Anthony O'Donnell: I'm Anthony O'Donnell and this is Life Accelerated, a podcast for life insurers striving to achieve digital transformation. We're taking this episode across the pond for a global perspective on the life insurance industry with Legal and General's Morgan Spillane Chief Technology and data officer in L&G's retail division.
During our conversation, Morgan shares some of the trends he's seeing in the UK market that he anticipates will make their way state. More importantly, our conversation explores what's been successful for this dominant British life insurer and how that informs the company's efforts to improve its already enviable market position in the United States.
Morgan Spillane: I think it's fair to say that there's been a big push in the UK industry to interact more regularly with life customers.
Anthony O'Donnell: Morgan also shares L&G's thoughts as they prepare not only to enter the US market, but in his own words to dominate.
Morgan Spillane: L&G is a small player in the US markets with very large ambitions.
Anthony O'Donnell: Here's my conversation with Morgan. Legal And General is a very important UK company, but it's also a very competitive life insurer in the us. Today we'll begin talking about l and g's domestic life insurance operations and how the company's working to increase its market share in the us. Morgan, tell us about legal in general's overall corporate structure and the life insurance business within it.
Morgan Spillane: So essentially there are three parts to the business. There's an investment management business, but are known as lgm. There's an insurance business, and separately there's a capital business. The capital business invests in everything from, believe it or not, nuclear fusion to retirement villages. But I work in the insurance division.
Just to be very clear on that, that's actually the life and pensions business.
Anthony O'Donnell: And how important is Legal And General in the UK life and pensions?
Morgan Spillane: It's a dominant player in the UK market. Depending on which sectors you look at, it holds physicians. 1, 2, 4. It's number one. In the retail protection market, which is largely about cover, it's number two in the retirement income market.
It's number one in the workplace, DTC market, and it's number four currently in the group protection market. I think in the US you probably call it the group risk market. This is where insurance is provided through the work.
Anthony O'Donnell: And how are L & G's life insurance products distributed?
Morgan Spillane: We're largely in intermediate business, so selling through agents.
Agents, in our case would be anything from your high street broker to a bank building society, and there is some white labeling as well through the retail sector. About 95% of the business is intermediated, about 5% is d to.
Anthony O'Donnell: And tell us about your responsibilities as chief technology and data officer in legal, in general's retail division.
Morgan Spillane: So the retail division, as I said, is the life and pensions business. It's actually a relatively new creation. There were separate businesses, life and pensions up until the end of last year. My role is largely to support. The business in terms of its day-to-day operations and obviously in terms of its long term strategy from a technology and data perspective.
And there are essentially two aspects to that, not surprisingly, as is typical in the financial services industry, there is a rather large technical debt to clear. So this is basically legacy re-platforming and modernization of the estate. And on the second side then is obviously supporting of new propositions, new products, new pricing strategies, new relationships, and putting the two together.
Anthony O'Donnell: And as chief technology and data officer, how do you look at digital transformation and life insurance?
Morgan Spillane: Digital is a broad church. It means many things to many people, but in simple terms, from an internal perspective, it's largely around how we automate. Frankly, we're a scale operator, so how do we automate many of the internal processes to support our colleagues that work either in the call center or in back-office operations. And then from a customer perspective, we would define customer in two ways. Given that we're 95% intermediated, we would treat the agent as a customer, so that would be a B2B relationship. And then that 5% that is DTC, we would've a very different DTC relationship given the nature. Often because the DTC relationship and given that we are a life company, is going to be around far less interaction than you would have with the agents, where often it's many times day.
Anthony O'Donnell: What are some of the technologies that are most important to digital transformation from your perspective, both as the chief technology officer and specifically the chief data officer?
Morgan Spillane: Well, it's not necessarily the actual technologies themselves. It's actually what we do with those technologies that most matters to our customers. Now you're looking for the end customer. In a DTC market, you're looking for a pretty seamless experience, often around a sale that may only happen once in the lifetime of the relationship with that customer. People do not go out and buy a life cover every day. So it's very, very important that when they come onto our websites or where they come onto the websites of our partners and click through to our products, that that experience is first class. And given the nature of the product, and I'm referring obviously to the regulation in the UK and also given the nature of it from a consumer perspective, I mean, these are very, very important products.
