‘Embrace technology or be left behind’. It is a phrase intermediaries often hear when digital services are rolled out by incumbent providers or new market disrupters. But it is worth reflecting that every organisation – including the biggest behemoths in the economy – have to embrace digital to stay ahead of the curve.
That is the philosophy of Bernie Hickman, CEO of Legal & General Insurance since December 2018, who has in recent months been masterminding the launch of Protect, a digital group insurance platform which partners with financial wellbeing provider Salary Finance to bring a new level of personalisation and flexibility to group risk products.
Talking to Hickman about both the challenges and opportunities of using Big Data to be more effective in delivering health and protection products to customers, it is apparent that providers like Legal & General have to tread a careful line between embracing the techniques of Facebook, Amazon and Google, and protecting their image as non-intrusive providers firmly on the side of the customer. While L&G may not have access to deep personal information about individuals, their behaviour and their browsing history, the big tech companies like Facebook, Google and Amazon do. So part of that balancing act is ensuring the tech giants don’t come in and dominate the life sector.
“When we gaze into the future there is always this question about whether big tech companies threaten financial services companies, using data advantages that we either haven’t got or don’t want to have, or don’t think it’s right to do. That’s something we have to weigh up,” says Hickman.
“No industry is undisruptable from big tech companies or tech start-ups. It should keep us on our toes as an industry – keep us honest, and never think ‘they’ll never come for us because we are too regulated’. The only way they never come for us is if we innovate to such an extent that there is not a lot of innovation left for them to come after. So they will think it’s a lot of effort and regulation to contend with. ‘If it’s already highly digital, with a great use of data, it’s not the sort of thing we are going to come after’. That is why the whole tech innovation and data analytics is something you can’t afford not to be part of. It is a massive opportunity and the only way to mitigate the threat from big tech and tech start-ups.”
Insights from the US
Hickman’s understanding of the data issues is assisted by the fact that he is also responsible for L&G’s US protection business. “It is a big business with 1.4m customers, and $1.4bn GWP premiums a year, but it is quite a small share in a massive market, so it is an area of growth opportunity. Interestingly technology hasn’t been as quick to be adopted over there by insurers, including ourselves, which is somewhat frustrating. So we have been pursuing a technology and data strategy in the US as in the UK. It is several years behind the UK as a market. So it’s a great opportunity,” says Hickman.
“On the other hand US insurers have access to data sources that I don’t think the UK will ever have access to. You can find out in real time a prescription history for every customer, for all the prescription drugs they have been taking for the last five years, which I don’t see on the horizon in the UK. The customer has to give permission, but you can buy access to it once they have done so. It has taken a data provider a long time to set this up over a range of pharmacy shops to piece this all together.”
Hickman agrees that this highlights some of the Big Data issues stalking UK insurers, but he doesn’t think this particular version of customer insight is coming to this side of the pond any time soon.
“I think the UK feels pretty strongly about data protection and data privacy, and I don’t see that changing going forwards,” he says. “With all personal health data there are dimensions of it that need to be worked through and personally accepted. We need to be thoughtful about that as an insurer,” he says.
But L&G has lots of other information about customers from other channels. If the silos between different product lines do, in a super-digital future, get broken down, could insurers find themselves presented with data they wish they could unsee?
“Wearables is one area, and if you have got access to a lot of data about what people buy you can deduce a lot of things from that, and it is important that people are aware of that and happy with that. It is down to the individual to decide whether they are happy with different people having that access. We are very careful, mindful of regulation, mindful of society and ethical issues, and at the same time we will explore things where customers are interested in it and there is a use for it, we are open- minded to it. So if we can get access to a wide range of data to make our journeys easier, we are open-minded to it,” he says. “When it comes to protection what you are really interested in is their health situation – whether they have had any heart problems, cancer, strokes, that sort of thing. There’s not a lot of purchasing data or other data that is going to replace that knowledge,” he says.
