Three things on Life Insurers’ minds in 2014

In recent years, balancing between profit and affordability has been a taxing experience for life insurers and consumers. Like a tightrope walker veering nervously from side to side.

Sluggish growth, persistently low interest rates, competition from intermediaries and cautious consumer spending has taken its toll on the industry, and many have felt the pinch. Insurers reacted in the best way they know how; concentrating on core offerings, dropping products, cutting costs and shielding precious capital by de-risking their portfolios. In 2014, a large slice of the proverbial pie remains underinsured, under-engaged and unable to differentiate between insurance providers or products.

As the global economy begins to show signs of life, the race is on for insurers to capture their piece of the pie and innovation (as often is the case) will be key to the growth prospects for all involved. Insurers must respond to emerging trends in customer behaviour and attitude whilst at the same time, better support their business with smarter financial and operational management and navigate a stricter regulatory environment demanding greater attention and care.
Technology will no doubt continue to play a pivotal role in how well organisations are able to transform and adapt to the competitive landscape around them and, in this article, we will discuss the use of technology that life insurers have and will continue to adopt to enhance their growth prospects:

  • Enhancing market segmentation and customer engagement to drive growth
  • Supporting the business and its multi-channel product strategies
  • Coping with pressures brought about by tougher regulation whilst sticking to a budget

1 – Enhancing market segmentation and customer engagement

In a market where demand for new and complex life insurance products is weak, reaching the “underinsured” population and retaining customers is going to prove vital to the growth prospects of any insurer. However, with customer loyalty frail and emerging technologies making it easier than ever to compare offerings, insurers must find ways to identify opportunities and enhance their engagement with their customer base. Some recent survey findings include:

Insurance Survey Findings

  • 80% of people who switched insurance providers felt their insurer made little to no effort to retain their business.
  • 75% of people thought it was difficult to differentiate between providers or products.
  • 70% of people intend to proactively research their options using technology available to them for their next insurance product.

Simply put, many life insurers are blind to the changing needs of their customers who eventually consult their advisers or conduct their own research prompting them to switch.

Analytics to the rescue… or maybe not.

The exciting world of analytics was intended to be the saving grace for this challenge. By segmenting their customer base, insurers could identify which groups were most profitable to determine patterns and correlations they could build upon. Who was the most loyal? Where was the highest density of multi-product relationships? Why was the density so high in these groups? In addition, analytics presented the opportunity to tap into social trends (e.g. big data) and shine a spotlight on the “underinsured” portion of the population.

In reality however, the industry has seen a poor return on their previous investments in data analytics with issues such as a lack of focus on enterprise initiatives, a tendency for “analysis-paralysis” (indecision based on the perception that the information is inadequate, the timing is not right or that something bad will happen) and concerns about the quality and availability of data. As in many industries, the issue is not the lack of data; it’s not having the “right data” and in a reasonable quality to from which one can interpret and drive strategic decisions for the organisation.

Wising up and thinking differently about analytics

Going forward, rather than “warehousing” data by leaping into lengthy and convoluted BI (business intelligence) and DW (data warehousing) projects which can lead to the lack of focus and “analysis paralysis” mentioned above, life insurers are beginning to appreciate the concept of “supply chains” of data.

Often, the easiest way to improve an analytical model is better data. In contrast to focusing on constructing the “resting places” created by data warehouses to pool large quantities of data and deriving ever more advanced statistical uses for the data, the focus is shifting to first curating an extended supply chain of high quality data sources and then enabling staff at various points of the journey taken by the data to manipulate, expand, update and analyse the data so that business insights and outcomes that benefit customers can be derived.

By focusing their efforts on sourcing and producing better data, organisations will start to introduce opportunities to achieve the outcomes they always intended from analytics – powerful insights that drive value for their customers, whether it is in the form of enterprise wide analytical models or smart discoveries made by creative and committed individuals within the organisation when given the opportunity to access, manipulate and analyse data at various points across the supply chain.

2 – Supporting the business and its multi-channel product strategies

Aggressively pursuing customers through multiple sales channels has allowed insurers aiming to maximise their reach and potential target market by giving customers access to information across multiple devices and platforms including websites, call centres, mobile apps and financial advisers.

Furthermore, consumers now expect insurers to provide seamless multi-channel access ( 84% according to a survey by Accenture ) and therefore force insurers to utilise this strategy to remain competitive.

As is often the case when pursing a sales strategy, the financial and operational arms of the business start playing “catch up” as they attempt to support the activities of the business and the general problem is no different for life insurers.

The cost of supporting multi-channel strategies

Implementing policies and processes as well as technology to support seamless multi-channel access for customers is proving difficult for some. Furthermore, adapting industry legacy software to help define and manage a single, common portfolio of products that sit separate to the channels whilst at the same time incorporating the intricate business rules and behaviours of each individual channel is proving to be a challenge.

For those responsible for the day-to-day operational and financial workings of the business, the impact is generally more work and more headaches as they are faced with having to compensate for the lack of technology that is able to provide good quality and integrated data to support this business strategy – ultimately hitting the operational efficiency and profitability of the organisation.

Not forgetting the big picture

As much as it may seem obvious, the pursuit of multi-channel strategies should only be considered successful if it leads to a better experience for customers, for the staff who provide their energy in supporting it and in improved growth prospects for the organisation.

The emergence of cloud and SaaS provides insurers with options to addressing this problem head on and in a cost effective way. Gone are the days where it is “enterprise-or-nothing”. Organisations are now able to experiment – with little to no capital expenditure.

Whilst waiting for or implementing core technologies that integrate with the multi-channel strategy, those responsible for keeping the engine room running can browse a virtual supermarket of solutions that can help them with each specific task – whether that be reporting on the performance of sales channels, managing call centre performance or satisfying regulators and so on.

3 – Coping with pressures brought about by tougher regulation

It may be a “distraction” from running your business, but regulation is here to stay (at least while the 2008 era is fresh in our minds), and insurers are placing increasing reliance on financial modelling tools to help them implement and manage regulatory change.

Towers Watson performed a survey in 2013 of Life Insurance CFO’s and found that:

  • More than 50% of life insurers spend over one week to produce results from their financial modelling with around 20% not at all satisfied with the timeliness of the modelling activities
  • CFO’s regard model run-time requirements as one of their biggest challenges and their top priority is to enable faster run times to allow for more confident decision making
  • Most CFO’s are concerned with the effort required to produce and interpret financial results. 91% have to spend time interpreting results before they can act on them
  • More than half of the respondents to the survey plan to make changes to their model governance process.

Whilst a pain point for many CFO’s, according to a survey by Insurance & Technology, approximately 60% of 2013 Insurance IT budgets were expected to remain the same or be lower than their 2012 IT budgets. Shrinking budgets allocated for “back office” tasks, an impatience for long projects and an end user community of tech-savy individuals that demand more effective IT initiatives has shifted appetites away from enterprise systems to consumer products.

It is clear that Life insurers must find innovative and economically disruptive ways to reduce the time to model key financial results in a transparent and easy to interpret way. With regulatory pressures only set to increase, maintaining profitability will require thinking outside the box.


Life insurers will have a lot on their mind going into 2014 and pursuing growth opportunities will not doubt be at the forefront. Those who are willing to innovate and disrupt will – as history has shown time and time again – leap-frog those too stuck in their ways to remain competitive. And those who are able to do re-engage their customers whilst maintaining their profitability and keep up with regulation will be in prime position for growth and to leave their competitors in the dust.

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