Episode 17 with Mike DeKoning, SVP, Insurance Solutions at Thrivent – Transformation and Innovation for the Carrier of the Future

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Beyond the Challenge is a podcast where executives in the insurance and financial services industry share their insights and experiences. Hosts Kevin and Sandy Dougherty talk with today’s top business leaders about what keeps them up at night and the biggest opportunity organizations can capitalize on today. We encourage you to listen, share, and subscribe to our program.

Kevin and Sandy Dougherty each have over 20 years of experience in insurance and financial services, corporate leadership, and executive search. They’re the owners of Global Corporate Solutions and Global Corporate Leaders. Global Corporate Solutions partners with organizations to gain efficiencies and contain costs. Global Corporate Leaders partners with organizations to enhance and evaluate talent.

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Welcome to Beyond the Challenge. Here are your hosts, Kevin and Sandy.

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Sandy: Today, we’re talking with Mike DeKoning, Senior Vice President Insurance at Thrivent Financial. Mike is a reinsurance and workplace executive who has held executive roles at Allstate, Munich Re, and Manulife. Mike, can you tell us a little bit about yourself and how you got into the insurance industry?

Mike: Sure. So, thanks for having me, first of all, I very much appreciate it. My sojourn, so to speak, into the insurance business goes back many years. My father actually was an insurance broker so I remember I was in high school and I was pretty good at math and wanted to do something math related but didn’t wanna be an accountant or a teacher so I remember talking to my dad, he was in the living room where he was reading his newspaper as he did most nights and it was high school and I said, “You know, I’m thinking of doing something with math but I don’t wanna be an accountant or a teacher,” and he said, “You ever thought of being an actuary?” and, like most people, I said, “What’s that?” Learned a little more about it and actually met with a couple of actuaries that my dad knew at the company that he was doing a lot of business with, which was actually the Canadian subsidiary of Commercial Union, which is a big UK firm, but it was on the life side and I met with a couple of actuaries and it was interesting and, so, 35 years, 40 years later, here we are. So that’s how I got into the insurance business in the first place. It’s all my dad’s fault. 

Sandy: I love it. Mike, all sectors face challenges, but in the insurance industry, the list seems excessively long. Many mutual and fraternal carriers seem to be struggling to stay relevant while others are embracing new technology to help scale and cut costs. What do you see as the main barrier to innovation for mutual and fraternal organizations?

Mike: I think the insurance industry as a whole, I’m not sure there’s a lot of difference between fraternal and mutuals and stock companies here, I mean, one of the one of the biggest challenges that we face is when you’ve done something very successfully for a long time, it’s difficult to think about why you need to change. What’s that burning platform? I think the difference between stock and potentially mutuals and fraternals there is, at least on the stock side, you’ve got analysts every quarter telling you how you’ve gotta do things differently or at least asking you how you should be doing things differently. So that burning platform might be a little bit more evident by the daily ticker that you see, maybe a little less obvious for mutuals and fraternals. So there’s a part of the — one of the barriers is a mindset, you know? Kinda, “You’ve done it this way successfully for so long so why change?” I think there’s a couple of other things. One is we’re in the long-term insurance risk business so we have a lot of products that have been around for 30 and 40 years and so we have a lot of legacy systems that go along with that. So, when you think about doing something different, sometimes, you gotta think about how it fits into your current landscape and you tend to get a little stuck there. There’s a lot of cost pressure when it comes to especially legacy technology. The last thing I would say is, as an industry, I think, historically, we’ve been very product centered as opposed to customer centered. So, I mean, I can say 5, 10 years ago, there was still a debate among many carriers around who their customer was. Was it the agent? Was it the broker? Was it the actual end customer? I think the verdict is in on that. I think everybody knows that the end customer is the customer, but there’s a lot of constituents involved. So I think when your industry has kinda grown up without being maybe as customer focused and customer centered, I think that also creates some barriers to innovation. So, I would say those are the three main areas from my perspective.

Sandy: So then how difficult is it to change those traditional carriers into more of an insurer of the future, to move forward and look at the customer centric?

