·
16 minute read
This is the latest of the Insurance Innovation podcast. Join Alan Edgin and Barry Stowe as they discuss critical metrics, and bringing international experience to the US.
Hear a thoughtful view from the top - and why all sales are not created equal. Barry's extensive US and international experience brings a broad perspective to understanding consumer needs and considering many market dynamics in decision making - and a keen eye towards the difference in distribution in markets.
Insurance Innovation is hosted by e123’s own Alan Edgin. Alan’s experience from carriers to IMOs guides the conversation in a way that anyone interested in marketing and selling more products will appreciate.
Insurance Innovation, brought to you by e123 - the premiere life and health distribution management system.
Transcript:
Narrator
Welcome to e123’s Insurance Innovation Podcast, where you'll hear tips, tricks and techniques for improving sales, improving profits and achieving operational excellence. Each episode features an executive guest with a perspective to share, an interesting story and great examples for you to think about. Please give us feedback on the show or talk to us about your distribution management system needs on our website at e. One two Three insuretech.com. And now, here's our host, Alan Edgin.
Alan Edgin:
Welcome to Innovators Circle, our new series that focuses on the core issues of how to innovate, how to use data and to innovate and what the future might hold. Today's guest is Barry Stowe. Barry has an extensive business experience and knowledge gained through executive roles in the insurance industries in North America and Asia. Between 2006 and 2018 he was a member of the Board and the Group Executive Committee of Prudential Plc. From 2015 to 2018 he served as the Chairman and the CEO of Jackson Holding Limited, a subsidiary of Prudential Plc and from 2006 to 2015 as CEO of Prudential Corporation Asia. From 1995 to 2006, he held senior executive positions at American International Group (AIG), including serving as president of AIG Life Companies, Accident and Health Worldwide, based in Hong Kong from 2001 to 2006. He's also had other prestigious positions before that.
So Barry, thanks for joining us today and can you spend a few minutes and tell us how you got into the insurance industry?
Barry Stowe:
Well, thanks, Alan. It's a pleasure to join today and it's, as always, good to hear your voice. I got into the insurance industry right out of university graduated in 1979 and started looking for a job with a degree in politics which I found wasn't a particularly commercially oriented degree particularly at that point in time during a major recession. But I was able to make a connection at a firm here in Nashville called Corroon & Black which ultimately merged with Willis. And of course, there have been mergers since. So that's one of the major predecessor firms of what is now Willis, Towers, Watson (WTW) and I worked there for about twelve years and had. You know, started essentially in, in kind of sales and marketing roles and found that while I, you know, when I was in university or leading up to university and thinking about what I might do for a living, insurance wasn't necessarily in the frame.
I found that it actually really suited me very, very well. So it's kismet or serendipity or whatever you want to call it, but feel very fortunate to have ended up where I did.
Alan:
So our industry has some unique characters and fun people. Who have you met who stands out to you as a luminary, a mentor, or a fun person who really understands what we do.
Barry:
I've had the opportunity, like you, to work with so many really interesting people. I was at AIG for about twelve years, so obviously you’ve got to mention Hank Greenberg, who I had the opportunity to work with and who's a fascinating individual. To this day, well into his 90s, he continues to run C.V. Starr and is just honestly a force of nature. Fascinating guy. A lot of wisdom. Very interesting life story.
So just the opportunity to spend time with Hank Greenberg was fantastic. I worked directly for several years with Hank's son Evan (Evan Greenberg), who now runs Chubb. And Evan is just utterly brilliant. I mean, an incredibly clear, incisive mind and a real visionary in many ways. Knowing Evan was certainly formative CEO of Prudential plc when I joined them. Mark Tucker, who had was an English, actually a South African guy who, I guess sort of identifies as English, grew up in the UK. He now chairs HSBC.
Mark is the guy that sort of got the Asia business for Prudential planted. I was privileged to have the opportunity to grow that. He's a fantastic guy.
Alan:
Sounds like some pretty fascinating people!
Barry:
I've been fortunate.
