At Foundation, we believe that agents will continue to thrive and to play a key role in the future of insurance distribution. This is in sharp contrast to the predictions that many in Silicon Valley and even McKinsey, made over a decade ago*. Whenever I talk to executives from the agency channel, it’s clear that these predictions mostly reflect a deep misunderstanding of the role and functions that agents play. The agent’s role in life insurance, as compared with other insurance verticals, is unique and vital. And our recent investment in iLife is helping to turbo-charge them and financial advisors to transform permanent-life insurance distribution, making the process easier, faster and more enjoyable for everyone involved.
Life insurance is a massive sector, with total premiums in-force worth $12 trillion from 280 million policies. Annual premiums are $180+ billion with ~28 million policies sold each year. Most casual observers have never heard of “permanent-life insurance,” even though 80% of the premiums sold are of this type. Most of the insurtech innovation in distribution has happened in term life, a simpler, cheaper product that represents ~20% of the premiums and less than 10% of the profits in the space. Insurers are notorious tech laggards, but given its size, permanent life really stands out in resisting digitization on both underwriting and distribution.
In underwriting, the bulk of permanent-life policies still require bloodwork / doctor visit, plus direct human admin work to ‘push the policy forward’. The first half of 2020, during the COVID lockdown months really put the spotlight on these underwriting deficiencies as people struggled to buy life insurance when they wanted and needed it the most.
Things aren’t much more “digital” in customer acquisition (where iLife focuses). When it comes to leadgen, the experience hasn’t changed much since the dot-com era. Most of the business is distributed through brokers and financial advisors, yet life carriers famously lack even quoting APIs. That means brokers spend multiple hours per week “spreadsheeting” — slang for creating product-comparison tables in Excel for leads they buy in bulk and work through the phone. Innovation for permanent life lags behind where SMB-commercial insurance was back in 2015, when our former portfolio company CoverWallet got started and less than 3% of the $100b+ premiums in that sector were sold online. Less than 1% of permanent life premiums are sold online today.
All of these hair-pulling inefficiencies are why Nelson Lee launched iLife. With automated data collection, iLife provides financial advisors and brokers with customer-prospecting software that, to start with, simplifies client acquisition. It then unfolds into a full-client conversion suite: qualification, comparison, explanation, all the way to closing. Advisors and brokers can publish their personalized link on any of their websites or online properties. Once a prospective client finds the link, using iLife’s web interface, they can quickly input their basic data and financial goals, do side-by-side policy and product comparisons, and even get quotes in a matter of seconds.
With iLife, a prospective permanent-life insurance customer can get very far down the funnel on their own in only 6-7 clicks (vs. the status quo of 30+ screens to then get swarmed by agent calls). And until iLife, it would take anywhere from 5-14 working days for a consumer to get a life insurance quote back, which is a tough pill for people to swallow in today’s on-demand world. With iLife, getting the life insurance quotes back takes under 7 seconds. These are qualified leads and monetization opportunities not available to agents today. Given the fast and automated data collection iLife enables, it can also significantly reduce back-office overhead for agencies.
Like I mentioned earlier, both Foundation and iLife believe that the human agent component is critical in the life insurance process. One of the things I'm most excited about is how iLife is truly making the quality of life better for agents all over the country. They can now sell asynchronously from anywhere, to anyone online. One of their early users even moved to Hawaii to work remotely because of how iLife was able to overhaul his business! While Silicon Valley is notoriously seen as trying to replace human-to-human services, iLife's goal is to make agent's livelihoods better in every possible way, and they are already doing just that.
Finally, let me say a few words about why Nelson is uniquely suited to start this business. Nelson grew up in Taiwan where his family built one of the largest software-development shops in the country (thank you for helping bring many great video games to market, Lee Family!), so he grew up learning how to build products from an early age. After studying math at UC Irvine, Nelson went into wealth management as an advisor and later started his own (traditional) brokerage firm, growing it to an outstanding ~$2 million in production within a couple of years. Nelson wanted to grow it to $100m in revenue, but that model was too dependent on tight personal networks and customer referrals, which come along only so often, and is especially out of touch with how younger consumers want to be engaged. Nelson also experienced firsthand how few tech tools were available to him, as carriers — especially in life — are quite behind the times.
As insurtech investors, it’s rare to find entrepreneur whose skills and experience straddle both insurance and tech, and have trusted relationships with major players in both worlds. We, at Foundation Capital, therefore had no choice but to back Nelson, and we are excited to watch him and iLife permanently transform permanent-life insurance distribution.
*PS: Here is a good article exploring some of the reasons why agents aren’t vanishing.