New Era Underwriting: Delivering Term Life Insurance in 20 Minutes or Less!

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1 New Era Underwriting: Delivering Term Life Insurance in 20 Minutes or Less! Faster, Better, Lower Cost Bill Nutting American Life Insurance Co. of New York 1

2 Today s Topics 1. A Changing Market for Term Insurance 2. Technology s Impact on Distribution 3. Marketing with New Technologies 2

3 $526 Billion Life Insurance Market Observations! Sold vs. bought! Commodity pricing! Differentiation based on:! issuer rating & brand! commissioned agent recommendation! Little focus on product features! Middle policy markets overlooked 3

4 Term Insurance Traditionally Dominated by Agents Traditional Insurance Agents Financial Planners Mortgage Originators Lending Banks Affinity Groups Benefit Consultants Credit Unions Finance Companies 4

5 Enter Direct Marketers 5

6 Direct Marketers Are Targeting Savvy Baby Boomers & GenX Consumers with Highly Sophisticated Messages - Including TV Ads 6

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8 Competition is Fierce Among Direct Marketers Who Today Control Only 7.5% of the Market USAA AEGON Assurant GEFA NY Life Forethought CIGNA Physician's TIAA-CREF Globe CUNA Mutual Allstate Life Mutual Omaha Signature Minnesota Mutual Gerber Life Conseco Direct United Family Liberty Life Fidelity Security Central States Guarantee Prudential (NEA) ULLICO Foremost $ Premiums Source: JCG Ltd $ millions 8

9 . And They re Now Competing With All Types - From Credit Card Issuers to QVC Traditional Insurance Agents Electronic Insurance Marketplace Financial Planners Mortgage Originators Electronic Marketplace-Mortgage Mortgage Brokers Lending Banks Brokerages-National Brokerages-Tier II Insurance Direct Marketers-Life Affinity Groups Insurance Direct Marketers-P&C Benefit Providers Benefit Enablers Benefit Consultants Credit Card Providers Credit Unions Finance Companies 9

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11 Today s Topics 1. A Changing Market for Term Insurance 2. Technology s Impact on Distribution 3. Marketing with New Technologies 11

12 How Can We Capitalize on Emerging Technology to: 1. Differentiate products: faster & better 2. Lower costs to be more price competitive in a commodity-driven market 3. Produce incremental sales 12

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14 The Internet is Certainly the Most Important Component of Emerging Technology 14

15 But Pure Internet Life Insurance Plays (.com) Offer Limited Sales Potential Consumers Just Aren t Ready 15

16 Not Surprisingly Auto Policies Are Expected To Dominate Online Sales 16

17 But Things are Changing Quickly as the Industry Gears Up To Deliver Products Electronically 17

18 Companies Financial Services Companies Are Expected to Invest Nearly $10B in 2003 vs. $1 Billion in 1998; 3 Times That of Retailers 18

19 Consumers New, Faster, Lower-Cost, Readily- Available Technologies Are Fueling Consumer Internet Usage 19

20 The U.S. is Way Ahead of The Rest of the World United States 160+ Million Internet Users Germany Australia Mexico internet users Source: Internet.com 20

21 U.S. Internet Access Has More Than Tripled Since % of U.S. Households With Internet Access internet access Source: Internet.com 21

22 And The Pace Will Continue to Surge! incomes > $75k: 88% now have home! school computers level the playing field across income and ethnic groups! online shopping at work accounts for half of all online shopping! high speed internet access (broadband) is growing exponentially 22

23 Broadband s Growth Projection Reflects Its Many Advantages Broadband Subscriber Base (millions) Broadband Subscribers Broadband Connections Are Always On and Up to 125 Times Faster Than Dial-Up Modems Source: Internet.com 23

24 What s the Potential Impact on the Insurance Industry? 24

25 The Industry Will See The Internet As Much More Than.com.com vs. Electronic Processes E Commerce E Commerce Application Underwriting Account Servicing 25