Mike: Sure. I mean, obviously, if it was easy, you know, we’d all be there already. So it’s obviously a huge challenge. The legacy systems and integration, even if you put a new customer experience layer on top, some of the legacy systems and how they interact with each other is clearly an issue. But one of the other things I always say is that if you think about companies that are truly customer experience focused, they kinda grew up as customer experience focused, right? You know, everybody can name a company but if you think about Apple, Apple didn’t think about building a different or a new cell phone, they thought about the iPhone in a whole different way and it was truly customer centered. And so the whole design of the product becomes customer centered. And so, as we are making this shift as an industry, and we’re doing this very actively at Thrivent these days, as we start to think about designing what you do and what your whole customer experience is, when it’s completely designed around the customer, that takes a lot of change in thinking and new perspectives that you’ve gotta bring to the table. That also, of course, leads to different staffing discussions and how do you balance new way of thinking with your traditional way of thinking and so on and so forth, so there’s a lot of challenges as it relates to that and that’s why it’s a little tougher than it sounds.

Sandy: How do carriers, I guess, embrace that change to get long-term growth?

Mike: Yeah, so I think kind of this in two pieces. There’s kind of an innovation aspect and there’s a transformation aspect. Transformation is how do you change what you do today and how do you do it differently. So, in both cases, for both innovation and transformation, I think you actually need to have a separate dedicated team to doing it. To me, the difference between innovation and transformation is how do you integrate it into the organization. So, let me give an example. On transformation, if you wanna change an organization from how you do things today to how you wanna do them in the future, you’ve gotta get a group of people who are dedicated in thinking about that like every day, but they’ve gotta have some basis and, I’ll say, connection back to how things are actually going on in the company. Because you can’t just, you know, ignore the entire in-force of your business, right? So transformation has to have this real balance of forward thinking, thinking about something different while also bringing in the subject matter experts so you can literally transform from an old way of doing things to a new. For me, innovation, again, I see it as a separate team but that integration back into, I’ll call it the mothership, if you wanna call it that, has to be done much more carefully. I remember hearing a speaker talking about how to do successful innovation and they talked about organizational antibodies. And, of course, you know, with COVID, we all know a lot more about antibodies than we ever thought we would, right? But if you think about what antibodies do, they attack something that’s in the body, the things that are not supposed to be there. You know, one of the barriers to innovation is those organizational antibodies, finding a way to say not no but trying to fit it back into the box that they’re used to before that innovation ideas had a real chance to fly. So there’s lots of examples of where those organizational antibodies will pull innovation back from being truly innovative because it’s different. That’s one of the reasons why I think, from an innovation perspective, testing and learning, taking things to market, doing things in a really different way has to be done quite separate from the rest of the organization and allow it to germinate long enough so that you can truly measure the success of that innovation exercise or that innovation activity before you kinda try to pull it in. Because I think that’s where the difference, I think, between innovation and transformation is. How you integrate it back into the organization is the difference between those two but both, in my view, need a real separate focus and separate team of people thinking about it.

Kevin: What do you see as the next product of the future in the insurance industry? 

Mike: Well, if I knew exactly what it was, I probably wouldn’t be telling you, I would keep it for my new employer and, you know, we’d bring it to market and do great. I mean, I think there’s lots of things. I mean, if you look at the challenge of the long-term care product as a standalone product and you look at how the industry has developed combination products, whether they be annuity long term with long-term care benefits or life with long-term care benefits, that, to me, that combination product is, (a), from a risk perspective, much more reasonable, but, frankly, if you think of it also from a customer perspective, it’s actually dealing with a customer need over time, as it evolves over time. When I’m 45 or 50, I probably am not thinking yet about long-term care, I need more of death benefit protection and, over time, it morphs, right? And so I think that type of product, that combination product has a great future, not just for long-term care but things like critical illness benefits and so on and so forth I think have other opportunities. The other area that I think we need to do a better job of and it’s actually not a product concept, it’s actually more around — we have traditionally sold a product and then the customer can lock it away in a vault and as long as they keep paying their premiums, they don’t think about it anymore. And so one of the challenges as an industry we have is the number of touch points we have with our customers and the frequency of those touch points and the amount of engagement we have with our customers is not where they need to be. So I also think that the future of insurance products, whether they be, obviously financial products in general but insurance and annuity products has to incorporate a significant additional proactive customer engagement or else we run the risk of being a product in a financial plan, not the financial plan as a whole. So that’s something that I think that we as an industry are all working on and I think it’s got a lot of legs going forward.

