By RGA Global Research and Development
RGA provides quarterly updates on global product developments, which can be made available upon request. Click here to view the Q4 2016 digital newsletter.
For life and health insurers, 2016 was a year of continued industry evolution. Medical advances, integrated technologies, demographic shifts, and regulatory changes fueled product innovation worldwide. To keep pace, insurers are investing in insuretech, digital distribution, and a simplified insurance process. And they are targeting all segments of society – from exclusive offerings to high net worth customers in Asia to microinsurance products for low-income consumers in Africa. Carriers achieving success are those identifying emerging opportunities, assessing available resources and tools, and creating innovative solutions.
We live in an increasingly connected world. All generations, particularly Gen Y and Gen X, are more at ease with doing everything online, leading to a new term: the digital generation, or Gen D. Customers now expect much more from their digital products and services.
To keep pace, insurance companies are developing integrated, multi-channel distribution strategies that enable consumers to research products with one channel and then buy them with another. Agents are using convenient apps to facilitate sales and allow for cross-selling between life and non-life products.
Underwriting is also becoming more automated and integrating into agent sales tools. Online sales and aging populations have led to increased simplified issue offerings, and predictive analytics is gaining ground in the underwriting process.
Technological advances are changing the competitive landscape. Online aggregators comparing quotes from different companies are on the rise. Insurers have turned to social media to enhance their brand and market directly to consumers and are exploring cloud computing and other technologies to increase efficiency and generate savings.
The use of wearable technology is expected to double in the next five years. Insurers worldwide are partnering with companies like Vitality to launch wellness products that promote ongoing and personal interactions with customers.
Other general trends include simplifying mass products by going fully mobile from sales to claims, customizing products for niche markets, and reaching untapped segments through workplace or microinsurance initiatives.
Asia Pacific remains the most active region for product development. Trends vary between the more mature markets in North Asia and the emerging markets in South Asia, with China and India falling somewhere in the middle due to size.
The aging populations in North Asia are driving activity in the senior market, including demand for postretirement income and health insurance products, especially those with income guarantees. In addition to raising normal entry ages, these products relax underwriting to accept applicants with diabetes and/or hypertension. Next-generation critical illness products – early stage, multi-pay, disease-specific, annuity – now often provide customer support through rehabilitation, consultation, and other services in addition to payout benefits.
High net worth (HNW) products also continue to grow rapidly in mature markets as insurers discover that mass market products do not meet the needs of the growing number of HNW customers. This is producing more targeted product development for this segment and more exclusive offerings.
Meanwhile, the more youthful nations in South Asia are seeing greater demand for savings and investment products among the rising middle class. These include investment-linked products and endowment products to fund education, weddings, or home purchases. Online chats and call centers are driving tremendous growth in online term sales among a tech-savvy population. Robust online sales should expand with successes leveraged across countries.
Bancassurance continues to grow as a distribution channel for life insurance, leading to many savings-oriented products. Life insurers are spending substantial sums to secure multi-year distribution arrangements with large retail banks. In the low-income and rural parts of South Asia, microinsurance initiatives remain prevalent.
In Canada and the U.S., low interest rates have led companies to de-risk existing portfolios and favor products with lower or no interest guarantees. Whole life sales are gaining share as they offer a better balance between growth and protection against equity returns. Customers’ demand for comprehensive life and annuity offerings is producing greater focus on combo products and selling more riders. Insurers are also exploring more direct sales and simplified-issue products targeting underserved markets and working towards a simpler, faster, and paperless customer experience.
Latin American markets are experiencing varying levels of product innovation. Brazil is dominated by bancassurers, with individual life business being small but growing. Product development in Brazil and Colombia is driven by brokers, so products tend to be simpler and with limited medical underwriting. Chile’s life expectancy is highest in Latin America, leading clients to look for longevity cover through annuities and living benefits. In Mexico, there is a growing interest in surgical and critical illness products. Microinsurance varies by country due to market-specific restrictions on premium collection but is gaining traction in Colombia through retail store and ATM sales.
Europe, Middle East, and Africa
Despite being a saturated market with key growth challenges, the U.K. possesses a culture of innovation. Key players in the financial services sector have embraced behavioral economics and the latest science behind decision-making through predictive analytics. Companies are working towards a digital customer experience and more comprehensive workplace propositions.
Headwinds persist in other parts of Europe, stemming from regulatory changes, economic challenges, and low interest rates. The region has relatively lower levels of product innovation with the majority of protection-oriented sales made via bancassurance or linked to mortgages.
Life insurers continue to create bancasurrance partnerships in the Middle East as well. Meanwhile in Africa, companies are developing microinsurance products to reach previously uninsured and low-income consumers.
The Year Ahead
The industry evolution that characterized 2016 promises to only accelerate moving forward. The worlds of insurance, health and wellness, and technology are colliding amid sweeping demographic changes and a flood of new data. Capitalizing on resulting opportunities will require anticipating and adapting to this evolution and turning information and innovation into action.
Stay tuned for future releases of our quarterly newsletter to see where the next innovations will take us.