The coming year will be one of continued disruption for the US life-annuity insurance market.
The industry will remain in flux thanks to ongoing trends, as well as new uncertainty. Customer demand will continue to evolve, digital technology will keep advancing and InsurTech innovations will gain further momentum.
Today’s low interest rate environment and slow growth aren’t going anywhere. Regulatory pressures on consumer protection, capital and cybersecurity will intensify. Of course, a new Republican president and a Republican-controlled Congress bring uncertainty, with potentially sharp shifts in the country’s economic and regulatory agendas.
Despite the uncertainty, insurers will continue to draw on technology to improve cost efficiencies across their operations. These savings will help boost margins and free up funding for investments innovation and growth. With change coming from many directions, insurers need to stay focused on the customer while reassessing their competitive positioning in light of market trends. For some, 2017 will be a time to make brave strategic bets and rethink future plans.
EY’s 2017 US Life-Annuity Insurance Outlook report outlines six strategic priorities that insurance executives should focus on to navigate the uncertainties and changes coming in the new year.
1. Prepare for regulatory change
Insurance executives should develop a strategy to comply with the new Department of Labor (DOL) fiduciary rules, but be prepared to make a rapid course correction. The DOL rules will impact nearly every aspect of their strategy, operations and distribution models. Adding to the complexity is the prospect that a new president and Congress may reassess and adjust — or even cancel — the new rules.
The regulatory landscape for life insurers has never been more complex. Thus, it’s important to confirm that internal systems can keep pace with regulatory change.
To keep up and comply with changing regulations, insurers will need to build advanced data management and analytics capabilities, extract more value from governance, risk and compliance systems, and synchronize their three lines of defense among business operations, oversight teams and independent auditors. New procedures will not be enough, as best-in-class firms will better monitor regulatory developments at all levels and then assess how well their employees are complying on an ongoing basis.
Use analytical tools to discover insights in data that will help you understand the needs of four generations of clients. (Photo: iStock)
2. Stay centered on the customer
Understanding and addressing the diverse needs of four generations of clients requires advanced analytical tools to uncover usable customer insights hiding in reams of scattered data. In 2017, insurers should integrate their customer information systems across the enterprise and distribution channels to gain more complete pictures of their customers. Such views will help to identify new sales and product opportunities among new and existing clients.
Insurers also need to catch up with other financial institutions in meeting the rising expectations of customers, who are becoming more digitally connected, self-directed and better informed. Specifically, insurers will create digital platforms and mobile apps that simplify interactions, provide a more personalized service and offer better access to data.
With margins under pressure and customer buying behaviors evolving, insurers should continue to evaluate their distribution approaches in 2017. Insurers will need to look for new ways to improve customer engagement and act more as advisors for their “financial health,” while experimenting with direct selling platforms designed for specific customer segments.
3. Re-evaluate strategies for a changing marketplace
With the industry in transition and a new administration taking office, now is an ideal time for management teams to assess their current market position and decide where they would like to be in the long term. Such an evaluation should include strategic, competitive and technological dimensions.