They're often not just covering the mortgage necessarily. The customer may have, but you're talking about basically covering a life. It's very important that people understand and fully follow the processes that we have so that they buy in a no regress basis. You don't wanna be selling something where afterwards you want, but the fact you've actually bought the right product.
Basically our online journeys are designed to be seamless and frankly self explanatory because self-services at the heart of how we actually deliver that on the DTC channel. Obviously with the B2B interactions, it can be a little more sophisticated because our agents are regularly interacting with our products and therefore have a higher degree of understanding of how they work.
And the B2B experience overall applications is different to the dtp as a result.
Anthony O'Donnell: How much you talk about the cost benefit scenario when it comes to greater interaction with life insurance policy holders.
Morgan Spillane: As an insurer, we're not selling a much broader range of financial products. You know, we're not a bank, so I made the point that that interaction is going to be fairly irregular and in many cases only once.
And that's at the point of quotes basically. So it's very, very simple. We know there are two things that are really important to the customer in terms of our journeys. One is their belief in our brand, which is far more important, obviously at the point of claim. And second, Price. It's a very price sensitive market.
So given the strength of our brand in the UK, and that goes back, not surprisingly to our market share, our market dominance in many cases, and given that we are actually clearly pricing this properly, that's what's allow us in many ways to actually dominate its markets. Well then if you put those two things aside, it is really down to how easy or how hard is it to actually buy our products.
We sell 99.99% of all of our products online. It's very, very important therefore, that digital experience is first class, particularly for those customers that are actually taken through an underwriting experience. Yes. More than 80% of our customers will actually be able to buy our products first time out.
So we call it straight through processing basically because they have what we call clean lives. There's no underlying conditions that we, they need to worry about and they can buy our products within five minutes, but there is a cohort one in every five. There will be the need for some form of intervention.
It could be further underwriting rules, questions we may ask of them, or in some cases we may actually reach out for medical evidence to support statements they're making as part of the journey. And in those cases, very important that we retain the customer through that elongated process to make sure that we can actually provide the right service and hopefully actually sell them a product at the.
Anthony O'Donnell: What’s your view on life insurer's approaches towards interacting more with policy holders, making life insurance more about their wellbeing than their mortality?
Morgan Spillane: I think it's fair to say that there's been a big push in the UK industry to interact more regularly with life customers. Historically, and not surprisingly, the only contact really is at the point of quote, and by or dare I say, when the customer dies, which might seem strange, but that is the nature of the product. It's there. You hope you never have to use it, but there isn't actually any real reason to engage with it during the life of the product itself. But driven by the UK regulator, there's much stronger view. Now, certainly under consumer duty regulation and also with vulnerable customers in mind that we should really interact at least regularly.
Regularly can be defined in different ways, but at least every couple of years, we should reach out to our customers and remind them what products they bought from us, why they bought it, and make sure that the product is still relevant to their needs because needs change over time and made the point that many of our customers will buy life cover on the back of buying their first, second homes, and not surprisingly, the amount of cover that they acquire at that point is typically tied to the outstanding debt associated with that purchase. That debt changes over time. It may increase, it may decrease, and therefore, in very simple terms, you need to make sure that at least the cover required for that debt is still relevant as time passes.
Anthony O'Donnell: Let’s talk about L&G's involvement in the US market. How is LNG doing in the US and what are its ambitions for the American mareket?
Morgan Spillane: L&G is a small player in the US market with very large ambitions. There's a strong view that many of the experiences that have allowed us to succeed in the UK can be brought to bear on the US market.
And we've been trying over the last four or five years to bring that to life. And in simple terms, the measure will be an increase in market share, but there are differences in the US market compared to the UK market that are extremely relevant. You'd be well aware that posting rates by state is a requirement in the US. We don't have that complication in the UK, but more importantly than that still is the fact that there is what's known as a two year non-contestability rule in the US market, which simply means that if a customer has been with you and paying their premiums for at least two years beyond that point, if they claim then at whatever terms on which that policy was sold there has to be true and cannot be contested, or to be very blunt about that. If there is any misunderstanding, shall we say about preexisting conditions, then it's too late. Once you be on that two year point in the UK the market does not operate like that. You can be uncovered for many years if there is some degree of non-disclosure. So we describe it at the point of sale. That could very well come back to haunt you at the point of claim in the UK and that drives particular behaviors, both at a consumer, at an agent and at a carrier level in the US which are really relevant to how we go about doing our business. The strong view, therefore, is that if you contrast one thing that's really different about the US market, the need for bloods for medical data to support an application is extremely large in the US market, and dominates frankly, the entire process for actually buying life cover.
