If the shake-out in other commercial sectors teaches us anything, it is that no business, including insurance, is immune from today’s rapid and relentless shifts in technology and customer expectations.
Our extensive research reviews the sweeping changes across social, technological, environmental, economic and political (STEEP) perspectives, providing the knowledge to evaluate scenarios of maximum relevance to insurers.
What are the implications for life and pensions? Dealing with the STEEP dynamics calls for a major rethink of strategic assumptions, routes to market and organisational models, with the ability to look outside-in on your business.
We believe these developments are set to have the most decisive impact over the next five years in life and pensions:
Demand for retirement solutions in mature markets is increasing, but life cover sales as a proportion of GDP in a number of major developed markets including the US are declining (Source: Swiss Re Sigma World Insurance). In SAAAME markets, the big rise is in life cover, with sales of retirement products growing less quickly.
Insurers will need to develop an agile operating model capable of dealing with the different trajectories of growth. This includes developing innovative growth strategies on the one side and meeting the need for scale and efficiency to sustain margins on the other. It will also be important to support the development of insurance markets, including investment in professional training and educating consumers about the value of life and pension cover and how it works.
As cities grow and make up an ever increasing share of global GDP, they will become a key competitive 'battleground' for insurers. City dwellers’ demand for insurance and other financial services is greater than that of their rural counterparts, especially in SAAAME markets.
Consumers have become accustomed to the ease, intuition and elegance of digital retail interaction and want the same experience from insurers. As smartphones, iPads and other such versatile mobile devices proliferate, they also want to be able to conduct business when they want, where they want and on the channel of their choice.
Customers want greater transparency (allowing them to compare products), flexibility (products that adapt to their changing needs) and control (the comfort of being able to change their mind if not satisfied).
Regulatory insistence on greater transparency will make it easier to compare prices and value. Developments such as the caps on fees in India and the planned elimination of commissions for advisers in the UK are going to bring charges and the value policyholders receive in return further into the spotlight.
The emergence of virtual networks, multichannel interaction and direct-to consumer life insurance is fragmenting the value chain.
Risk-based capital regimes are raising capital demands for variable annuities and could lead to higher prices, just as many customers are once again looking for the assurance of guarantees.
Extracting profiling data from all of the unstructured purchasing, social media and other digital trails people leave behind would allow insurers to gain unprecedented insights into their health, wealth and behaviour.
The technology to make this possible is already available. The challenge is how to channel the data into actionable insights and build the results into decision making, product design and the underlying culture of the business.
Sensor technology could be used to help develop a more proactive approach to risk management and customer support by allowing insurers to monitor policyholders’ health in real time and alert them to any early signs of illness. Insurers would benefit from reduced liabilities and could offer lower premiums in return.
The improved ability to sense consumer sentiment would allow your business to adjust your position in the market and provide products and services that meet customer demands in shorter timeframes. Gathering information throughout the customer lifecycle, in near real-time, would allow insurers to shorten management decision cycles, speed up development cycles and ultimately better serve their customers.
Use of cloud computing and other technology developments to harness more data and automate underwriting is opening up customised solutions at lower cost.
Use of technology to create ‘virtual outsourcing’ solutions can improve service and reduce costs.
Cheap and easy access to open source software and cloud computing allow new players to enter the market and take advantage of flexible rented computing capacity and smart new analytics to develop their businesses without the need for high start-up costs.
A combination of more informed risk management and use of automation to lower costs would allow your business to provide policies offering secure returns at reasonable premiums under a risk-based capital regime.