Alan:
So you spent eight years as Chief Executive in Asia for Prudential after an eleven year worldwide stint at AIG. How did your international experience compare to your US. Experience?
Barry:
Well, the international experience, I guess, is more varied and dynamic just by its nature. Because the US, there are interesting market segments and there's diversity amongst the market segments of the US. But when you're working across the globe, you're dealing with entirely different levels of economic development, different consumer needs, different regulators. It's really varied and interesting. And in the same day you're dealing with issues in a place like Japan, which is highly developed, thoroughly First World, and in many respects kind of looks and walks and talks like the US. Market, and then the next phone call is about opening an operation in Myanmar or building the agency force in a place like Indonesia, which is an entirely different proposition. So I guess it's the variety and the dynamism that was really interesting to me.
Alan:
So in the United States, we're fairly accustomed to the various classical distribution channels, whether it be a direct to consumer model or it's a traditional agent selling either kitchen table agents or now telephonically. So how in Asia was it different?
Barry:
Really, the most powerful form of distribution by far is traditional agency, which sort of exists there in a form that you don't see here today. It's more like agency you might have seen in the US in the 50s or 60s. Big agency forces a multilevel structure. So you might have a guy that's selling for himself, but he's more focused as a general agent might in terms of recruiting new agents and building new agencies. Then you end up with enormous distribution platforms in terms of the number of people. And then the key, as always, with agency is to focus on productivity and make those agents either work at a minimum level of productivity to justify their existence, or you have to pare it back and build again. So that's very much the model in Asia.
Second to agency in Asia is bank distribution, and that's growing very rapidly. You've got big bank distribution deals with organizations like Standard Chartered, HSBC and the American (banks), the Citi’s and so forth, who have footprints in Asia, as well as a lot of the local banks. And if you look outside of Southeast Asia, specifically other parts of the world, you'll still see agency, but it looks more like it does in the United States. It is more heavily regulated, tends to be more structured and more disciplined and more productive, but smaller in scale.
And bank distribution also in places like Europe as an example. Latin America is another example. Is big, very big.
Alan:
Are these agents career oriented, like a captive agent that works just for one carrier? Or will they represent multiple carriers?
Barry:
They're generally captive, particularly in Asia, they are captive, so they're only allowed to work for one company. Some of them will start part time again. This is like the way it might have worked in the U.S. 50 or 60 years ago. They might start as part time to make sure they've got the skills and that they like doing it. And then as they start generating some success, then quit whatever else they were doing and go full time. But, I mean, I can remember getting in taxicabs in Hong Kong and when I was working for AIG, and I'd give them the address of the building and you get there and say, I'm going to AIA on Stubbs Road.
And the agent would turn around or the cab driver would turn around and say, oh, yeah, I'm an agent. Okay, well, great. There.
Alan:
Yeah, exactly. So, just out of curiosity, is there one distribution channel that would be more profitable for the carrier in regards to having better persistency, less non taken and all of that? Is there one that stands out over the other?
Barry:
The persistency between bank distribution and agency distribution is really not statistically different. The margins for agency business are slightly higher. It's not a dramatic difference. And that reflects the fact that you need to pay the bank a pretty healthy downstroke just to get into the bank, and then you got to pay them ongoing compensation on everything to get sold. They're both worth the effort and they both, in our case anyway, a Prudential generated margins well above our required rate of return. So it was all good business.
Alan:
In terms of, say, the product offerings, are they fairly similar to the United States from both life and health type products?
Barry:
No, they're pretty different, really. The important thing when you enter a market is focus on the consumer need and meet that versus just, hey, we like to sell this kind of endowment life product. Let's go try to sell that. The overwhelming need in Asia is for health products because virtually none of these countries have any kind of social safety net at all. And the concept of employee benefits provided through your employer is relatively unknown. So everyone is sort of left to sort themselves out. And you'll have like in some markets, like Singapore, you have public hospitals where people can go.
