Industry’s Biggest Opportunity: Helping Fund Retirement
February 3, 2015 by Arthur D. Postal, arthur.postal@innfeedback.com
WASHINGTON – The biggest growth opportunity for life and annuity carriers could be helping consumers generate sufficient savings and income for retirement. That’s according to Deloitte’s 2015 life and annuity industry outlook. This growth opportunity, Deloitte said, stems from the aging U.S. population, improved health care and lengthening lifespans.
However, the report continues, because of the long-tail nature of the risk and the uncertainty of investment markets, “figuring out how to profitably design and underwrite longevity-related policies could also be their most formidable challenge.”
The insurance industry will have to endure a “wide-ranging reinvention” if it hopes to survive in the face of sluggish sales overall and “shrinking market penetration,” according to the outlook.
Many carriers have adjusted the types of policies and features they offer, “but have steered clear of more fundamental changes in how they connect with prospects, communicate their value, and distribute their products and services,” the report states.
Americans’ increased longevity rates also pose opportunities and risks for insurers, according to Deloitte.
The report indicates some conditions in which the industry could see some growth in the short term. Growth could take place if, despite occasional turbulence in equity markets, the U.S. economic recovery maintains and even accelerates its momentum through 2015 and the Federal Reserve finally starts raising interest rates in the second half of the year.
However, the longer-term challenges pose the greatest risk, the report said. It cites the current picture of low rates of life insurance ownership and complex annuity options as creating “a mystery for many prospects.”
In order to respond to those challenges, insurers will have to rely on “experimentation and innovation” in order to create products “that are more consumer friendly.” They also will have to improve methods of attracting and engaging clients through traditional as well as new channels, “as well as more effectively communicating the value proposition they offer,” the report says.
The report calls for insurers to create “five pillars” for growth. These include:
– Creating new products by thinking out of the box.
– Addressing the longevity risk issue.
– Achieving “information fluency” by fully leveraging the vast amount of data insurers already have.
– Overcoming regulatory challenges.
– Upgrading capital management.
Among the steps needed to achieve information fluency, the report says, is creation of a new “data management infrastructure and governance architecture” that should help carriers “break free of outdated, siloed systems, while turning data into both a strategic asset and a competitive advantage.” The report says that, specifically, these efforts should encompass client-targeting through service and supplemental sales.
At the same time, the report says, “carriers also should take additional steps to become more secure, vigilant and resilient in the face of the rising threat of cyber attacks.”
The “bottom line,” the report says, is that carriers should move more aggressively in 2015 to reassess their products, distribution platforms, communication options and consumer outreach campaigns with the goal of connecting with and educating prospects more effectively.
Beyond specific actions such as product simplification or perhaps direct sales, life insurance carriers “should refocus marketing and advertising strategies to rebrand the business. Insurers should be portrayed not just as product sellers, but as a long-term partner on whom consumers can count to help them meet evolving financial needs over time.”
