Loma’s Forecast for the year ahead
ATLANTA, January 24, 2017 /PRNewswire/ — What’s the outlook for the life insurance industry in 2017? Executives surveyed by LOMA’s Resource magazine think the new year will continue the trends set in recent years, with small to modest gains in most product lines.
Fourteen senior executives from life insurers and consulting firms took part in the magazine’s 2017 Forecast for the Life Insurance Industry, giving their views on sales expectations, technology, customer service, human capital and other issues.
“We believe that 2017 will continue the very modest growth trends of 2016,” said Tom Scales, Research Director, Celent and a Forecast participant. “We would expect under two percent growth in North America, with larger single-digit growth in the developing world…we also see the industry continuing to struggle with low interest rates,” but he added there may be a very gradual move to modestly higher rates.
Excerpts from the LOMA 2017 Forecast:
Sales, Premiums, and Profits
2017 will continue the trend set in recent years—that is, modest growth in most product lines, which will experience slight increases in sales and case counts.
Bright spots include indexed insurance and indexed annuity products, both of which have benefited from the low interest rate environment. Another bright spot is group life/disability products—both employer- subsidized and voluntary—which will continue to benefit from current economic and labor market projections.
Whole life continues to increase in popularity due, in part, to the recent financial crisis. “From a product perspective,” says one executive, “we continue to see a flight to quality as purchasers move to whole life, seeking secure alternatives for their money while building a legacy.” Term life products are doing well as a protection solution for the middle market. Hybrid life insurance/long term care products are gaining traction as are annuities, both driven by an aging population and the growing need for guaranteed income sources in retirement.
The short-term prospect for annuity sales, however, is a bit up in the air. Another executive points to three yet-to-be answered questions. “First, will interest rates rise and, if so, how much? Second, how will the Trump administration handle the Department of Labor’s fiduciary rule? Third, how will the tax code change under the new administration?”
The DOL fiduciary rule has the potential to exert significant price pressures on the industry and to upend producer business models. InsureTech is another disruptor. Executives are not too worried about the non-traditional online companies that have sprung up recently. Nonetheless, they are staying alert—as one executive points out, firms from outside insurance and financial services have begun to circle and examine the potential of our industry. Another executive believes disruption is not such a bad thing: “I think business-as-usual needs to be disrupted.” His company is embracing disruption as the new normal, keeping an eye on new entrants (and partnering with some of them), investing in new technologies, and devoting resources to an innovation lab.
“Technology is transforming virtually every aspect of the business,” says one executive. “Consumers see the impact of technology in other industries and expect the same from insurance, driving future opportunities from end to end.” In fact, says another, “Technologies that help transform the customer’s experience offer the greatest potential.”
Of great interest at the moment are intelligent underwriting technologies, because they have the potential to shorten the new business cycle, cut expenses, minimize invasive medical testing, make the job of the producer easier, and transform the customer experience.
Here are some other insights from the forecast:
- Technology will continue to transform the industry, and there is particular interest in intelligent underwriting, which can shorten the new business cycle. Big data and predictive analytics also offer potential, and mobile and social media will play an increasing role in communicating with customers.
- Companies are beginning to embrace 24/7 customer service, via the customer’s preferred channel and device of choice. There is recognition that companies need to be focusing on the customer experience, not just a service transaction.
- There are varied opinions as to what may happen with the DOL fiduciary rule, due to the new administration.
Read the entire 2017 Forecast 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 website.