An Appraisal of Computerized Life Insurance Estate Planning

Abstract

For over a decade, a number of life insurance companies have attempted to use the power of the computer to assist in the direct selling of individual life insurance policies. chief form this assistance has taken has been the comprehensive planning of the customer's insurance needs. While this use has grown in recent years (from 17 percent in 1966 to 45 percent in 1970 among those companies surveyed by the Life Insurance Agency Management Association), there is nevertheless fairly wide spread resistance to this technique, particularly among individual agents. Although preliminary evidence seems to indicate that larger sales do result from computer-aided selling, a closer look at the data suggests that these conclusions are flawed by the failure to take into account certain key variables. Thus the potential benefit from this application of the computer to life insurance marketing still remains to be proved. With the development of electronic computers in the early 1950's, insurance companies were among the first to recognize the potential that this equipment had to offer in helping to improve and streamline home office operations. large number of clerical activities, mostly highly routine, were in many cases tailor-made for computerization. Indeed, it is almost impossible today to imagine the task of policyowner accounting and recordkeeping-to say nothing of actuarial analysis, employee payrolls, agent compensation calculations, and investment accounting, to name a few-without the aid of the computer. But what of the vital task of selling the policy in the first place? How has the computer helped in supporting the sales effort? In 1967, the author made an initial study of the sales-related use of computers in life insurance marketing' and recently had the opportunity to update his investigations. Although the technology has improved over the last five years, the types of sales applications have remained fairly stable. Basically, computers have been programmed to provide assistance in three major areas: in reducing Ephraim R. McLean, Ph.D., is Assistant Professor of Information Systems in the Graduate School of Management at the University of California, Los Angeles. He is also Director of the Center for Information Studies in the University. This p-aper was submitted in April, 1973. 1 Ephraim R. McLean, The Use of Computers in the Selling of Individual Life Insurance, unpublished masters thesis, Sloan School of Management, Massachusetts Institute of Technology, Cambridge, Mass., June 1967.