To compete successfully in the year ahead, life insurers must become more customer-centric, adopt digital technologies and streamline operations. They also need to invest in enterprise data excellence, improve capital efficiency and prepare for regulatory and accounting changes.
The source of this to-do list: Ernst & Young, which details in a new report its recommendations for the industry. The white paper, “2014 EY U.S. life insurance-annuity outlook,” identifies solutions to implement in the five operational areas covered and recaps key findings from recent EY surveys dovetailing with the recommendations.
“[The industry’s challenges include a more empowered insurance consumer, due to advances in communications, data analytics and other information technologies, and the uncertain impact of regulatory and accounting changes and proposals,” the report states. “The latter will require companies to reevaluate and adjust their business based on an analysis of their competitive position, financial strength and future capital requirements.”
The report flags a disconnect between intentions and current IT budgets devoted to digital technologies.
For example, 57 percent of companies polled in a recent EY survey intend to develop a regularly updated “digital business case.” And nearly eight in 10 (78 percent) expect to have an organization structure to support digital strategies within the next three years.
But significantly fewer respondents (40 percent) indicate they have senior management support and a digital sponsor within the C-suite. And nearly seven in 10 (68 percent) of life-annuity respondents acknowledge spending less than 10 percent of their business and IT development budgets on digital initiatives.
The report identifies the following as high-priority digital initiatives for life insurers to pursue:
Enhance their distributors’ financial planning knowledge and advisory skills;
Leverage digital and mobile technologies to effectively reach customers who prefer direct contact with the insurer;
open and integrate their administrative systems with distributors’ back offices, thereby streaming application processing and improving customer service;
automate application processing and integrate insurer/distributor back offices; and
adapt their digital capabilities to interface with mobile devices (including smart phones and tablets), which the report notes are now the primary vehicle by which consumers access the Internet.