Session 75: Disruption of

Insurance Product Distribution

Kevin Pledge

CEO and Founder

Acceptiv Inc.

www.acceptiv.com/LAS2015

How much personal protection life

insurance will be sold online 5 years from

now?

1. 0 – 9%

2. 10 – 19%

3. 20 – 29%

4. 30 – 39%

5. 40 – 49%

6. 50 – 59%

7. 60 – 69%

8. 70 – 79%

9. 80 – 89%

10. 90 – 100%

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Do you believe that online distribution

could disrupt your business?

Size of Insurer

Small Medium Large NA

Yes 1 2 3 4

No 5 6 7 8

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Agenda

1. Trends

2. Innovation in Insurance Distribution

3. Case studies

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Digital Disruption – Other Industries

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10 years ago you would not

dream of banking online – “it’s not

safe”

5 years ago few people would buy

groceries online

15 years ago Travel Agents would

claim that you cannot book

vacations online – “it needs a

personal touch and experience”

Online Retail Sales

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Life Insurance Industry - Barriers to Entry

Highly Regulated

• Prudential oversight of insurance companies

• Capital adequacy

• Policyholder protection

Complex Infrastructure

• Systems

• Processes

Brand Reputation

LIFE INSURANCE IS SOLD NOT BOUGHT

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Trend – Life Insurance Sold in US

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Trend – Life Insurance Sold in US

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Trend - Uninsured households

57% of families with children will have immediate financial

trouble if the primary wage earner died

50% of households believe they are underinsured

30% of households have no life insurance

Insurance Gap - $3T in US, 1T in Canada

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Trend - Agents

• 85% of consumers research insurance online

• Most consumers happy doing business online

• Disconnect to consumers – average age of

agents now 57

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Can innovation address these issues?

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Innovation

Is possible due to trends creating a discontinuous opportunity

Will question an existing paradigm

Often involve looking at the bigger picture or from another perspective

Timing is critical

Disruptive Innovation will be:

n times better, at

1/x of the cost

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INSURANCE IS SOLD NOT BOUGHT

1. Yes, this is true

2. No, insurance may be bought

Paradigm

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Perspective

Look at the bigger picture

…..from the customer perspective

Issue is NOT

agent productivity

Customers

want choice

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Timing

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N times better at 1/x of the cost

Metrics to beat:

Time to Issue 42 – 47 days*

Capacity Depends on number of agents

Cost $500 - $747** + commission

Sources:

* 2009 LOMA Service Turnaround Times Survey – Term Products: 47 days

**SOA 2010 Expense Study Average Per Policy $500 weighted, $747 unweighted

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What makes disruptive innovation difficult?

You actually have to do it

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Life Insurance Industry - Barriers to Entry

Highly Regulated

• Prudential oversight of insurance companies

• Capital adequacy

• Policyholder protection

Complex Infrastructure

• Systems

• Processes

Brand Reputation

LIFE INSURANCE IS SOLD NOT BOUGHT

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Case Studies

“The future is here,

it’s just not very

evenly distributed”

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Beagle Street

UK New entrant – not really an insurance

company

Not encumbered by existing distribution

Online only

No advertising for first two years

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The Problem

The new business process is not customer friendly

Indicative Quote

Underwrite

IssueOfferAdd’l Q’s

Modify Application

Apply

Underwrite

evidence

Further Questions

multiple hand-offs

lack overall process control

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The Solution – North America

Indicative Quote

Underwrite

IssueOfferAdd’l Q’s

Modify Application

Apply

Underwrite

evidence

Further Questions

Indicative Quote Apply

UW at claim!

or

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The Solution – Beagle Street

Indicative Quote Apply and UW

Buy

> 5,000x faster

∞ scalable

(85% of the time)

1/10 of the cost

Fully Underwritten

No fluids or additional

evidence

Cover up to £750k

Better lapse experience

Ave issue time 12 mins

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What about barriers to entry?

Not an insurance company

• Focus on distribution

• Partnerships – Reinsurer, Traditional Insurer

No complex systems

• Focus on distribution – outsource the rest

Fresh approach to branding…

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www.acceptiv.com/LAS2015

Can this be applied in North America?

Market research tested

Customers go to Google for

information

Facebook and Google for

advice

Disconnect with agents

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Can this be applied in North America?

Market research tested

“Almost half of participants found the

value proposition [to buy directly

online] very appealing (rating of 8 or

more out of 10); these results are

encouraging.

Years ago, when evaluating consumer

interest in the ING Direct value

proposition, our goal was to find

interest in only half as many target

group members (who we defined as

innovators).”

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• 10 – 30 year term insurance, up to $500k

• Coverage age range 18 - 70

• Applied UK experience and P&C lessons

• Simpler, yet more flexible than current products

• No medical evidence referrals

• Online, with offline support if needed

• On cover in 15 minutes or less

Full UW + Lower cost = Lower premium

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T10 - $18.65

T20 - $24.80Online Quote and Application

Simplified and Manual Underwriting

T10 - $20.00

T20 - $26.04Online Quote and Application

Basic auto and Manual Underwriting

T10 - $20.10Online Quote and Application

Basic auto and Manual Underwriting

T10 - $20.30

T20 - $30.69Online Quote

Manual Application and Underwriting

Where did this put Teachers Life?

Insurance

T10 - $13.42

T20 - $21.08

Online Quote, Application and Buy

Automated underwriting immediate

decision including rating if applicable

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Do we need to innovate?

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$3T uninsured

New Entrants?

Synergy

$2.7 b

term market

$14.5 b

protection market

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www.acceptiv.com/LAS2015

Thank You

Kevin Pledge

CEO and Founder, Acceptiv

kevinpledge@acceptiv.com

416 949 8920

www.acceptiv.com/LAS2015

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