The life insurance sector has to pick up the pace on innovation, according to EY’s 2016 Life Insurance Outlook. Rapidly advancing technology and changing consumer preferences add to the bleak economic landscape, creating 6 forces for life insurers to manage this year.
“In 2016, six forces will dominate the life insurance sector, driving insurers to transform their business on multiple fronts,” says Janice Deganis, EY’s Insurance Leader. “While there are many opportunities with digitization and increased insights through data analytics, life insurers will face stricter regulations and a weak economy. Those who manage the balancing act will better position themselves to remain competitive this year.”
“Life insurers need to make innovation a priority not just in their business plans, but on the ground,” adds Deganis. “To create a culture that encourages new thinking, life insurers will need to experiment, allow their employees to fail, develop innovation labs and attract new talent.”
EY has identified six external forces that will shape the life insurance sector in 2016. Insurers can address these forces with EY’s roadmap (below), which focuses on staying ahead of change and investing in the right technologies, systems and people to move forward.
Impact of external forces on the Canadian life market in 2016:
(0 = Very low impact, 10 = Very high impact)
Technology (9) – Digital technologies will redefine life insurance in 2016, as customers push for new tools, from robo-advisors to omni-channel access. These same technologies will enable insurers to transform their front- and back-offices.
Customer expectations (8) – Demands for customized services, digital platforms and personalized support will grow sharply in 2016. Insurers will need to move to a customer-centric approach built around personal relationships, better access to data, and a strong service attitude.
Cyber risks (8) – Digital transformation will expose insurers to higher risks from fraud, data theft and political activism. With greater access to sensitive data, privacy breaches will become a bigger worry, as will reputational risks from the use of social media.
Competition (7) – Competition will heat up as established insurers act fast to capitalize on game-changing market shifts. Challenges will also come from non-traditional sources, such as FinTechs, offering innovative digital solutions.
Economic and financial conditions (4) – Uncertain financial and economic conditions will continue into 2016. Slow economic growth, decline in the Canadian dollar and a weakness in the oil and gas industry are major downside risks for insurers.
Regulation (6) – In 2016, insurers will need to stay on top of the potential implications of changing regulations such as modified policyholder taxation and start planning for risk-based capital requirements in 2018.
Roadmap for transformation: priorities for 2016
Leading life insurers will focus on the following path to change:
1. Pick up the pace of business transformation and innovation
2. Reinvent products and services for the new digital customer
3. Adjust distribution strategies for technological and regulatory shifts
4. Reengineer processes to drive efficiency and market growth
5. Bring in the right talent to lead innovation
6. Put cybersecurity high on the corporate agenda
“Life insurers will need to cut across organizational silos to drive innovation this year and beyond,” adds Deganis. “Establishing cross-functional teams and fostering information-sharing can help lead to new ideas and improved customer experience. But this is just the first step towards business transformation.”
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SOURCE EY (Ernst & Young)