New platform
The new Protect proposition enables employees to dial up or down cover across group life, income protection and critical illness and buy extra cover on a voluntary basis. The solution is aimed at businesses with 500+ employees, and aims to bring employees a 24/7 seamless digital experience, extending access group life, income protection and critical Illness cover to entire workforces at no extra cost for the employer.
Personalisation is key to benefits across the market, and L&G is putting its money behind a solution which allows employees to do that – describing Protect as a market first in this respect.
“Protect has received a lot of positive feedback and we are looking forward to rolling it out to as many employers as possible,” says Hickman.
So what other innovations would Hickman like to bring to L&G’s protection offering going forward?
“Around looking at health and linking that through to premiums. It would be a nice thing to be able to do – we haven’t done anything like that yet but it is something we have always had on our radar. Other companies have done, more in the retail market than the group market, but it is something that could really nicely bring everything together – value-added services with some reflection that if you look after yourself and keep good physical and mental wellbeing, there’s a reward for you.
“It is in our thinking – this is not something we are bringing in soon. It is a possible next stage for Protect – we could bring that physical linkage into the top-up pricing. It’s something we’d like to explore.
“It’s not happening soon but it’s an obvious next place to go, to build on the engagement and wellbeing of the benefits you are already providing. Something that builds up into some kind of reward system, whether that is discounts or more tangible rewards.”
Protect offers access to voluntary cover in a way that is cheaper for the end customer than cover bought directly. Does this create a challenge for providers like L&G that offer both?
“I think they are very different markets right now, accessed in very different ways. I don’t see it in the short term, but it will be interesting to see how it develops. We think with Protect we can bring together a hybrid product almost, bringing the best of retail protection with its personalisation with the best of group cover organising it via the employer and getting economies of scale and getting engagement with employees, and we think that’s a good thing to explore from many different angles. Quite where that ends up will depend on how good a job we do in rolling out Protect. But it is going to be a long time before it is noticeable in a group versus retail context.”
Market opportunity
Feedback from across the workplace protection sector is that 2021 presents a massive opportunity. “People are more aware of their own mortality, and we are seeing extra interest from employers when it comes to their employees’ wellbeing. The pandemic has shifted something. It has prompted everyone to think a bit more compassionately on everything and that includes employers thinking about their employees. There is greater profile for the social good protection cover can deliver for employers, employees and individuals.”
Balancing the books
Group risk has been on the receiving end of a lot of love for being there for employees and employers when it really matters, paying out to help workers and their families deal with the worst ravages of the pandemic.
But someone has to pay in the end. In the same way that Chancellor Rishi Sunak will have to switch from the popular business of giving away money to bringing it back in again, so too insurers have to figure out just how much this challenge to life and health is going to cost them. The Institute and Faculty of Actuaries estimates that of all group risk products it will be income protection that could see the highest claims hikes , driven in large part by employees suffering from mental health issues. Critical illness too could see premium increases, if missed diagnoses lead to more serious conditions in the longer term, although to date claims are down, reflecting the fact that many customers are not being diagnosed at all.
Pricing Covid
So how does the chief exec of a life office price something like Covid-19 into future premiums?
“If vaccines roll out at speed and we get back to normal in February or March, will this all evaporate to nothing?” says Hickman. “You basically have to get as many expert opinions as you can. In the end it becomes as much an art as science. We have never seen this before – if the hypothesis is that isolation is bad for people’s mental health then that is clearly a concern.
“Income protection is more of a risk than critical illness cover. We’ve seen a reduction in critical illness claims. We expect this to catch up as the NHS catches up with diagnosis. But I don’t think it will be material.” Hickman says not surprisingly, 2020 has been a year with a higher number of death payouts. “We’ve had a torrid year, but it’s for years like this that we exist. We’re not complaining – we are treating this as a one- off event.”
Looking forward
And where does he see the market a decade from now?
“The use and quality of data will change. It makes for a manually-intensive quote process for intermediaries. If you are just processing stuff, these roles will be replaced by more technology.
Technology i s about making intermediaries look better and be better at their job, augmenting what they are doing as people. If they are employing people to get quotes and not add any value, those are the areas that I would expect to change most over the next five to 10 years.”
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