It means that typically consumers will have to wait a number of weeks. To actually get cover if they get cover at all, as those bloods are processed, and then hand it back to the carrier for decision to be taken. You know, that's very different from how it works in the UK. In the UK, that can happen, but in reality, far more customers are actually processed at the point of sale, meaning instant decisioning.
And just to bring that to life, L&G in the UK will typically have at least 80% of customers getting an instant decision. From the point of quoting to the point of going on cover can be a matter of minutes. And contrast that with what I've said about the US market. There's clearly a big difference there.
But the strong view is that the US market can be more like the UK market with the right interventions. And those interventions are going to be around what additional data can be brought to bear on any decisioning to allow more instant decisioning in the US market. And this is about greater use of data mining, machine learning, and changes to the process.
Frankly that persisted in the US market and working with the agents themselves. I'm referring to the BGAs. I mean, they have a very, very strong hand in how products are actually distributed in the us and when I say strong hand, again, I would contrast that with the UK market in the US it is not uncommon for an agent to have.
A longstanding relationship with a consumer in many cases spanning generations in the uk. That's extremely unusual. There's a much stronger DTC market, so direct to consumer market in the UK and the extent to which agents are used, and I made the point that we're still 95% intermediated. The intermediary is really a conduit to a product, not necessarily an advisor on that journey. And again, that's quite different from how the US market works. So I suppose in simple terms, what we're trying to do is to take the best of our learnings, the things that have allowed us to grow our market share and dominate in the UK and work out to what extent can they be brought to bear on what is a fantastic opportunity to grow market share in the US.
Anthony O'Donnell: When listening to you, I thought about how accelerated underwriting has actually been a trend in the US for several years now. Right? So using data rather than blood is definitely a trend, but I gather the US is still behind the UK in that regard, and I'm wondering why that is and what it might have to do with data accessibility or not.
Morgan Spillane: I don't think it's to do with data accessibility. My personal view is in the US data protection rules are far less stringent than they are in Europe, and therefore, by default in the UK we have GDPR regulation in the UK. And if you do not comply with that regulation, then the results of that are punitive and you only have to go to the press and see what's happened to Google in Europe, in France, for example, to realize how punitive that can actually be.
So we operate under far more difficult data protection rules in the UK than apply in the US. So I think access to data is a lot easier in the US It's really about the right data sets, what proxy data sets can we bring to bear that will help us make more instant decisioning, and that's work in progress. So access to data is one thing, and then obviously what does that data.
Telling us, so this is back to the mining and the machine learning. Basically, large datasets are one thing, but it's the quality of that data and then obviously shall say the intelligence we can bring to bear on that to see whether that can actually help us improve the levels of instant decisioning.
We've got quite aggressive targets in minds here compared to what generally happens in the us. This is all back to the investments we're making right now, and all things are also relevant. It's not all about what L&G can do. We're very keen on InsureTech and FinTech partnerships. We've invested heavily in the UK in that respect, and we're exploring that in the US because there are others that can bring fantastic ideas to bear from working in the US for much longer time than we've been to help us with some of these challenges.
But we've got a strong view that the do can be moved on this. The more we can do to simplify the journey for a customer, the more we can. To shorten those cycle times, frankly, whether that's in the underwriting cycle or it could be in the back-office processing, the more we can do to digitize the entire experience.
And another example of that is access to online documentation rather than the traditional paper flows that generally are associated with the setting of life insurance. Then the better basically, and that's where we're spending our money.
Anthony O'Donnell: By the way, I think you're being modest about L&G's involvement in the US.
I recently read a 2019 document about the top 100 life insurers in the US, and legal & general showed up as number 28 of a hundred. That's a significant market share. So I thought we would drill down a little bit into some of the ways that technology is helping L&G to address these unique challenges of the US market that you've talked about, and in a variety of areas, whether that be pricing, distribution, self-service. We've already talked a bit about underwriting.
Morgan Spillane: Well, let's take pricing as an example, and again, notwithstanding the constraints that apply in the us I'm back to the fact that we have to file obviously by state pricing Agility is undoubtedly one of the reasons why we've managed to grow our market share in the UK to the dominant position we have.
