Life insurers can renew efforts to aggressively penetrate new markets
January 3, 2014 by IFAwebnews Staff
Given the rise in consumer confidence and ongoing economic recovery, life insurers are poised to rebuild product portfolios, expand into under-penetrated markets and deploy the capital they have accumulated into profitable business opportunities, according to Ernst & Young’s 2014 U.S. Life Insurance-Annuity Outlook.
“Insurers eyeing growth opportunities need to develop cost-effective ways to distribute products to empowered consumers who are open to purchasing life insurance and annuities through alternative distribution channels,” said Doug French, principal, Financial Services and Insurance and Actuarial Advisory Services at Ernst & Young LLP. “By leveraging sophisticated technology, digital and data analysis techniques, and investing in the right people, processes and methodologies, insurers can streamline operations and support robust growth strategies.”
EY believes that U.S. life and annuity insurance companies must move from playing defense to taking the offense by pursuing five key areas in 2014:
Become more customer centric and adopt digital technologies to reach expanding markets
In a highly competitive marketplace, life insurers need to deepen their relationships with customers. To capture this growth opportunity, they must respond to customers’ rapidly evolving requirements for product transparency, quality service, communication, and enhanced recognition of customer loyalty. Companies that integrate social media with other distribution and communication channels will have a competitive advantage.
Streamline operations to improve efficiency and resolve legacy systems
In a low-interest environment, life insurers need to re-evaluate their existing operational models and cost structures. Outsourcing, co-sourcing and implementing shared services across the organization can streamline processes, guide long-term operational excellence and increase profitability – enabling companies to compete more effectively in the expanding market.
Invest in enterprise data excellence
Data management and enterprise data excellence must be a priority across the organization. To outperform their competitors in 2014, life insurers should focus on a common architecture of standards and policies, enhanced and predictive analytics and a data governance framework that defines ownership and controls. Within this mix, companies must also adopt data security processes to protect against the exponential rise in cyber-attacks.
Improve capital efficiency
In a volatile economic environment, life insurers can enhance shareholder returns by improving the yield on investments in products and operations, and balancing risk and reward in their asset portfolios. In addition to modifying and re-pricing products, they must take the next step and develop economic capital models that support products, optimize capital and enhance risk management. Capital models must identify broad risks, particularly interest rate movements that affect product maturity, quality and liquidity.
Anticipate and prepare for regulatory and accounting changes
The trend toward greater regulatory intervention and related pressures will continue in 2014. This will increase the need for life insurers to assess enterprise risks, heighten operational transparency, enhance government efficiency and establish clear risk ownership and accountability. It is crucial that they build both management and information capabilities to minimize regulatory impact, and maximize the opportunity to differentiate their value proposition to stakeholders.
[Read/download Ernst & Young’s 2014 U.S. Life Insurance-Annuity Outlook]
