’re unable to do medicals or blood tests. Many are shut for new business. They’ve cut back on marketing to shore up their losses. They’re no longer seeing digital as the new thing to test, they’re seeing digital as the new way to be.
There’s also been a seismic shift on the consumer side of the life insurance equation. Now people can imagine death or disability happening to them. Turn on the TV and you see people dying. Hospitals in Italy and the US are being overwhelmed. Life cover is suddenly a must-have. At the same time, the no touch economy is firmly here. People don’t want to meet face to face with a broker. They don’t want to go to a clinic or see a nurse; they definitely don’t want to give blood. They want reliable life cover, all online and right now. According to an article in insurancethoughtleadership.com, “demand for life insurance has spiked and is at its highest since 2011.”In one fell swoop, the status quo bias and the optimism bias have been obliterated.
And while the economy is now worse than anaemic – it’s shut down for all but essential services – we’re seeing decisive leadership and massive stimulus being pumped into the economy. I can’t pretend we’re not going to experience massive pain over the next 12-18 months. We are. But we’re also going to see some businesses – some that are well-suited to the new normal, others that can reinvent themselves – do better than they ever have.
So, life insurers and brokers, if you’re digital, if you can adapt quickly, if you can target accurately, the future looks good.
At Simply, we’ve seen strong growth since the beginning of March, with sales up around 30%. It seems fear and consumer preference for a ‘no touch’ product is off-setting the shrinking pool of customers who can afford to pay for life cover. Growth has been particularly good in our digital broker channel, where we’ve enabled brokers to sell remotely in a secure, compliant way. They’ve grabbed the opportunity with both hands and more than doubled monthly volumes. They say it takes 3 weeks to form new habits. When the pandemic finally passes, our brokers will have learned new, digital habits that they’ll keep for life.
The time for digital life insurance has now arrived. Of that I have no doubt.