Same situation in Hong Kong. But if you go to the public hospital without a comprehensive insurance plan, you end up in a ward with a lot of other people, and it's not necessarily the best experience. Whereas if you have insurance cover or the means to pay out of your pocket, which obviously can be quite expensive, you can end up in a private room or a semi-private room and get the level of care that you would get at a hospital in the United States. So the appeal of health products is enormous and the need for them is visceral to these families. We found that the most effective way to build the customer base and to serve the real needs of that customer base is to start with health and then sell in the life. Which sounds kind of backwards, the way people think about it in the States. Everybody in the States seems to try to lead with life insurance in terms of the individual sale.
I lead with life insurance and then I'll sell some disability or I might sell some kind of critical illness or specialty cover or long term care or whatever else that family might need. But it's kind of the other way around in Asia, because the need for health is so important.
Alan:
So I know you left Hong Kong and you moved back to the United States, and you're the CEO & Chairman of Jackson National, which is predominantly an annuity company. I know they have other products, but did you learn any lessons from Asia and other places that you could bring back to the States and implement what you had learned?
Barry:
I was kind of late in my career, just a few years from retirement when I came back to do the Jackson job, before I ultimately retired from Prudential plc. Of course, you know, Alan, Jackson was owned by Prudential, which is right; I kind of slid into that role. But it's more the fundamentals about how successful businesses operate. Decide what your definition of success is, look around the market and figure out what are the obstacles to growth and how do you get around those obstacles? And what was really interesting to me when I came back to the United States in 2015 and was immersed in the Annuity market, is Jackson was sitting there as the number one writer of Annuities, and they were celebrating the fact that their market share in the channels where they were present, working with these financial advisors tied to broker dealers. They said we're up to 50-52% market share this quarter.
It's just unbelievable how well we're doing. Yeah, but our sales are down. Looking at the business five years ago, we sell less. Everybody's selling less. They're like, oh, well, yeah, the market's shrinking. He but we're you know, we got 52% market share, and I it occurred to be, as I thought about this, are we Blockbuster Video? Are we going to be the biggest one left?
The real problem, not just for Jackson, but for the entire industry, was the perception of annuities. And so, really, through my whole tenure there, we focused on repositioning the store story of what annuities are and how they could work for people. And we set out to win over the people, the influencers in the marketplace. Like Susie Orman is a notable example, who historically never had a nice thing to say about an annuity. And she's got a powerful voice, and a lot of people listen to her. And, you know, I went down and spent a lot of time with Susie Orman and helped her understand how annuities could work really well for consumers. And she changed her tune.
And we formed an organization called the Alliance for Lifetime Income. We got a lot of industry partners with us insurance companies, fund managers, broker dealers. All came in and supported that. We ran TV ads and did all kinds of promotions, and most importantly, consumer education so that consumers would understand how annuities fit into their overall retirement scheme. And the great news is, you look back now, six or seven years later, and annuity sales are up again in the United States. People are buying more of these products because they really are valuable.
Alan:
So at e123, we think a lot about innovation and love to learn how others in the industry experiment with new products, building distribution, tweaking their business model. So let's do a little shift here. In your previous companies, how did you innovate new products? Anything new in regards to your business model?
Barry:
Well, I guess I think about that in a couple of ways. First of all, I've already mentioned the importance of focusing on what consumers need as opposed to what you want to manufacture. So you have to find it's like a Venn diagram of what you've got, the risk, appetite to manufacture and what consumers really want and need. And you have to find where the Venn diagram intersect and then focus on that space. Depending on the regulatory environment that you're in, it can be brutal, absolutely brutal to try to get products built and approved. And particularly in Asia, we worked really hard to ensure that we got ideas trans, translated into products on the street in weeks, not years. There were places where it was taking us a year to go from the idea in the boardroom to an agent actually out with sales materials trying to sell the product.
So. Some of that is systems. It's making it easier to get the product on the system. A lot of that is working with regulators, having the right sort of collegial, collaborative relationship with regulators so that they trust you and understand that you're trying to do the right thing, all of those elements are really important. But in terms of real innovation, bringing something to the market that no one else has really done or hasn't done very well, that does really just go back to what's the biggest problem with this product in the marketplace and how would we solve that for consumers? One thing that I think about that was unbelievably successful for us in Indonesia, which was one of Prudential's largest in Asia. We had a huge health business there.