26 Countrywide New Business Flow Opportunity to Simplified Re-Engineer Issue Product Process Cumbersome, Intermediated by Phone Center Representatives Expensive, Paper-Based Processes Like This. No END START Customer Approved for mortgage? Yes Sent to Licensed Agent Does Client want 10K No Does Client want additional? Yes Does client wish to apply electronically? No A No END Yes CW Sends Contract Data to ALNY Electronically Yes See weblink work flow ALNY Sets up Contract *EFT and Credit Card Payments Only A Agent Links to ALNY Web Site Agent enters client data taken over phone for underwriting Pass underwriting? Yes Collect personal data, beneficiary, & payment information B No END B Sign Electronically? Yes Agent sends for digital signing Customer performs digital signature Coverage Begins Generate Initial Payment Transaction END No Agent will print bar coded app and place in closing packet Applicant will sign application at mortgage closing CW Faxes App to ALNY C C ALNY merges to client's file Coverage Begins Generate Initial Payment Transaction ALNY sends policy print file to Countrywide CW prints contract and payment confirmation CW mails contract to policyholder END ASSUMPTIONS: *This flow supports the simplified issue product only and assumes no MIB, MVR, or Labs. August 3,

27 Electronic Underwriting, As An Example, Can Instantly Incorporate Always Reliable Prescription Drug Database Information 27

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29 And Electronic Underwriting Can Dramatically Improve Decision-Making Turnaround Time..in an Industry Not Known For Its Speed 29

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31 Today s Topics 1. A Changing Market for Term Insurance 2. Technology s Impact on Distribution 3. Marketing with New Technologies 31

32 Marketing Options Range From Simple Links to More Complex Integration with Existing Distribution Channels 1. Link on Your Website 32

33 Marketing Options Range From Simple Links to More Complex Integration with Existing Distribution Channels Campaign to Selected Addresses - mortgages - life events 33

34 Globe/Credo reportedly sold 3,800 simplified issue policies via the internet in 3Q Globe also sold > 20,000 on their website. 34

35 Marketing Options Range From Simple Links to More Complex Integration with Existing Distribution Channels Direct Mail Lead Generation with Data Center Inputs (key-in) 35

36 Marketing Options Range From Simple Links to More Complex Integration with Existing Distribution Channels Call Center/Data Integration - outbound - inbound -point-of-sale 36

37 Marketing Options Range From Simple Links to More Complex Integration with Existing Distribution Channels Link on Your Website Campaign to Direct Mail Lead Call Center/Data Integration To American Life Selected Addresses Campaign with Data Center - outbound Of New York - mortgage Inputs (key-in) - inbound (co-brand w/ your brand) - life events - point-of-sale Incremental Sales Are Expected to Increase With Integration Complexity % Link on Your Website Campaign Direct Mail Follow-up Call Center Integration Incremental Policy Sales 37

38 Bringing it all together 38

39 Application through Issuance in < 20 Minutes! 24 hour availability! all-electronic application process! immediate underwriting decision! electronic signature! immediate binding & issuance! policy issued online & stored immediately 39

40 inviva Term Insurance 1. Fully Underwritten 1. $250k - $1,000, questions; immediate bind for 90 days; electronic Scheduling of Paramed 2. Simple Term a. 100% electronic b. $25k - $250K c. 6 questions d. 20 minutes start to finish e. Documents Stored in Your ifolder f. Online Servicing Available Immediately 40

41 Technology Platform Policy Administration System is fully internet-enabled MARTHA is our Modular Automated Real Time Health Analyzer MARTHA Underwriting Engine evaluates applicants (capacity is 325 applications per hour) MARTHA orders and evaluates outside supplemental data Customer self-service improves speed and accuracy of policy administration Innovative identity validation reduces chances of fraud 41

42 Underwriting Engine (MARTHA) Data Sources 42

43 Your Brand 6 Questions 43

44 Your Brand 44

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49 Your Brand 49

50 Your Brand 50

51 Instant Term Fully Underwritten Term Product Customer Service Contacts Are Evenly Distributed imail Phone Chat Mail It s still too early to draw conclusions 51

52 Are Variable Annuities Next? 52

53 Now that the first online-only variable annuity has been approved..american Life Insurance of New York got the commission's (SEC) go-ahead to launch an all-electronic VA late last year. Investors get all their statements, make all their transactions and monitor their accounts online. 53

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56 Thank You Bill Nutting 56