Mark Scafaro sees insurance distribution technology startups going down a popular path: Pivoting from trying to reach consumers directly — and cutting out the agents — to supporting the agents.
Scafaro is the co-founder and CEO of Afficiency, a company that develops life insurance products designed for distribution through websites and mobile phone apps.
Scafaro helped start the firm in 2016. It has received a total of $10.2 million in funding from an investor group that includes The Savings Bank Mutual Life Insurance Company of Massachusetts and Western & Southern Financial Group. The company says millions of dollars of insurance business are now moving through its systems every month.
In September, Afficiency joined with Western & Southern to make life insurance available through part of the mortgage purchase process to home buyers in California.
He earned a bachelor's degree in accounting and finance from the University of Sydney in 1997, then entered the world of financial services as an analyst at Morgan Stanley, in London. He spent 11 years as a strategy executive at American Express, then three years as head of customer acquisition and servicing at MetLife, before launching Afficiency.
Scafaro answered questions via email about life and annuity insurtechs' shift from direct-to-consumer strategies, or DTC strategies to agent-support strategies.
The answers to the questions in this interview have been edited.
THINKADVISOR: When did you suspect this pivot would happen?
MARK SCAFARO: Let's say that the pivot was not a surprise; in the case of some insurtechs, it was a case of a pivot, or else it was a shift out of necessity.
There are a couple of reasons for this: a) the opportunity with agents was always there; agents increasingly want easier digital solutions themselves; and b) there is no denying that making direct-to-consumer (DTC) work economically is extremely difficult.
It's often said life insurance is sold, not bought. While some consumers out there want to buy and not be sold, it's really hard to find them.
The acquisition cost for those consumers is high, so it's only natural that insurtechs focused on DTC have pivoted to agents.
Did the pivot happen faster or more slowly than you expected?
COVID-19 certainly whet the agent appetite for digital tools.
Agents more or less had to become more receptive to digital solutions, and they realized they needed more digital solutions to get their jobs done.
So, the pandemic and all the accompanying changes accelerated the pivot on the agent side.
What's great is that insurtechs can now capitalize on the move of the agent force to digitization.
Why have life insurance agents survived?
Once again, the adage that life insurance is sold and not bought rings true. The economics are still there for agents to be profitable; agents will continue to be relevant.
