Rising medical costs, aging Baby Boomers, technological developments in advanced analytics, threats of cuts in government pensions and healthcare, and shifting global economies are all rapidly changing the environment in which insurers are trying to compete. Insurers that view these market shifts as opportunities instead of threats and adapt their role will not only survive, but thrive in the new landscape.
The recent PwC report, titled "US Life Insurance 2020: Competing for a Future," outlines four key tactics insurers should incorporate into their daily activities in order to be successful in the new life insurance marketplace.
Growth in the life and pensions market will come from expanding into new customer segments by offering holistic advice and customized solutions. According to the most recent U.S. Census 2010, the percentage of traditional family households is less than 50 percent. Insurers will need to spend more time educating new segments (e.g., single female households or ethnic households) on the value of life products and make them easier to understand in order to attract and retain customers.
The overall market for life insurance is decreasing in the developed world and increasing in emerging nations. In the United States, life insurance assets as a percentage of overall household financial assets have been steadily decreasing over the past two decades. However, since the 2008 financial crisis, U.S. consumers are viewing life insurance as protection, not an investment. Paired with changing demographics, such as aging baby boomers, the market for retirement planning and retirement income is growing.
Customers have become accustomed to easy online research and transactions when they want, where they want and through any channel they want. Since customers are in control, they demand more information and flexibility when choosing life and pension products—and the role of the adviser is evolving as a result.
Advisers are just one of many channels that customers use for their planning. Their advice often supplement the online research that customers do on their own. Customers also want more advice about a wider range of financial products from many channels. To stay relevant, life insurers need to broaden the portfolio of products that they advice on and help customers determine how much money they will need at each stage of their lives.
In order to customize their products, insurers are turning to advanced analytics and external sources of data from purchases, social media and other channels .
Financial service providers use information on past purchases, healthy behaviors and demographics to design products that meet the customer’s needs through each life stage. Using this data, advice will be tailored based on each individual’s requests, making products more convenient for consumers, while automation and analytics make insurance products easier to comprehend.
New players are entering the market strictly online, with new business models and lower costs. Being big is not enough—insurers need to act fast. To compete effectively, traditional insurers need to change their cost structure, make their products easier to understand, and use online platforms to reduce distribution costs and enhance effectiveness. These tactics will improve service by providing customers with easy access, as well as facilitate customization through individual customer data. Companies will also need to streamline their procedures and reorganize talent to focus on high-growth markets and customized solutions.
The biggest challenges to the life and pension sector are also the biggest opportunities for insurers to succeed in the next decade. By using technology and tailoring products to customers throughout every life stage, insurers can acquire and retain customers in the increasingly competitive market. What other changes do insurers need to make to stay relevant in the industry?
Jamie Yoder is the co-leader of PwC's US insurance advisory practice.
Readers are encouraged to respond to Jamie using the “Add Your Comments” box below.
This blog was exclusively written for Insurance Networking News. It may not be reposted or reused without permission from Insurance Networking News.
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