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Disney’s MagicBand Shows the Future of the Internet of Things

By Jeffrey S. Shaw, Executive Director, Life Insurers Council
From the LIC Bullet, April 2015

A number of years ago, in addition to being known for exemplary customer service, Disney theme parks were also renowned for their crowd management.  Endless velvet ropes that serpentined deceptively for miles created the illusion that the line wasn’t nearly as long as it was.  As the popularity of the parks increased, families resigned themselves to spending hours waiting for a single chance to experience an especially trendy attraction.  

Long lines and stellar service are at odds with each other so Disney came up with something called the “Fast Pass” to guarantee a spot on a premier attraction for a specific time.  This resulted in a separate but shorter line for “those in the know” who were smart enough to make their reservations ahead of time.  But this had some unforeseen downsides as well.  Families that had waited patiently in line for hours were angry to see late comers waved ahead of them from a VIP queue.  In addition, Fast Passes sold out early and were only available on a “first come first served” basis.  Families were sprinting to kiosks as soon as the park opened in order to reserve their spots on the most coveted rides.  

This was all very “un-Disney-like” and not consistent with the experience they were striving to create for their customers.  In 2008, Disney tasked a team with the responsibility of identifying and breaking down all of the barriers that were keeping their customers from enjoying and experiencing everything their theme parks had to offer.  They came back with a vision of a Magic Kingdom without turnstiles and the ensuing execution evolved into a team of more than 1,000 people and took years to develop.  

The fruits of this effort were detailed in a recent article in Wired Magazine called “Disney’s $1 Billion Bet on a Magical Wristband” by Cliff Kuang.  The concept drew inspiration from the growing popularity of sporting devices that monitor heart rate, sleep, and distance traveled daily by feeding data to your phone or computer from a wrist mounted monitor.  According to the article, the process “begins when you book your ticket online and pick your favorite rides.  Disney’s servers crunch your preferences, then neatly package them into an itinerary calculated to keep the route from being a frustrating zig-zag back and forth across the park.  Then, in the weeks before your trip, the wristband arrives in the mail, etched with your name.  If you sign up in advance for the so-called “Magical Express”, the MagicBand replaces all of the details and hassles of paper once you touch-down in Orlando.  Express users can board a park-bound shuttle and check into a hotel.  They don’t have to mind their luggage because each piece gets tagged at your home airport.  Once you arrive at the park, there are no tickets to hand over.  Just tap your MagicBand at the gate and swipe onto the rides you’ve already reserved.  There’s no need to rent a car or waste time at the baggage carousel.  You don’t need to carry cash because the MagicBand is linked to your credit card.  You don’t need to wait in long lines.  You don’t even have to go to the trouble of taking out your wallet”.  

One of the most impressive applications of the MagicBand comes from making a reservation and pre-ordering your food at the Be Our Guest restaurant.  Here, the hostess greets you by name when you enter the restaurant because your MagicBand has notified them of your arrival.  After you’re instructed to sit anywhere you’d like, your food miraculously is brought to your table without you even ordering or identifying where you’re sitting.  Again, the MagicBand transmits all of this information once you’re inside the restaurant.  Disney is considering wiring the entire park with sensors to triangulate your location throughout your visit to open up a new world of data.  “They could have Mickey or Snow White find you.  They might use the park’s myriad cameras to capture candid moments of your family – enjoying rides, meeting Snow White – and stitch them together in to a personalized film.  They also might know when you’ve waited too long in a line and email you a coupon for a free ice cream or a pass to another ride”.  The possibilities are as endless as they are exciting!  

Although the opportunities opened up by the MagicBand are remarkable, the technology is not nearly as high tech.  In fact, this is just an early example of what is currently referred to as the Internet of Things.  Soon we will all be interacting magically with our surroundings everywhere we go.  Restaurants could greet us by name, stores could acknowledge our buying preferences as soon as we’ve entered, our houses could detect what room we’re in, and even the walls around us could become interactive to our approach.  The challenge isn’t so much a technical one as it is cultural.  Fortunately for Disney, their customers may be more willing to give up additional privacy in order to enhance and improve their experience at a Disney park.  

What does this mean for the life insurance industry?  

First, consider Disney’s motivation for considering a MagicBand in the first place – the desire to remove any and all barriers that might take away from their customers’ experience.  Then consider the resulting conclusion—a park without turnstiles—and how impossible that vision must have seemed when it was first proposed.  

In the life insurance business, we readily acknowledge that the complexity of our products keeps most consumers from even understanding something as fundamental as the difference between term and whole life.  We also recognize the unpleasantness that accompanies the application process in terms of medical exams, blood and urine samples, and a seemingly endless number of personal questions.  We’ll concede that the lengthy time required between applying and approving a policy is also a turnoff for consumers.  In response, we’ve initiated simplified underwriting, plain-language contracts, and jet-issue new business processes.  One could argue that our industry is approximately at the same place as Disney was then they first introduced FastPass: we’ve improved the experience for a small group of our customers but we’re still far from removing all barriers.  

What would be the life insurance equivalence to a process without turnstiles?  No medical exams?  No blood tests?  No applications to fill out?  Death benefits that were paid instantaneously to beneficiaries?  

To some extent, just like MagicBands, much of the technology is already here.  Agents could get pre-authorization approval from prospects prior to their meeting, allowing underwriters time to complete much of their risk assessment in advance.  For many cases, the agent could walk into a prospect’s house with most of the application information already completed from publically available information and an offer for insurance already determined.  The close would consist of an agreement of terms rather than the acquisition of data and the deal could be sealed with another voice confirmation rather than an actual signature.  

Before the lawyers and the privacy advocates pounce on this idea and shred it to pieces, it’s important to remember that the challenge is more cultural than technological – and fortunately (or unfortunately), none of our customers are demanding that we dramatically improve the life insurance application process.  

