Canada’s life insurance sector needs to innovate, particularly on the distribution side, in order to keep up with shifting consumer expectations, according to Ernst & Young LLP’s (E&Y) 2016 Life Insurance Outlook report.
The report, released on Monday, suggests that life insurers need to find new ways of reaching the underserved mass-affluent market. In particular, EY suggests that life insurers should consider incorporating robo-advisors into their current distribution platforms — either through internal development, partnership or acquisition.
However, the insurance industry must also ensure face-to-face advice is available to those consumers who prefer that channel, the EY report says. But given the aging population of insurance agents, the report suggests the industry must focus on attracting younger advisors into the business.
“Life insurers need to make innovation a priority not just in their business plans, but on the ground,” said Janice Deganis, EY’s insurance leader, in a statement. “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.”
The report also suggests that the life insurance industry needs to make its customer service model more flexible, similar to the way banks have provided customers with 24/7 access and self-service on multiple devices.
“In 2016, life insurance customers will expect a similar anytime, any device experience from insurers from point of sale and throughout the relationship,” the report says. “Developing an integrated, personalized digital experience that makes use of the latest mobile and video technology will be a key to success across all product lines.”
Innovation is also important at the product level, the report says. Specifically, as customers demand greater digital access, better information and quicker service, insurers must develop products that are less complex, with clearer product information and pricing transparency, and a more streamlined and transparent issuance process, the report recommends.
Wearable technology presents a key opportunity for innovation, the report says. By using data from wearables such as wristbands, smart watches or glasses, the EY report says insurers can create incentives for policyholders to live a healthier lifestyle through the possibility of lower premiums. This technology can help insurers promote wellness and measure risks more accurately, thereby improving profitability and efficiency, the EY report says.
Nevertheless, the insurance industry will face key challenges as it strives to innovate, the report notes. In particular, cyber risks, new competition from financial technology (fintech) players and regulation will create hurdles in the coming year while the weak economy will continue to create a challenging operating environment, the report suggests.
“While there are many opportunities with digitization and increased insights through data analytics, life insurers will face stricter regulations and a weak economy,” said Deganis. “Those who manage the balancing act will better position themselves to remain competitive this year.”
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