Its No Longer Business As Usual, So Dont Offer The Usual Solutions
Micheal Levison
These are difficult times for the life and health reinsurance industry. Margins continue to narrow and investment portfolios have been battered. Capital is difficult to raise and the industrys core value proposition is seen by many as a commodity.
Long gone are the days when reinsurance client relationships were built largely on personal relationships and entertainment budgets. Todays cedents are much more demanding and much more focused on their bottom line.
The major players in the industry are reacting to these realities in two distinct ways. One group has adopted a “back to basics” strategy, shedding unprofitable product lines and trimming ancillary services. This camp is focused on doing just a few things and doing them very well. Rather than forsaking innovative ways to add value, these reinsurers seek to add services that are much more product focused.
Contrastingly, the reinsurers in the other camp have adopted a “more is better” strategy. They feel the best way to differentiate themselves from the competition is to offer a wide range of support services that address many of the most fundamental challenges insurance companies face.
Some of these services have been offered for quite some time. Support provided in the areas of IT, policyholder administration, claims management and asset management have been of tremendous help to many carriers. Most of these initiatives can be broadly classified as operational support.
But recently, some of the most innovative companies have developed and begun offering marketing support as well. On their own or in partnership with specialists, they are bringing their clients and prospects unique strategies designed to generate more revenue, lower acquisition costs and improve retention rates. Naturally, the quid pro quo for this support is healthy participation in the premium generated from these initiatives.
For instance, one leading reinsurer has made significant investment in a product chassis and an IT infrastructure designed to more efficiently sell face amounts of life insurance below $250,000.
This “middle market” is a primary focus for large retail banks entering the life business. As these banks seek out carrier partners, those that can bring an effective processing system to the challenge will have an edge. By helping their cedents compete in new distribution channels more effectively, these reinsurers ultimately help themselves.
Another strategy is focused on the retention challenge facing annuity portfolios. At least one carrier provides a turnkey marketing campaign designed to “capture the runoff” of a cedant’s annuity contracts during the surrender process. Other strategies are aimed at acquiring additional deposits on existing contracts.