Technology Poised to Reshape Life Insurance in '16: EY

The tides are shifting and new opportunities arising for life-annuity insurers, according to the 2016 EY US Life-Annuity Insurance Outlook. The industry is in a strong financial position as it moves into 2016, but companies need to innovate and experiment if they want to stay competitive in an omnichannel world of digital-savvy consumers, nagging regulatory issues and global economic uncertainty.

“Past years have focused on shoring up their balance sheets while bolstering reserves and capital,” says Doug French, Principal, Financial Services and Insurance and Actuarial Services at Ernst & Young LLP. “Now, balanced sheets are more robust, putting companies in a position to fuel growth.”

For EY's P&C industry outlook, click here.

However, insurers can’t rest on their laurels — they need to reinvent their strategies, services and processes, explains French, and take decisive action to keep up with technology advances, increased competition and rising customer expectations. “Strategic ‘bet taking’ is important going forward for life-annuity insurers,” he says, adding that traditionally the industry has relied on ‘close follower’ strategies. “However, experimentation is needed to propel these companies ahead of the curve, especially with regard to customer experience and advice models,” he says.

Technology is the highest-impact external factor affecting life-annuity insurers, according to the E&Y report. Customers are pushing for new tools ranging from robo-advisers to omnichannel access, while insurers will use digital technologies to transform their offices, both on the front and back-end. “Today’s processes involve too much paper and are too manual for today’s consumers,” French says, while insurers will soon face greater competition from new digital startup PolicyGenius, which offers digital platforms to help consumers shop for insurance, and the recent launch of Google Compare.

Overall, the E&Y report hones in on six key areas that life-annuity insurers need to prioritize in 2016:

  1. Increase pace of business transformation and innovation. Insurers need a company-wide culture of innovation; cross-functional teams and better information sharing.
  2. Reinvent products and services for the new digital customer. Customers want anytime, anywhere, any-device access — as well as more flexible solutions, quicker service and pricing transparency.
  3. Better distribution strategies for technological and regulatory shifts. Life-annuity insurers need to adapt to an omnichannel world — that means exploring more digital options as well as worksite and health exchanges for new or expanded distribution strategies.
  4. Reengineer processes to drive efficiency and market growth. Besides going beyond the assembly-line approach, companies need to meet new regulatory standards, revamp IT systems and consider technology partnerships.
  5. Hire the right talent to lead innovation. Insurers need to compete for young, diverse talent to create the next-generation insurance company — that means offering greater flexibility; offering creative rewards and focusing on diversity as a strategic must-have.
  6. Place cybersecurity high on the corporate agenda. Like every other industry, cyber risks are a huge issue — but it is of particular importance for life-annuity insurance as breaches can impact their reputation and trust with customers and the general public.

These six issues will not be quick-fixes, French emphasizes. “By the end of 2016, innovation and experimentation will still be the main topics of conversation,” he says, adding that steady M&A activity is also on the horizon for the coming year. The proposed DOL Fiduciary Standard may also alter the landscape as it exists today, in terms of a potential new business model.
However, life-annuity insurers currently have a powerful opportunity to take advantage of their strong financial outlook in 2016 — by investing in the innovations and technologies needed to fuel growth and keep up with both competitors and consumer expectations.

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