And the problem was that the hospitals in Indonesia were kind of bureaucratic, and trying to get people's hospital claims filed was immensely difficult. And it caused a lot of aggravation for people. And they're going through this at a time when they're in the hospital or their loved ones in the hospital. And this just puts a lot of stress on the family, trying to ensure that this health issue that they're trying to deal with doesn't become a financial issue as well. So we said, where do our customers tend to go to the hospital? But we looked at where there were hospitals where there are big concentrations of Prudential insured, and then we negotiate with the hospitals and. We actually put Prudential employees in the hospital.
So when one of our insured was admitted, they would let our person know. That person would come to admissions, introduce themselves, and say, I'm with Prudential. I'm here. I'm going to handle all your paperwork. And they would help them get up to their hospital room, and they would bring them a little arrangement of fly and put it in the hospital room. They'd pop in a couple of times during that person's visit to make sure everything was going okay, and they took care of all the paperwork. And you cannot imagine the impact that had on our customers, on our reputation, how easy it made it for our distributors to go out and say, we've got a service that no one else has.
And it solved a real problem for people. It was not immensely expensive to do it, but the halo effect we got from that was unbelievable.
Alan:
You? Yeah, that's pretty brilliant. It's that personal touch, I'm sure. Obviously, you worked out the economics and it made sense, and that's impressive. At e123 Barry we're a technology platform, essentially, and we try to help either insurance companies or distribution channels make it easier for them to enroll insurance products, to administer insurance products, to bill and collect and so on.
So Data is really big for us. But what role does Data or what role did Data play in some of your decision making with some of your product offerings, some your analysis?
Barry:
Oh, well, data is huge. We tried to use it as effectively as possible, and we made enormous strides during the time I was there. And they continue to make strides. Looking at places like Southeast Asia, they tend to be a little bit behind in some respects compared to where I say the US. Might be in terms of warehousing data and slicing and dicing and figuring out, but certainly understanding your customer. One of the simplest things that we did that was most effective is you use it really to drive more efficiency from your salesforce. When you can go to a guy that's running a big agency and he and his agents have got lots of customers, and you can tell him, look, you've got X number of customers that buy this XYZ Life product.
And the data shows that virtually everyone that buys the XYZ Life product also buys this ABC Health product. But you've got a chunk of people that haven't done that at. So go back and focus on this set of and for an agent, it might be, look, here's 17 customers you've got that have bought this but haven't bought that. And again, our company wide data suggests that they'll probably all buy it if you just go ask them. So you're sending a guy out. You know, with a product that you're pretty certain these 17 customers want, and he, you know, get his hit rates 100%, you know, when he goes and calls. And it's just, you know, it's impressive to him, you know, you you've uncovered something that, you know, he just, you know, he lost and, you know, in in the mix and you know, it just, it just makes him infinitely more efficient. So, you know, just simple things like that data is immensely powerful as, as you well know.
Alan:
What metrics were important to you when you're analyzing the performance of your product offerings. And we touched on earlier about some of your distribution channels and what are some of the key metrics that you use to analyze your products that you offered.
Barry:
You have to look at a blend of metrics. But the first among equals to me was always new business profit. If you just look at sales, all sales are not created equal. Investment oriented life sales carry very low margins. Health products carry very high margins. And so rather than looking at the amount of premium coming in, we would even report our numbers to shareholders and to the public, not in terms of total sales. But our headline number was always the new business profit number, which of course is the lifetime profit expectation that you're going to get out of the sale of a product.
And to me that was absolutely critical because that's looking at new sales through the lens of that product's profitability for the company and ultimately for shareholders. So new business value was critically important. Always front of mind persistency. Because if you've gone to the effort and the expense to get business on the books and it doesn't stay, then that's a problem. So persistency comes right behind and persistency is part of the calculation. New business profit too.
