By RGA Global Products and Market Intelligence
RGA provides quarterly updates on global product developments, which can be made available upon request. Click here to view the Q4 2017 digital newsletter.
2017 was another year filled with innovation in the life and health insurance industry around the globe. The world around us keeps changing, and changing F.A.S.T., propelling companies to respond with F.R.E.S.H. solutions! The F.A.S.T. changes are:
The world is more interconnected than ever before. While frictional challenges still exist in international banking and insurance, the ease with which an individual can invest in foreign stocks, bonds, and currencies has increased rapidly over the last 20 years. This has created opportunities for insurers to explore more diverse hybrid investment/insurance offerings that provide more tailored solutions to potential policyholders. The success of many future products will be tied to how they leverage the greater connectedness in financial markets and how they link it with traditional insurance offerings.
Solvency II, New GAAP, IFRS 17, new U.S. Valuation Manual regulations, tax changes, and more are also bringing a whirlwind of change. Marrying these regulatory changes to growing concerns around privacy and data protection reveals a profound shift in how insurance is not only sold, but managed. This presents increased risk, to be sure, but insurers who take a forward-thinking attitude towards these opportunities will be able to get ahead of the market and define what insurance looks like in the future.
Population growth, lengthening life expectancies around the world, increasing employment, and shrinking family size are fundamentally redefining social dynamics. Thus, the needs of people at different points in their life cycle are changing. Products that may have made sense 50 years ago (or even 20 years ago) may be poorly suited to current requirements. Recognizing how social dynamics are changing insurance needs will be instrumental for growth and success in the near- and medium-term.
The world now has a population of over 7 billion people, almost half of whom regularly access the internet. 2.3 billion of them use social media, mostly on their mobile devices. Not only have the financial markets become more interconnected, but so have people and businesses. Social media has extended well beyond just posting selfies or giving likes; it has now integrated sales and marketing platforms. Never before has there been such a low-cost, globally penetrating means to advertise and sell products and to receive near-instantaneous feedback. Customers’ buying habits and expectations are further fueled by smartphone applications, wearables, chat-bots, and more.
So how should insurers respond? Here are some F.R.E.S.H. product ideas companies have engaged in:
One of the most salient characteristics of generational changes is a rejection of the one-size-fits-all model. Younger generations crave flexibility, while those entering retirement are healthier than any prior generation, allowing them to pursue a wide range of activities in their golden years. Insurers can help by providing more flexible options to increase cover, to allow for policy loans and to promote greater convertibility between products (such as going from term to permanent life). A menu-like approach to rider features to allow for changes across family members, across coverages, or across investment options are additional means to entice clients to purchase products tailored to their specific needs.
We have already seen the rise in wearable tech: the internet-of-things has created an explosion of activity and lifestyle tracking. While privacy concerns are still under consideration, there is a profound opportunity to leverage this technology in the insurance space. By rewarding activities, insurers can move to a more-involved, central role in lifestyle promotion and management. This can encourage persistency, help to improve claims experience, and foster greater customer loyalty.
In general, insurance is often not regarded as a necessity until it is either too late or not an ideal time to purchase it. Products are increasingly customer-centered, targeting needs at different life stages: senior-care products for the elderly, mortgage and wealth protection for the middle-aged, and savings plans for young families and their children. Products are also targeting substandard or underserved customer segments through disease-specific covers or affordable microinsurance and bancassurance channels. Companies now offer services beyond paying claims, such as rehabilitation, nutritional and psychological therapies, pre-screening benefits, doctor’s hotlines for consultation, and more.
Customers no longer need to travel to the local insurance agency to purchase their coverage. Websites, mobile apps, and engaging communication platforms can allow customers to handle every aspect of the insurance process, from purchase to filing a claim, without ever having to travel anywhere or even talk with someone. Accelerated underwriting can prevent the traditional challenge in insurance in which many people abandon applications if they discover they cannot get instant coverage. Leveraging predictive analytics, machine learning, and related algorithms/tools can also enable targeted cross-selling and up-selling; such tools also allow for improved robo-advisors, which in conjunction with remotely situated human advisors can allow for a more optimal and low-cost business model. And while it may sound like science fiction at this point, virtual reality may eventually be leveraged to engage customers and provide low-cost customer service.
Even though insurers are focusing more and more on specific needs, they should never lose sight of the customer as a complete individual. The goal must be to provide targeted services, either alone or in partnership, that offer a comprehensive insurance and savings/investment experience for customers. This may include a suite of products that will cover life and P&C; protection and savings; families and individuals; and coverage for both high-concern critical conditions and for those conditions that are not deemed critical, but that still may impair quality of life. Selling these features through ever-more-novel channels will further integrate insurance with people’s lives.
It seems like a cliché to say, but the world is changing and changing rapidly. This is resulting in an explosion of innovation in insurance offerings in all parts of the world affecting all customer segments, and there will be more to come from existing players and new market entrants ready to bring in their new ideas to the marketplace. Rethinking how insurance can and should be sold as well as moving to a non-commodified view of insurance, where products become more bespoke, will help insurers get closer and more integrated with the lives of their customers and proactively help them achieve their goals.
Stay tuned for future releases of our quarterly newsletter to see where the next innovations will take us.