Chicago — Financial services firms, insurers and healthcare payors admit they will need to add new capabilities as they prepare to serve baby boomers, who will control some $40 trillion in retirement assets by 2020.
Boomers face uncertainties about how they will fund their retirement, and how wealthy they will be during those years. Those who fail to plan accordingly may fall short of their expectations. And, there are many boomers not planning accordingly.
Boomers Ready to Launch, a survey on behalf of the Westport, Conn.-based MetLife Mature Market Institute during November 2007, revealed that 54% of boomers acknowledge doing only a poor to fair job of ensuring that they have adequate coverage for their own long-term care needs, which speaks to the possibility that they do not feel old enough to have great concern about it.
Insurers planning to serve the boomer market run a similar risk of missed expectations, according to a study by Chicago-based Diamond Management & Technology Consultants Inc. Unless they consider new strategies now, financial services firms, insurers and healthcare payors will lack the flexibility to survive in a changing health/wealth market.
For example, while 89% of the insurers Diamond surveyed believe that "making products simple for their customers to understand" is a source of competitive advantage, 23% believe they have effectively developed that capability.
Companies competing for boomer business will need business and technology platforms flexible enough to accommodate different boomer market segments, new types of transactions, new federal and state regulations and competition from multiple fronts.
Diamond surveyed 626 consumers aged 45 and older, asking questions about their health and finances, probing their attitudes, behaviors and current situations. For comparison, Diamond also surveyed executives at 105 banks, investment firms and life insurance companies, each with revenues of more than $500 million, to understand how those companies are pursuing this market.
The results clearly illustrate that boomers are not a homogeneous group, and companies cannot treat them as such. "Companies will not be able to adopt a ‘one-size-fits-all’ approach toward serving the market," says Aamer Baig, managing partner of Diamond's Financial Services practice and co-author of the study.. "They will need to thoroughly examine the value chain to determine where they are best positioned to meet customers' emerging needs, tailoring their offerings to targeted sub-segments of the boomer population."
Banks, insurance companies and financial advisory firms traditionally focus on managing specific risk characteristics—banks deal with market risk and income risk, insurance carriers with mortality risk and morbidity risk, and financial advisors with longevity risk and market risk. But boomers need products that are more integrated—products that take into account how one type of risk affects another, according to the study.
Diamond's analysis finds that some consumer needs cut across multiple segments, such as consumer education and understanding risk. But in general, baby boomers are best served through a segmented approach. "Healthcare, financial services and insurance firms should take a broad view of the overall retirement market, looking across industry lines," says Tom Weakland, managing partner of Diamond's Healthcare practice. "At the same time, the vast differences among consumers and their needs should drive companies to remain intensely focused on targeted market segments."
Companies that succeed in the retirement space will have four distinguishing traits that will help set them apart:
* Defined role in the emerging market&md s ;trying to be all things to all people is unlikely to be an effective strategy.
* Tangible commitment to be a leader in the retirement marketplace—dedicated resources and capital are required to stake a claim in the retirement market.
* Alignment across the organization—delivering the breadth of products and services retiring boomers expect requires collaboration and cooperation, not corporate silos.
* Demonstrated commitment to the well-being of target segments—leaders will have a deep understanding of the needs and concerns of their customers, and help them achieve a balanced portfolio of health and wealth products.
Health insurers might also want to consider boomers. According to research from the National Association of Insurance Commissioners, Kansas City, Mo., many boomers are confused about their post-retirement health insurance options, including their Medicare eligibility. A large majority of baby boomers (84%) said that access to health insurance was important when choosing a retirement date. However, only 43% said that Medicare eligibility was an important factor in determining when they would retire.
Sources: Diamond Management & Technology Consultants Inc., MetLife Mature Market Institute and National Association of Insurance Commissioners
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