In coming years, expect to see more simplified and consumer-friendly products, including annuities tailored to young workers looking to build a nest egg. Life insurers’ back-office operations will also be better integrated, availing advisors of more cross-selling opportunities across product lines.
These developments are in the offing if carriers follow the recommendations of a new report from the Deloitte Center for Financial Services, “2015 Life Insurance and Annuity Industry Outlook: Taking the Longer-Term View.” LifeHealthPro Senior Editor Warren S. Hersch recently interviewed three Deloitte representatives — Gary Shaw, vice chairman and U.S. insurance leader; Sam Friedman, research team leader-insurance; and Howard Mills, national insurance investors senior advisor and a former superintendent of the New York State Insurance Dept. — to discuss the report’s key findings. The following are excerpts.
Hersch: What are the report’s most important findings? What were you endeavoring to achieve in undertaking the research?
Shaw: The report identifies 5 topline priorities for insurers: transforming for growth, addressing longevity risk, upgrading capital management, overcoming regulatory challenges and achieving what we call information fluency. The last item calls for implementing new data management and governance solutions to help carriers break free of outdated, siloed systems, while turning data into both a strategic asset and a competitive advantage.
Securing these objectives will require, among other things, the hiring of data scientists, making greater use of analytics software and being more inclusive across disciplines when addressing business challenges.
Oftentimes, industry outlook reports focus on short-term issues like the state of the economy or whether markets are up or down. We’ve done this in the past, but this year we’re focusing on bigger picture items that are very high on insurers’ strategic agendas — and not just for the rest of 2015.
These issues will remain prominent for the next 3 to 5 years. One example: how insurers can become more efficient, productive and streamlined internally so as not only to better serve consumers, but also other stakeholders — regulators, ratings agencies, etc. We’re talking about fundamental changes that insurers have to undertake to better position themselves to be market leaders for the rest of this decade and beyond.
Hersch: What are the key market drivers underpinning the needed technology upgrades identified in the report?
Friedman: Much of the technology push is external in that insurers are reacting to the competition. And so we’re seeing much greater use of predictive modeling and advanced analytics software among life insurers.
These upgrades are, in turn, driving the demand for more data analysts and data scientists. Also, consumers are demanding of insurers more fluid service: 24×7 access to product information or carrier reps via the web, mobile devices and social media.
Insurers’ technology initiatives are also internally driven. As Gary indicated, there is greater demand for integration — information fluency — of still siloed IT systems across an enterprise. These silos are divided along both business line and function, such as underwriting and claims.
Absent the needed integration, it can be difficult to capitalize on data on a holistic basis — for example, by taking greater advantage of cross-selling or product development opportunities. All of these improvements require cross-departmental cooperation and systems that can be easily accessed by individuals in finance, marketing, claims or product development.
When you share data across functions and for different strategic purposes, you increase the value of the data exponentially. Right now, many insurers are information-rich, but knowledge-poor. So much more can be extracted from the data in an information-fluent organization.
Hersch: Does the information-fluency you talk about mainly entail greater leveraging of human capital or technology investments in solutions that can aggregate and interpret the now-siloed data within insurers?
Friedman: You’ll always need tech people to work on IT systems. But this is a broader issue, one that requires a commitment from company c-suites to push data fluency throughout their enterprises.
Companies also need a steward, such as a chief data or information officer, to coordinate efforts. We’re also urging insurers to not bite off more than they can chew because systems integration can be a very involved process. In some cases, companies may want to run pilot programs before rolling out IT initiatives enterprise-wide.
Shaw: Some of the more successful insurers are doing just that — taking bite-size chunks. They’re developing targeted business-use cases, then harvesting information to change how the company addresses a specific issue, rather than trying to tackle everything at once.
Hersch: Another market analyst I’ve spoken with suggests that C-level executives who oversee technology initiatives, such as CIOs and CTOs, don’t have as much influence as other senior executives in shaping strategic priorities because the return on technology investments is often hard to quantify. Would you agree with this assessment?
Shaw: To a degree. But at a growing number of insurers, the CIO or CTO now reports directly to the CEO. And they are in some cases disaggregating their roles into separate positions. These might include, for example, a chief science officer or chief customer experience officer, both of whom again report directly to the CEO.
These people are becoming more prominent across the c-suite. And so they’re better positioned to drive investments in new technologies and facilitate greater cooperation among systems managers and departmental heads to secure business objectives.