Are we Blockbuster or Netflix?
I woke up this morning to news that a major movie theater may file for bankruptcy. My reaction to this was that the coronavirus is accelerating trends already in motion. Issues with movie theaters were evident long before the virus hit. Netflix, Hulu, and Disney+ all provide the same product, but in a way that is more convenient and less expensive. When Martin Scorsese released "The Irishman" on Netflix after only two weeks in theaters, you knew the end was near.
It's not that people don't want movies — they do. Maybe more than ever. It's just that people don't want movies the way they've historically been provided.
It's a lesson learned the hard way by travel agencies, music stores and, of course, Blockbuster. The same fate may be true for many big-box, brick-and-mortar retailers. We still want commodity goods like nails, t-shirts and dog food. We just don't want to have to go to the hardware store, pet store, or the mall to get them.
However, not all products are commodities. While I am happy to buy a pack of t-shirts online, I am not comfortable buying a new suit online—I need help with that. In purchasing a suit, I actually want two different things. First, I want the suit (that's actually the easy part) and second, I want advice and service.
I think this same thought process applies to life insurance. Some insurance products are a commodity, such as a 10-year term policy (which is totally and completely a commodity). You purchase it based on price (and maybe a little brand recognition), but the products themselves are identical. If I wanted to buy term insurance (more on the "want" later), I would be completely comfortable buying it directly online. That capability already exists. The issue in this scenario is demand, not supply.
But if I "wanted" a more complex life insurance product (hold your laughter at the outlandish thought), I wouldn't feel comfortable buying it directly online. I would want advice. Just like purchasing the suit, I want two different things. I want the product and the advice.
During this pandemic, people are coming to the realization that they need protection for themselves and their families. Maybe they aren't at the point where they "want" life insurance, but perhaps they are now aware that they "need" it. The question is, will we be Blockbuster, or will we be Netflix? Herein lies the opportunity.
If our industry is going to seize this moment to finally chip away at the $25 trillion protection gap, we need to provide products in the way people want to consume them. At the same time, it may be necessary to break up the value chain into discrete but integrated pieces, recognizing that often the purchase of life insurance includes two different needs—one for the product and one for the advice.
We must seize this opportunity to accelerate the trends that the life insurance industry has been flirting with for decades. The industry must lean in to digital consumer engagement by leveraging electronic means of data collection and implementing tools to make better use of the data at hand. All of this must be done to make the process "frictionless" and more consumer friendly.
We have good examples to learn from on the "advice" side of the equation. It's very easy to get reliable financial advice, relative to 401(k)s, IRAs, and stock portfolios. Advisors are available online, by phone, and through tools developed to provide bespoke "virtual" advice. As in other areas of their business, banking and investing are ahead of life insurance.
The concept of a "silver lining" during this pandemic is tough for me to swallow. But perhaps this extraordinary time in our history will create an awareness that life insurance is a valuable and necessary thing for millions of people who are currently without protection. We may have a window here, where life insurance products will be "bought" and not "sold." The question for us as an industry is "Are we ready?"
The pandemic is pushing our industry to take the leap that we've been contemplating for years. It is forcing us to embrace some of the tools, processes, and platforms that we've been flirting with but have been hesitant to marry. My hope is that the confluence of consumer awareness around the need for protection, and our industry's forced embrace of more consumer-centric approaches will create a unique opportunity to help shrink the protection gap, and, as a result, make the world more resilient.
At Swiss Re we are happy and proud to help our clients take the digital and technological plunge during these trying times. We have supported the use of digital health records, extensions of digital sales platforms and the expansion of underwriting methods that reduce or eliminate the need for face-to-face interactions. It is our hope that many of these initiatives will lead to permanent solutions that support a more consumer centric approach.
Swiss Re is ready to help our clients correctly answer the question . . . are we Blockbuster or are we Netflix? Our industry's time is now.