Low interest, high tech-costs and compliance all bear upon profits
ATLANTA, Jan. 11, 2018 /PRNewswire/ — Life insurance industry executives predict modest growth in 2018, according to a recent survey by LOMA’s Resource magazine.
The prolonged low-interest-rate environment, coupled with the high costs of replacing aging technology platforms and complying with new regulations, will continue to challenge profits. Survey participants also suggested new technology will continue to impact business strategy and results.
Sixteen senior executives from life insurers and consulting firms took part in the magazine’s 2018 Forecast for the Life Insurance Industry, giving their views on sales expectations, technology, customer service, human capital and other issues.
“I think the game changer is carriers’ ability to make instant underwriting decisions at fully underwritten prices,” said Tom Scales, research director, Celent and a Forecast participant. “A number of insurers are leveraging automated underwriting systems, in-house technology and mortality scoring systems to slash their cycle time to days, if not hours. This truly could bring life insurance more mainstream in financial services.”
Other insights from the 2018 Forecast include:
Industry executives now are eyeing the potential of artificial intelligence (AI), robotic process automation (RPA), blockchain, smart delivery and more.
In today’s world, the life industry needs to deliver an Amazon Prime-level of service and trust along with full transparency, convenience, real time decisions and solutions tailored to unique needs of customers.
To attract and develop the kind of employees they need to be successful, insurers must demonstrate that they are innovative, interesting and in tune with the times.
Excerpts from ‘Industry Directions: Our Annual Forecast
Sales, Premiums & Profits
Industry executives predict modest growth ranging from one to five percent in 2018. If the new U.S. administration curtails the Department of Labor (DOL) fiduciary rule, growth will reach the upper end of that range. On the other hand, the prolonged low interest rate environment, coupled with the high costs of replacing aging technology platforms and complying with new regulations, will continue to challenge profits. Interestingly, the run-up of the equity markets in 2017, which is expected to continue in 2018, can hurt insurance sales because it can lessen the perceived need for protection and guarantees.
Bright spots include steady whole life insurance sales, a surge in indexed universal life (IUL) sales, and the growing popularity of hybrid long-term care (LTC)/linked benefit products. Another is term life insurance as InsurTech players such as Bestow, Ladder Life and Haven Life seek new ways to get to potential customers through online and social media. Solid economic and labor market projections will have a positive effect on group life insurance and long-term disability (LTD) sales. The middle market—some call it the mass underserved market—continues to be wide open. Sales of annuities, especially variable annuities, continue to face headwinds. The outlook for annuity sales will depend, in part, on what happens with the DOL fiduciary rule, but will likely rebound.
Last year, it was all about Big Data, predictive analytics, and agile underwriting. While they still are vital, industry executives now are eyeing the potential of artificial intelligence (AI), robotic process automation (RPA), blockchain, smart delivery, and more. AI builds on data analytics by enabling computers to mimic human intelligence to find patterns and perform tasks, including making decisions, which previously required human intervention. Using them enables companies to find customers, tailor products for them, accelerate underwriting decisions and more.
Executives also point to the potential of robotic process automation (RPA) for automating tasks, enabling industry professionals to focus on higher value activities, and driving down issue costs. Smart delivery is another IT focus. “Consumers expect to interact through a multitude of touchpoints—smartphones, tablets and voice interaction—for advice,” emphasizes one executive. Consequently, forward-looking companies are enabling more digital client interactions; shifting to online, mobile, smart and simple applications; using social media channels; and building seamless interactions among all these touchpoints.
In today’s world, the life industry needs to deliver an Amazon Prime-level of service and trust, notes one executive, “along with full transparency, convenience, real time decisions and solutions tailored to their unique needs and challenges.” Customers expect to be able to transact business through a seamless multi-channel experience, says another, who adds, “The ability to meet these expectations will shape the industry going forward either through existing participants or new entrants. If carriers don’t make that happen, new entrants will.” A third emphasizes the industry needs to “go beyond service, which can suggest a once-and-done transaction, and explore how we can positively affect the customer experience.”
It is the Millennials, in particular, who are triggering a paradigm shift in client experience conversations. “They are able to acquire and compare information with ease,” says an executive, “and coming to the insurance provider is more about affirmation of their choices rather than information seeking, redefining the client-provider interaction. They seek convenience, simplicity and a streamlined through their preferred [technology] touchpoints.” Finally, the industry must deepen its relationships with all customers to remain relevant.
The 2018 Forecast for Life Insurance is featured in the January issue of Resource. Read the entire article here.
Established in 1924, with 1,200 plus member companies in over 80 countries, LOMA is committed to a business partnership with its world-wide members in the insurance and financial services industry to improve their management and operations through quality employee development, research, information sharing, and related products and services. To find out more about LOMA and the learning opportunities it offers, visit LOMA’s Web site at www.loma.org.