The top 5 concerns of insurance executives today

Talent management and human capital issues have become so critical to the industry’s future outlook that one survey respondent expressed a belief that the chief human resources officer (CHRO) will be the most important person in the C-suite.

The talent shortage affects every layer of the organization, with a lack of sufficient candidates to fill senior executive roles and significant gaps in technical skills. And then there are the generational issues; the insurance industry is simply not attractive to young people, executives believe. A few comments from survey participants sum up the reality:

• “No one wakes up and decides that they want to go into insurance.”
• “Financial services companies are heavily regulated and slow moving and we are competing against cool companies for talent.”
• “[We have the] same problem attracting talent as attracting customers.”

In other words, the industry’s image as staid and risk-averse simply does not appeal to the brightest and most promising young people, who likely view technology companies as their employers of choice.   Insurers also seem less appealing to young people because their offices are typically located in less desirable cities and offer less collaborative work environments when compared to technology firms.

Executives recognize the deep need to find new talent – like data scientists and digital experience designers – is not merely about burnishing the industry’s image. Rather, there is a clear and pressing need to replace an aging workforce, especially in critical areas like underwriting. Taking a more strategic view, the talent issue reflects the need to foster innovation-centric and entrepreneurial cultures and to develop next-generation capabilities. Lastly, there is an opportunity for the industry to tell a clearer and more persuasive story about its mission and important societal role in helping individuals and families secure financial protection. The rising generation of workers is seeking such purpose in their careers and choice of employer.

4. Flexing and evolving distribution models.  

Economic pressures, demographic shifts and technology-driven disruptions are forcing change in the realm of distribution models as well. As one survey respondent put it bluntly, “Buying habits are changing, and we’re going to have to change with them.”

Current distribution strategies are neither reaching high-potential market segments (like the under-penetrated middle-income market) nor meeting the needs of many current policyholders. The fact is that little customer service and few interactions occur after initial sales are made. In many cases, premium invoices are the only communications policyholders ever receive from their insurance carriers.

This low-engagement model is not conducive to strengthening relationships with the broadest possible set of consumers. After all, today’s empowered customers have unprecedented access to information about products and benefits and, therefore, less need for a broker or advisor to guide them through the education and research portion of the sales process.

Survey respondents believe omni-channel distribution models, with consumers able to choose among self-service or in-person or other purchasing options, are destined to become the industry norm. Others are considering lifecycle selling, or re-engaging customers at certain points during their lives based on their stated preferences. Such an approach may open up cross-selling opportunities (e.g., integrating 401K plans with options for life, health, annuity or disability products). However, there will be challenges with this approach as well discussed in the next topic.

5. The evolution of consumer protection needs and requirements.  

There are many regulatory initiatives underway that are aimed at better educating and protecting insurance customers and executives are not particularly bullish on the outlook. Proposed rules from the Department of Labor regarding fiduciary duties and insurers’ obligations to “know their customers” are among executives’ top concerns. Everyone wants “common sense” protections against abuse and fraudulent behavior, but those threats must be balanced against the pressing need to provide the middle market, in particular, with advice regarding retirement products and services.  

Personal privacy and data security are other pressing matters. Executives justifiably believe “no one is safe” from the very real threat of data breaches, hacking and other forms of cybercrime. “It’s not a matter of if it will happen, but when it will happen,” said one executive.

Shifting regulations could fundamentally change how annuities are written, product information is disclosed and advisors are compensated and whether cross-selling opportunities can be realized. In the end, respondents believe there will be a pronounced shift away from commissions and toward fee-based relationships. Compliance costs are likely to rise. In the eyes of survey respondents, the effect of new regulations range from “destroying the business” and “massive impacts on operations” to “getting rid of commissions” to “more challenging to give financial advice.”

The bottom line

The life insurance and annuity industry experiencing a period of extreme turbulence is not breaking news. But the increasing focus of executives on the necessary steps toward innovation and transformation underscores their focus on fundamental change and strategic evolution. Our respondents summed it up this way, “When we do right by the consumer, we do well as an industry,” and “companies that think, innovate, experiment, fail and win will beat the relevance challenge.” As an organization focused on building a better working world, we at EY couldn’t agree more.