Kevin: I think a good follow-up to that is kind of the next question I have in mind is how can a reinsurer help carriers shape the product and distribution landscape?

Mike: There are almost two different answers. One is the product side and one is the distribution side. So, on the product side, especially, I think that reinsurers are experts at evaluating risk and truly understanding how the underwriting process influences the financial consequences and the risk consequences of the business decision that the company makes. So, clearly, when you look at accelerated underwriting and you look at automated underwriting, all sorts of new data sources instead of using blood and using different medical and other data, they’re at the forefront of that as it relates to improving the customer experience in the underwriting and issue process. So they’re really at the bleeding edge of that, no pun intended. On the distribution side, it’s a little more mixed. There’s a couple of reinsurers who are trying to use some of that expertise as well as partnerships with fintech firms to go direct, to offer direct to consumer type insurance products almost as competitors to their clients, to their insurance company clients. And then there’s others who are helping carriers work with those partners and distribution, of course, comes with its own kind of challenges for carriers, right? Because if you’re gonna completely change your distribution methodology or if you’re gonna go direct, that’s a little more challenging because of the distribution conflict that companies have to manage. So that’s where, in my view, anyway, reinsurers are — it’s a little bit more of an open landscape on distribution than it is on an Allstate product and underwriting.

Kevin: What type of strategic partnerships do you see working the best for carriers? 

Mike: Yeah, so I’ll go back to distribution partnerships to start with. I think distribution partnerships are a little more challenging because of the distribution conflict. If you’re gonna partner with a fintech firm or, frankly, an Amazon or wherever you wanna do it, and you’re a traditional carrier with a traditional distribution, how do you manage those two conflicts? That’s actually a little bit more challenging. But that said, I think where strategic partnerships have a huge opportunity for us is improving and helping with the customer engagement, right? There’s a whole number of fintech and insurtech firms that really work through whether it’s ongoing customer engagement, promoting healthy lifestyles, there’s some out there that specialize in providing services and community for certain types of athletes, whether they be triathletes or whatever they would happen to be, obviously, those types of engagement platforms and then you can incorporate the insurance aspect is really, really interesting and I think has some really interesting strategic partnership possibilities. Where the challenge always lies is who owns the customer, right? You know, because is the customer a customer of that engagement platform and then they’re selling other services and if one of those services happens to be insurance, is that customer the customer of the engagement platform or the customer is the customer of the insurance company? And you gotta really think that through. My experience is, if you don’t think that through upfront, it becomes very problematic. If you think it through and you really figure out how to do it right, there are some burgeoning examples that, frankly, look to have some pretty significant success.

Sandy: With Google and Amazon getting ready to come into the insurance marketplace, how do you think that’s going to affect the traditional insurer across the board and how are they going to have to make changes to adapt to that?

