Life insurance distribution in Canada could be on the cusp of modernization, with new efforts underway to digitize industry functions. The historically slow pace of change in the life insurance industry, however, is raising some doubts regarding the extent to which the industry will embrace this type of innovation.
Recently, Toronto-based startup Finaeo Inc. announced that it had raised $2.25 million toward expanding the reach of its eponymous front-end management software program, which aims to digitize administrative processes for life insurance-licensed financial advisors.
The leadership team behind Finaeo plans to expand the software to include a "marketplace," which advisors would be able to use as a digital intermediary to generate insurance quotes and submit business directly to the insurance carriers. Essentially, that would automate some of the functions performed by managing general agencies (MGAs).
"Our company really started with 'How can we create more efficiencies in a day in the life of the advisor?'" says Aly Dhalla, CEO and co-founder of Finaeo. He says the company is striving to create a more modern alternative to the "archaic" supply chain in place in the insurance industry today.
Meanwhile, Toronto-based APEXA Corp., a subsidiary of Toronto-based insurance-industry consulting and outsourcing firm LOGiQ3 Group, launched a platform in August that aims to digitize another element of the life insurance distribution channel: advisor contracting. The platform, called APEXA, aims to create an industrywide digital database of insurance advisors that consolidates all of the advisor information that MGAs and carriers require for contracting.
That would automate a process that traditionally is paper- intensive and redundant, says Tonya Blackmore, CEO of APEXA.
"Everybody has worked with these paper processes, and it's been a headache that everyone has accepted," says Blackmore. "We didn't just take the process and make it digital; we streamlined it and made it a lot better."
Insurance advisors such as Ian Moyer, founder of Ian C. Moyer Insurance Agency Inc. in Ingersoll, Ont., say industry processes such as paper applications and advisor contracting are in dire need of modernization.
"The industry loves paper. It's addicted to paper," Moyer says. "That's very, very cumbersome."
Joshua Harris, director of Harris & Partners Financial Inc. in Markham, Ont., agrees that efficiency needs to improve. For example, he says, the process of having a paper life insurance application couriered to an MGA and then to the carrier is expensive and time-consuming, and could be done digitally much more easily. "The [current] process is absurd," says Harris.
Harris feels encouraged when he sees some insurance carriers develop electronic insurance applications (e-apps) that expedite that process. However, he says, many of the e-apps are not user-friendly, and because each one is different, advisors are forced to learn how to use numerous systems.
"I think there's a huge opportunity to digitize [the application process]," he says, "and centralize it."
Not all advisors are as quick to embrace change, however. Blackmore admits that for some advisors, the idea of adopting a new technological process is daunting.
"For some people, they see this as: they now have another technology to learn; they now have another process to learn," she says. "[Going digital] is getting people used to doing something new."
Ensuring APEXA is user-friendly has been a key priority, she says, in order to win the support of advisors.
"We were very conscious about that when we were building APEXA," she says. "Change is change, and the easier and more intuitive you can make the experience, the better it's going to be."
Dhalla agrees that some advisors are likely to push back against the prospect of changing the way they've done business for many years.
"I think [digitizing aspects of the insurance industry] organically something we're going to struggle with, probably for the length of [Finaeo's] tenure," he says. "Not only are we asking people to make a behavioural change - to go from pen and paper to a [digital] platform - we're also asking them to make a process change."
In order for the industry to truly modernize, Moyer says, the insurance carriers need to lead the way. "The companies themselves have to be behind [going digital]," he says. "If they're not behind it, it's not going to go anywhere. They have to accept it and lead it, and be in favour of it."
That leadership could be slow to come. Although some insurance carriers recently began investing heavily in innovation, the industry in general has been slow to embrace technology, partly due to reliance on antiquated legacy systems and business cultures that are defined by risk-aversion and resistance to change.
A recent study by Stamford, Conn.-based research company Gartner Inc. and the Life Office Management Association revealed that 49% of North American life insurers have no digital strategy in place.
Moyer says a tool such as Finaeo, which he believes could bring significant efficiency to the life insurance sales process, will struggle to gain traction unless the insurers get on board with the concept of digitizing processes.
In APEXA's case, the company managed to secure industry support early in the process. APEXA's leadership team worked with nine MGAs and carriers on the design and development of APEXA's platform, including: Woodbridge, Ont.-based Hub Financial Inc.; Calgary-based PPI Solutions Inc.; Mississauga, Ont.-based IDC Worldsource Insurance Network Inc.; Kitchener, Ont.-based Financial Horizons Inc.; Manulife Financial Corp., Sun Life Financial Inc. and Canada Life Assurance Co., all based in Toronto; as well as Quebec City-based Industrial Alliance Insurance and Financial Services Inc. and Kingston, Ont.-based Empire Life Insurance Co.
Now that APEXA's platform has launched, the firm's leadership team are turning their attention to the rest of the industry, in the hope of eventually getting the entire industry on board.
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