And agility can be defined in a number of ways, but in simple terms, what we're talking about is actually being able to price. And to react to pricing changes in the market in real time. That's the capability we created nearly a decade ago here in the UK. In very simple terms, when you hold the high ground as we do, given our ness in the market, it's not really in our interests to move market prices, but where our competitors do, if they do it in the morning, we will typically spot that.
By lunchtime and we will react by close of play on the same day. And that does not require bringing large teams together to make sort of data and technology changes. We've put configurable tools to allow our pricing actuaries to simply react as they see fit. And it's been an extremely powerful thing to be able to do in the UK and has allowed us, as I said, to keep the high ground well. Imagine our ability to do something like that in the US market. So it's exploring to what extent is that even relevant in the overall scheme of things? Pricing's one thing, automation more generally. So the use of robotics is another example. That's not necessarily for the benefit of the customer, but if it allows us to decrease unit costs in the back office, well then that flows through to pricing eventually.
So, you know, we've got a very, very successful robotics practice in the UK business, and it takes the back office costs down enormously. It also means that we can focus our very valuable call center and operation staff on more value added activities, things that really make a difference to the customer.
And again, we would like to see more of that in the us but it's another example and then. I can't emphasize how important the whole service activities are going to be. So these interactions, these digital interactions, whether it's agents with our business or and customers with our consumers, with our business, is very important that we constantly tune those journeys to make sure that they are fit for purpose and the best way to do that, it's ongoing and regular dialogues with agents and the end customer to make sure that it is fit for purpose and constantly scan the market, see what others.
Anthony O'Donnell: So how are UK operations influencing s life insurance distribution or channel strategy in the us? You've spoken, by the way, about how DTC is much further advanced in the UK than it is in the US.
Morgan Spillane: Well, it's a separate run. Business has got its own team. In some cases we are influencing, to use your term, but in reality, we're advising, we're making available to the management team there.
Everything that we have, we've documented and all those experiences. So it's access to documentation, access to systems, and frankly access to people. There are many people here on the UK payroll that have been doing this for decades and making sure that they're available to senior management in the US to lean on for advice.
And it's a two-way street because as I said, there are differences in how the US market operates that are incredibly important. So not everything is going to work and some things will either require a small tweak or in some cases they just won't work at all. So it's understanding that, and I think that's working very well.
If we're to be honest, I think we would like to have got further, been pushing very hard on this for four years. I think we would like to have got further than we have, but I think we've also realized that those differences in the US market are very, very important and we have to operate within those constraints and find other ways of achieving our goals. If not everything we're doing in the UK is actually relevant to the US market.
Anthony O'Donnell: It sounds as if you've got a real good handle on what those obstacles are and you have a strategy in place to address them. So I mean, would you agree about that, that L&G has a good strategy in place? You're well on your way?
Morgan Spillane: I would say that. Yes, absolutely. And we're extremely bull about the opportunities in the US market and we're there for the long haul and have been for some time now. So the question is, how soon can we crack these? We would love to have US market. Look like the UK market shares, but there's a hell of a gap at the moment and it's just gonna take time understanding.
And we will continue to build out our understanding of the US market. We have actually transferred some staff across from the UK to work in the US management team, but it's a US managed business. And you know, it's very important that we create a joint approach to this. Our US colleagues fully understand the nuances of working in the US market, and you can't simply lift and shift to UK process and approach into the US market.
That's simply not going to work
Anthony O'Donnell: It sounds as if L&G is shaping up as a very powerful competitor and maybe the domestic American life insurers should be worried.
Morgan Spillane: Hopefully.
Anthony O'Donnell: All right. Well thank you so much, Morgan. It's been such a pleasure talking to you today.
Morgan Spillane: Thank you.
Anthony O'Donnell: This conversation was fascinating in the way it raises the topic of digital transformation to a more universal level, discussing how technology can be applied in two very different markets.
Morgan explains the differences between the UK and the US markets, not least in the way consumer behavior differs in the two countries, which is interesting for thinking about life insurance. Digital transformation more broadly, but the more important point for our listeners may be that in Morgan's understated way, he's talking about how Britain's preeminent life insurer is calibrating its competitive approach to the US market.
Thank you for joining us for the Life Accelerated podcast. For more relevant content to help you achieve digital transformation, visit equisoft.com/life-accelerated-podcast.