Mike: Yes, so it’s a great question. I don’t think that there are many of the players from outside the industry that actually wanna take risk. What they wanna do is sell our product, right? So I think there’s a greater opportunity and I think they’re recognizing that as well, there’s a greater opportunity from a distribution perspective than there is from a carrier perspective. So, it’s a heavily regulated industry, it’s not as simple as it looks. It rarely is, but it’s definitely not as simple as it looks to sell a bunch of business. So I think that’s one thing that I would say for those companies is gonna be more on the distribution side than on the, I’ll say, on the risk-bearing side. I think the other thing that is really different is the long-term investment horizon and the long-term horizon of our business, right? If you think of the home and auto space, it’s shopped almost every year or every few years, it’s much more interactive. You know, my experience at Allstate, you got interaction with customers all the time, right? And even on the benefits side in my prior world at Allstate, you know, you have an annual enrollment so, again, you’ve got at least an annual decision making process, right? Our products are very much more long term in nature, they’re set sort of at a point in time and how we ongoingly engage with our customer is our challenge, but it’s also a bit of an impediment to new distributors. I mean, they don’t wanna sell one product, right? Amazon doesn’t work if you only go there once and, you know, you’re not gonna be a Prime member if you’re only gonna use Amazon once a year or once every few years. And that’s where I think some of those partnerships need to really be thoughtful in terms of how they work the frequency, the engagement, that kind of stuff is actually really different for our industry than it is for some of their core business so that’s where, you know, you go back to the strategic partnership question on — the ones that I’m seeing that are starting to get more and more successful, they’re more around of incorporating insurance into a broader engagement platform. That I can see, again, being a fair amount more successful.

Sandy: What do you see as the biggest opportunity for mutual or fraternal carriers over the next few years?

Mike: I think there’s a number of things. One is the long-term horizon of our business. And when you add low interest rates to that perspective, the current low interest rates and the prognosis that they’re not gonna go very high in the future. I do believe that mutuals and fraternals have a longer term investment and thought horizon and so I do believe there’s a really interesting opportunity there. And if you look over the last number of years the number of companies that have either exited or significantly shifted their focus, the stock companies who have shifted their focus away from longer term guarantees, away from longer term investment products, that’s where I think fraternals and mutual have a really, really interesting opportunity. The other thing I would say is if you do believe that customer engagement is really important going forward, 5 years ago, 10 years ago, I think a lot of people were really concerned about the future of the career distribution network. If you think about engagement being the future of your business, if you really believe that, I do believe that the career agency system brings an engagement and relationship side of it that is really different than we may have even thought of 5 or 10 years ago. So I do believe in that, again, is the career agency is more on the mutual/fraternal side than it is on the, I’ll say, the stock side so I do believe that the career agency distribution is actually a competitive advantage from that perspective as well.

Kevin: How have you seen COVID-19 change the digital strategy for carriers?

Mike: Well, so first of all, I think we have surprised ourselves by being able to continue to function as well as we have. I think most carriers, you know, if you ask them in the privacy of their own home or on a one-on-one, they would say that they’re a little surprised, pleasantly surprised at how well they’ve been able to function as we had to go 100 percent remote almost overnight. And now, it wasn’t without its challenges and it’s not without its continued challenges, but the fact that we have a lot of legacy technology and we have been able to adapt with it and continue to service our customers and sell product and so on and so forth is a testament to our industry. So, from that perspective, I think it’s been a real affirmation for our industry. That said, what I have seen is a significant increase in the sense of urgency to invest and transform technology. You know, I can give you an example. When I was with the group benefits space, we were looking at doing some major technology upgrades and technology transformations and when we talked to not only vendors but also consultants, I don’t think there’s a single one of the top 15 group benefits carriers in the insurance industry that isn’t undertaking, isn’t in some stage of a massive transformation. I don’t mean, you know, their underwriting system. I mean soup to nuts, front to back. And they’re either pretty heavily involved in starting it or is thinking about it but they’re deep into thought, they’re a quarter of the way through it or halfway through it. Very few of them are all the way through it but almost the entire industry, now it’s more focused, it’s more concentrated, right? The top 10 or 15 carriers control a higher proportion of the business than they do on, I’ll call it the individual side, but on the group side, as an example, I don’t think there’s a single one of the top 10 or 15 carriers that isn’t doing it and hasn’t significantly improved and increased their investment as a result of COVID. So I think it’s really kinda doubled down and forced people to think about doubling down on technology transformation and, with that, the customer engagement side of that technology transformation.

Kevin: Mike, what is the best decision you made that had a positive impact on your career?

