The Future of Insurance Distribution: Amazon and Google Entering the Insurance Marketplace Panel

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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.

Beyond the Challenge podcast is sponsored by Exactuals, perfecting payments and the data driving them.

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

Sandy: Welcome to Beyond the Challenge. We have spent the last year talking to some of the most influential and forward-thinking leaders in the insurance marketplace.  Their perspectives have been very well received by our audience and we thought it was time to put together some of our favorite guests to see what they thought about some hot topics.

Sandy: In this episode you will hear from Chris Blunt, President, and CEO at F&G Annuities and Life, Mike DeKoning, SVP Insurance at Thrivent Financial, Norm Trainor, President and CEO at The Covenant Group, Nick Lane, President of Equitable, and Bruce Parker, President Global Life Insurance at Pan-American Life.

Kevin: During our interviews, we asked our guests what they thought about Google and Amazon entering the insurance marketplace and how it will affect the industry. Let’s start with what Chris Blunt had to say.

Chris: I don’t think so. I mean, the reason that I say that is, again, if you go back to the premise of what we do, we provide products, but products without guidance or some context for where those products fits is gonna be pretty limited, and I think for years, we’ve been predicting that the whole world will go direct and there are certain products that I think do lend themselves for some direct distribution, simplified term insurance, for an example, would be an obvious case, but I think a lot of the solutions that we’re bringing are only appropriate in the context of an overall plan. And so I don’t see this necessarily game changing. I think they could be interesting lead sources for advisors there today and I think that’s something that’s going to continue.

Sandy: So, it sounds like Chris doesn’t think that Google and Amazon entering the marketplace will change distribution but may be an interesting lead source for advisors.

Kevin: That’s right. He goes with the premise that carriers provide products, but products without guidance would be pretty limited for life insurance. Now it’s time to hear from Mike DeKoning.

Mike: 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: Mike doesn’t think too many players from outside insurance would want to take the risk of entering a highly regulated space, but that Google and Amazon would be interested in selling current insurance products to their customers.

Kevin: He thinks there’s a greater opportunity from a distribution perspective than there is from a carrier or manufacturer perspective.  He also thinks that they have a bigger play in the P&C space than the life space. Let’s see what Norm thinks.

Norm: One of the models that we use, Kevin, to reference these kinds of challenges is Geoffrey Moore’s Crossing the Chasm and Moore’s thesis is that you have to define your business based on two parameters: value and volume. And you have to decide are you going to be a low-value, high-volume business or are you going to be a high-value, low-volume business? And, fundamentally, the distinction is the way in which you focus the differentiation in your business. Michael Porter at Harvard talked about three distinct ways we differentiate ourselves: product superiority, operational excellence, or client intimacy. Product superiority is very difficult in the life business to sustain. Usually it’s either operational excellence or client intimacy. In a low-value, high-volume business, you focus on operational excellence and so much of the way in which you operate is to commoditize products and services. The entry of organizations like Amazon and Google really represent this commoditization of insurance products. A lot of carriers have moved to the high-value, low-volume side of the business. They’re focused moving upmarket where advice is the differentiator. Just one example, we live in the Greater Toronto Area in Canada. The Greater Toronto Area is comprised of about 5.9 million people. In 2017, 75 percent of all the life insurance premiums that was placed in the Greater Toronto Area by the four major life insurance companies in Canada that have 78 percent market share was representative of policies with an annual premium of $25,000 or more. To pay a premium of $25,000 a year or more, you have to be in the top 1 to 2 percent of the income population. So what we’re seeing is a lot of life companies are moving to the higher end of the market where their advisors are applying a high-value, low-volume approach. They’re basically bifurcating. They’re separating out the commoditization of products with the higher value advice that differentiates. 

Sandy: Norm thinks that organizations have to decide are they going to be a low-value, high-volume business or are you going to be a high-value, low-volume business? And, fundamentally, the distinction is the way in which they focus the differentiation in your business. The entry of organizations like Amazon and Google really represent this commoditization of insurance products.

Kevin: He says that a lot of carriers have moved to the high-value, low-volume side of the business. They’re focused moving upmarket where advice is the differentiator which is the opposite of what a Google or Amazon would bring. Let’s hear what Nick had to say.

Nick: Yeah, it’s exciting to see new entrants coming into insurance, and I view them as partners. I view technology firms, the use of artificial intelligence, straight-through processing as a way to reinforce our value proposition to consumers. How does that help us connect with consumers better and how does that help us deliver our products in a more economical fashion? With that said, I would leverage what Jamie Dimon said, you know, the regulatory complexity of the US system does create moats and barriers and it’s hard for new tech companies to acquire the relationships with existing clients. So, in many ways, you see them partnering with existing firms to talk about ways to create new value propositions. But it’s an exciting time, we saw Ethos come out, SoftBank, Google thinking about serving the mass market in new ways. To me, it’s an exciting time and it validates the opportunity and the need that’s out there in American society.

Sandy: Nick thinks its exciting to see new entrants coming into insurance, and he views them as partners. He views technology firms, the use of artificial intelligence, and straight-through processing as a way to reinforce our value proposition to consumers.

Kevin: That’s right. He sees them partnering with existing firms to talk about ways to create new value propositions. For Nick, it’s an exciting time and it validates the opportunity and the need that’s out there in American society. Let’s see what our final guest, Bruce Parker had to say.

Bruce: We, especially those of us that have been in the business a long time, you’ll say this is a relationship business, it’s face to face, I don’t think that ever changes but we do have to come to terms that the consumer is changing. So, the consumer does wanna have that ease of doing business and if we do not address that question than we do open ourselves up for the Googles and those types of players to come in and take part of the market share. I think those types of organizations are always gonna be hard on the life side of our world to sell effectively on cash value products because it does take a really good financial advisor to be able to work with the client to be able to make those decisions, but commodity products like term insurance and those types of things, they might have opportunities there. And my only advice to everyone is, you know, if that’s the market that you wanna be in, then you really have to address your digital shortcomings to be able to maintain your market share.

Sandy: Bruce says that insurance is a relationship business and does not believe that that will change but does know that consumer buying trends are changing.  That people want the ease of doing business and we need to address that trend, or we open ourselves up to the Googles and Amazons taking part of the market share.

Kevin: He thinks organizations like Google an Amazon are always going to find it hard to break into the life side of our world to sell effectively on cash value products because it does take a really good financial advisor to be able to work with the client to be able to make those decisions, but commodity products like term insurance and those types of things, they might have opportunities there.

Sandy: One of the repeating themes I heard from many of our guests was that carriers need to plan for new tech entrants into the marketplace and know their long-term strategy to partner or differentiate themselves will be key.

Kevin: I really enjoy going back and listening to our past interviews.  I always find something new that I missed the first time and today was no different.

Sandy: I agree, I always pick up at least one more tip that I missed the first time.

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