Alan:
Well, thanks. Obviously you realize and understand the importance of data. Same with e123. Let's look at and get your visions for the future. And I know you've retired, but you're very involved in the insurance world. Obviously, you're on the board of Zurich, which is one of the largest insurance companies in the world. And so you still got your finger on the pulse. But what changes do you see coming in the next two to three years that's going to impact our industry?
Barry:
Well, of course, some of that. In terms of the regulatory risk, which you always have to keep your eye on, I think it depends on what happens in the 2024 elections and who controls Congress and the White House and so forth, because they'll have different points of view. Congress has become very active in the retirement space in recent years. We made some progress, and we had some regulatory change and some legislative change pushed through, which ultimately makes it a little easier for companies to sell retirement products as long as they're doing so fairly and with transparency, which obviously is kind of a given. But I think you'll continue to see and this is certainly in the US, and I think you'll see it globally as well: a continued increase in focus on consumer centricity, making sure that consumers are getting fair value for what they pay in terms of what the product does for them, um, and focusing on service levels as well, and making sure that not just the claims that are paid, but the way that they're paid and the speed with which they're paid is fair.
So I think it's really important for companies - don't wait for the regulatory wave to wash over you and react to it, get in front of it. And the surest way to control your destiny is to get out in front of the issues. The best companies, the leading companies in the industry, Jackson is one of them., we spent a lot of time in Washington talking to congressmen and senators and regulators in the executive branch about how important the insurance industry is and the critical role it plays in society for consumers, the critical role it plays in the capital markets as the massive investor with a long view, who's not constantly in and out of the market but who buys and holds investments in the capital markets.
There's great stabilizing force of the life insurance industry and talk about how products are improving, becoming more responsive to consumer needs so that regulators get the sense that the industry is constantly trying to do the right thing for consumers and having a very positive impact on society. And so we need to work with the industry, not against the industry, just make sure that there's no bad behavior out there, be self-policing and then you end up with not having to deal with big regulatory problems.
Alan:
And I totally agree. If you listen to some of these financial analysts, there's this impending recession looming over our heads, if that's the case. Um, does an insurance company react to that in any way? Or do they just say, you know, we just got to plow through this and it's business as usual, and we know there might be a downturn in production, but we're going to stick to our guns with the products? Or do they change their model a little?
Barry:
Well, first and foremost, the core elements of insurance companies, they don't react dramatically to economic downturns. As I just said, life insurance companies in particular are the force in the marketplace that buys investments and holds them over the long term. So you might buy an office building as an investment, and you bought it for $100 million, and you go through a recession and property values drop, and your $100 million is only worth $80 million. But it doesn't matter because you're not going to sell it this week, you're not going to sell it for 30 years. So ultimately, you wait nine months and it's going to be worth $100 million again, and two years after that, it might be worth $150. So a lot of this stuff you just simply don't take note of in the short term.
You may find, oh, well, you have an expense crunch or something. Business is down. What can we do reasonably to control the short-term impact of a recession? So maybe you don't hire as many people, or you think of other creative ways to hold down your expenses for a brief period of time, but basically, the insurance industry just voters through. It's kind of interesting you asked that question. We had a new board member at Zurich and, you know, during some of this economic volatility, when the when the market dropped dramatically, you know, one of the big market drops we had during COVID you know, this new board member who was not an insurance person.
He's from another sector. He's a really smart guy, but he, you know, but he wasn't entirely in tune with how insurance companies think about these things. He's like, you know, what are we doing? What are we doing? Look at the value of our assets is dropping. What are we doing? And I said to him, we just wait six months.
And he was shocked that our approach, is we just wait. But then the chairman said to him, well, that's exactly right. This is the role we play in the capital markets that virtually no one else plays. Banks don't do it. Certainly the hedge funds and so forth that are daily trading don't do it. This is what life insurance companies do. So staying the course is an important dimension of our industry's culture.
Alan:
So, Barry, thank you so much for spending a few minutes with us and sharing your thoughts.
Barry:
No, it's my pleasure. It's always great to talk.
Alan:
Hopefully, we'll have you on again down the road. But thank you so much and we'll talk soon.
Barry:
Take care.