Mike: Well, I kinda have — I’m five days into my Thrivent career so I have to say joining Thrivent and I’ll stop — no, I’m kidding. I hope so and I believe it is but we’ll see. So I’m an actuary by background and I started my career at Manulife Financial in Toronto. I only worked in the Canadian business for a couple of years but 20 years I was there so most of the stuff I did was either international or in the US market. But Manulife had a great actuarial program. They had this great student rotation program, they had this great development program for not only students but also for fully qualified actuaries. And so, all of it was extremely valuable in starting to see various sides of the business. And I was maybe five or seven years into my career when I realized that one of the things I really wanted to do was run a business. And the vast majority, if not all, of the actuarial career trajectories at Manulife led to Chief Actuary, Chief Product, or CFO type roles. They didn’t lead to business leadership roles. So I kinda had to break away relatively early in my career from the — coddling is not the — from the bosom of the actuarial program and start to break out of that, right? And to take operations roles, take business leadership roles that were kinda off the beaten path for the actuarial community. Now, I always had the benefit of knowing that if it didn’t work out, I can fall back on my actuarial side, but I would say early on in my career, I had this dream of being more of a GM, more of a general manager of a business, and I had to forge my own path to do that. I mean, it seemed risky at the time, when I think about it now, it probably wasn’t that because, again, I had the actual credentials and support to fall back on but that, to me, I would think was kind of the big turning point for me is that I had to kinda decide to forge my own path and follow it despite the fact that the leadership that I would talk to are kinda trying to point me in that traditional product and/or actuarial kind of role. So that was something — and so I had to keep kinda the discipline for myself even to go down that path. For what it’s worth, that’s what I would say. That’s how I would answer the question.

Kevin: Great answer. What advice would you give to someone looking to get into the financial services or insurance industry?

Mike: There’s kind of three things that I would say. One is be curious, the second is challenge people, and the third is be humble, and I’ll dive into that a little bit more. I think all of us have worked with people who come from outside of either our organization or our industry. So, first of all, I think we need that different mindset and we need that experience, but the ones who’ve been least successful are people who come in and say, “Oh, you guys, you’re so backward. Let me tell you how it has to be done,” and quite often, and it’s actually senior people who are actually relatively successful in whatever industry they’re in and they come into the insurance industry and they think, “Well, that’s obvious,” right? But there’s reasons why our industry is the way it is. Some of it good. Some of the reasons are good and some of the reasons not so much, right? So that’s why, to me, being curious, asking the why, understanding the why, before just deciding that it’s not appropriate, there’s a better way to build the mousetrap, whatever it happened to be, I think that’s why being curious is important. The second piece of it is challenging and there’s a way to challenge the right way. You know, there’s a way to challenge where it comes across as positive, as truly thinking about the right solution and then there’s ways to challenge that comes from a level of, I’ll call it arrogance, for lack of a better word. So, again, even challenging, if you’re gonna challenge people, I think you need to challenge them in the right way. And then the last is being humble and I think that that’s something that’s not the easiest, especially as you get more senior in organizations because, you know, a lot of people who get to be successful over their career, you know, you get a bit of a swagger about you. But, again, if you’re curious and you truly wanna understand the why and you can challenge in an appropriate way, I think that humility that goes along with that, that you don’t have all the answers, that the teammates that you’re working with have really good ideas and valid perspectives if they’re given the opportunity to express those, I think that’s where we, in the insurance industry, if we truly believe that we need to transform the customer experience, and I truly believe that if we’re gonna transform the customer experience, we’ve gotta bring in people from outside of our industry. We, collectively, both, you know, the outsiders and us who’ve been in this industry for, you know, I’ve been in it 35 years, need to approach it in the way of collaboration, being curious, challenging each other, and understanding we don’t have all the answers. I think that, to me, are the three areas that I think are most important for people who are thinking about getting into our industry and I would say mid-career, especially.

Sandy: Mike, thank you for your time today. It’s been great to hear your insights on how carriers can stay relevant and the opportunities you see for the insurance industry over the next few years. I’ve really appreciated your time today and I’ve really enjoyed your insights.

Mike: Thanks to both of you.

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