Consider e-applications.  A well designed e-application saves time by pre-filling known or redundant information, eliminates the inefficiency of amendments by requiring that all forms are in good order, and creates a legible and professional foundation for the actual contract.  One would think that this would be a win-win for carriers, agents, and consumers, yet many carriers experience dismal adoption rates by their independent distribution.  Reasons given include a discomfort and distrust of technology, a resistance to change, and a staunch insistence that any deviation from a traditional sales approach will inevitably doom the sale.  In most cases, no one complains that e-apps are just poorly designed, less efficient, or too difficult to use – it’s just that many agents aren’t ready to abandon a process they know is inherently inefficient.  In the same way, as much as consumers may dislike medical underwriting, they seem quite happy to use their dislike as yet another objection for not buying our products.  

While Disney has raving fans for their customers, the life insurance industry has to work with consumers who are indifferent about our products, or in some cases downright hostile or agnostic.  We distribute these products through an aging sales force that on the one hand consistently demands that carriers make it easier for them to sell our products while at the same time rejecting and resisting our efforts to do so.  

What can we do rather than just sit on the sidelines and wait for our primary customers to catch up with our own aspirations to improve the life insurance buying experience?  

A recent Fortune article by Beth Kowitt titled “Ikea World Domination” might offer some ideas.  According to the article, “it took some time to figure out just the right shopping complex, off just the right highway interchange and just the right distance from Seoul, that could accommodate a 624,000-square-foot store – more than three times the size of the average Wal-Mart Supercenter.  It took more time to solve certain mysteries, like how big to make the store’s children’s section in a country where kids are often given ample space in the family living quarters.  It took more time to figure out how to showcase kitchens that incorporate kimchi refrigerators, a uniquely Korean appliance – and even more time to untangle the nuances of the market, like the South Korean’s preference for metal chopsticks.  In all, it took about six years for Ikea to unveil its inaugural store starting from the first scouting trip”.  

Getting it right in emerging markets like China, India, and Korea is a key part of Ikea’s growth strategy, but it requires “mastering one of the hardest challenges in the retail universe: selling high volumes of inventory at a consistently low price in vastly different marketplaces, languages, and cultures”.  

Ikea “used to be pretty lousy at expansion.  When the company first went into the U.S. market it forgot it was a retailer.  Instead it behaved like an exporter, taking beds and cabinets measured in centimeters and plopping them down in its first U.S. stores.  Even sales success happened for the wrong reasons: Americans bought an inordinate amount of Ikea vases…using them as water glasses.  The European-size ones were too small to satiate Americans’ preference for ice.  As a result, the company decided to do something it had never really done: study the market intensely.  Today, research is at the heart of Ikea’s expansion.  Rather than focus on differences between cultures, they figure out where they intersect”.  

For example, the company did a study of 8,292 people in eight cities, examining morning routines.  Although the time required to head out the door varied from a very rapid 56 minutes in Shanghai to a leisurely 2 hours and 24 minutes in Mumbai, there was one consistent factor: “regardless of which city, women spend more time than men picking out their outfit for the day, a process many find stressful”.  This revelation led to the creation of a free standing mirror that has a rack in the back for hanging clothes and jewelry in order to help customers assemble an outfit the night before and cut down on morning panic.  

On the other hand, “even surveying 8,292 people doesn’t always get you the right answer.  The problem is that people lie – or to put it more delicately, sometimes we are not aware about how we behave and therefore we can say things that maybe are not the reality”.  

“One way Ikea researchers get around this is by taking a firsthand look themselves.  The company frequently does home visits and – in a practice that blends research with reality TV – will even send an anthropologist to live in a volunteers abode.  Ikea recently put up cameras in people’s homes to better understand how people use their sofas.  What did they learn?  They do all kinds of things except sitting and watching TV.  The Ikea sleuths found that in Shenzhen, most of the subjects sat on the floor using the sofas as a backrest – an application that Ikea certainly was not factoring into the design of their sofas”.  

Should life insurance companies begin employing anthropologists?  

Fortunately, we may not need to.  Nor do we need to dramatically expand the number of focus groups and consumer surveys we need to conduct.  Imagine the insights that could be garnered from spending time in the field with our agents on 8,292 actual sales calls?  Would our e-applications be structured differently if we understood that most agents begin the application process with the medical questions rather than the personal data?  Would we feel differently about how a laptop could create a barrier between the agent and the consumer if we observed the process numerous times?  Or how typing on a device can send a signal of distraction while writing on a piece of paper can indicate interest and importance?  Would we detect barriers to the sales process that we haven’t ever considered if we routinely required everyone from actuaries to underwriters to techies to marketers to observe the sales process not just once but hundreds of times?  

Why stop at the sales process.  Do we even understand how our beneficiaries are actually utilizing policy proceeds?  How much of final expense policies are actually being used for final expenses – and which final expenses are they paying?  How much of traditional life proceeds are invested to replace lost income, pay off mortgages, and fund college expenses?  Would our policies need to be as complex if we understood how our customers actually use them?  

One could argue that the life insurance industry’s approach to our customers is very much akin to Ikea’s first foray into the U.S market before they learned the value of research.  We’re operating more like a manufacturer than a service provider.  

Disney’s unique relationship with their customers provides them with an excellent opportunity to leverage all of the benefits of emerging technology to create an improved and seemingly magical experience.  In the life insurance industry, there is little demand and even less desire from our primary customers (consumers and agents) for us to dramatically change our processes at all.  However, rather than sitting on the sidelines and waiting for cultural shifts to take place, carriers can learn from Ikea to use real-life observations of how our processes and products are being utilized.  And if all else fails, we can always resort to employing anthropologists!