affluent market, Prudential Financial has teamed up with banks to
harness the online channel to reach the mass market with a simple
term life product, MyTerm. LII spoke to Prudential to gain insight
into what is proving to be a successful strategy. Charles
Davis reports.
With term life insurance costs at record lows in the US,
insurers see opportunities in the middle market buoyed by the
operational efficiencies of the online marketing channel.
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The challenge, however, is to harness the power of the channel
while still building on brand loyalty and recognition. The internet
is filled with low-cost, no-name insurance providers, and
mainstream insurers cannot win a commodities pricing game
online.
Financial services company Prudential Financial has solved both
problems with MyTerm, a simplified-issue term life policy available
through the internet to customers of select banks and, in the
future, other financial institutions.
Joan Cleveland, senior vice president of business development in
Prudential’s individual life insurance division, told LII that the
insurer did not set out to form alliances with banks to sell life
insurance – it simply worked out that way after customer focus
groups convinced the insurer that they would be far more likely to
purchase term products introduced by a trusted fiscal agent.
When Cleveland was hired three years ago to find new business
opportunities for Prudential, she said that the first, most obvious
play was to move beyond Prudential’s traditional mass affluent
market focus and to look for opportunities in the middle
market.
A massive market
So, excited by the possibilities – after all, insurance industry
association LIMRA places the mass market in the US at 63 million
households, representing 80 percent of adults aged between 20 and
64 – Cleveland set out to see what kinds of product offerings and
delivery channels would work in a series of focus groups. Those
studies were an education in the needs of the middle market, she
said.
“Looking at their attitudes, about coverage and about life, they
began to show some real differences,” Cleveland said. “They thought
more about common themes – what’s in it for me. They looked at the
price of a whole life policy, versus ‘how do I get my kids through
college, how do I take care of the parents, how do I retire…’, so
for the middle market it’s clearly a need, but it’s a need to
balance against other needs. I don’t know how many times we heard
that they feel it ought to be the equivalent of their monthly cable
bill.”
She said that the clear drivers for the market are simplicity,
convenience and education as to coverage need. “The middle market
was almost always so surprised that they needed hundreds of
thousands of dollars in life coverage,” she said. “We saw that it
was going to take some education, but also that it had to be
fast.”
There were also pleasant surprises. Medical questions and other
examinations were not a deterrent at all to this market segment.
Instead, it was the time delay – six weeks of waiting between the
examinations and the decision – where Prudential stood to lose a
lot of potential customers. “They clearly wanted a decision on the
spot, and they wanted to pay with their credit cards, because they
wanted the points,” she said. “That hadn’t crossed our minds, but
it was important to them.”
The need for speed
Cleveland was talking to bankers about their needs for a term life
product at the same time, and they echoed the need for speed. So,
in December, Prudential introduced MyTerm in alliance with the
insurance arms of National City Corp and Banc Corp South. Customers
of the banks are directed from the banks’ websites to
Prudential’s.
“Our top priorities are to offer our customers protection, value,
and convenience. MyTerm is an excellent complement to our suite of
financial products and services, and we’re pleased to offer a
product that comes from a company our customers will recognise,”
said Troy Huth, senior vice president, Annuities and Insurance,
National City Insurance Group, one of the first to offer its
customers this new insurance product, in a release.
Once they are there, they can get a quote and bind a policy in
about 10 minutes, although Cleveland said the average these days is
around three to four minutes. Alternatively, they can go to their
local branch and have the platform representative there interact
online with Prudential.
Customers may choose from 10-, 20-or 30-year level term policies
with face values from $50,000 to $250,000. After the applicant
answers about a dozen medical questions, the underwriting engine
sends data to the MIB Group, a fraud detector for the
life-insurance industry, to motor vehicle departments and to
pharmaceutical-benefit aggregators.
The data search informs Prudential what prescriptions applicants
are taking. The engine then accepts or rejects the risk, and
applicants can pay the first premium with a credit card or
electronic fund transfer.
Cleveland said that so far, Prudential has been quite pleased with
the underwriting, and despite the immediate issuance, the rates
charged are only a little higher than standard rates and about 20
percent higher than if the applicant underwent a full underwriting
process.
More partners coming on board
Although customers are paying extra for a more transactional
experience, these individuals are looking for a long-term
relationship, Cleveland said, and are attracted by the notion of
buying term life from a major national issuer. “Many of these
middle-market customers simply could not afford to buy life
coverage from Prudential before, and now they find they not only
can afford it, but they can purchase it in one session online,” she
said.
She said that several more MyTerm partners are in the process of
coming on board. The banks solicit interest with cards mailed with
bank statements and with adverts on their websites.
“By the end of the year, we’ll have a pretty good alliance of banks
in MyTerm, and we’re just getting started really, but we like
everything we see so far,” she said. “We feel that giving the
consumer the ability to purchase life insurance when and how they
want and in the amount they’d like is a natural outcome of this
rising trend toward online management of one’s personal finances
and purchase decisions.”
