Life insurers need to prepare for a different future, says new PwC report
21/11/2012 10:49
Half of life and pensions executives believe that the internet will influence the types of products that consumers choose
A new PwC report, “Life Insurance 2020: Competing for a future”, says that emerging markets (South America, Africa, Asia and the Middle East - SAAAME) are seeing rising demand for insurance products as their economies expand and their consumers acquire more wealth to protect. Further, almost 50% of insurance industry leaders see emerging markets as more important than developed markets to their company’s future. Life insurance is a shrinking market in some countries like US, while pensions and retirement income is a growing sector for developed nations and China due to the changing demographics. Demand for pension products in emerging markets is likely to catch up with the West as health improves and consumers live longer.
Life insurers are likely to make significant changes to their business models over the next ten years. The cap on financial advisers’ fees in many countries, including India, and planned elimination of commission for advisers in the UK will bring the value policyholders receive from these charges further into the spotlight. Further, technology will have an increasing influence over the purchase of insurance.
As direct to consumer life insurance, and the use of virtual networks and multi-channel interaction increase, the value chain will become more and more fragmented and insurers will need to adapt their business models to remain competitive.
The report also found that half of insurance leaders believe that a combination of inflation, rising government debt and economic turmoil threatens the business of smaller insurers, particularly those in Western markets.
Androulla Pittas, Partner in Assurance Services and Insurance Responsible Partner at PwC Cyprus said:
“The old adage that insurance is sold, not bought is being challenged. As customers use the internet and their own social networks to gain knowledge about the kinds of products they need and use technology to determine the affordability and worth of insurance products, life insurers will need to adapt accordingly.
“The growth agenda is being shaped by the very different economic prospects and demographic profiles of emerging and developed markets. As urbanisation and longevity are increasing in emerging countries at a faster rate than in developed economies, there is enormous potential for life insurance businesses to grow in these markets.
“Insurers, particularly smaller ones in Western markets, need to be brave enough to look beyond the short to mid-term problems facing their businesses and position themselves for the future. That means mapping the potential impacts of social, technological, environmental, economic and political change. The amount of information and change out there is overwhelming but getting to grips with what the life insurance sector will look like in 2020 will help define a vision for the future.
“Effective use of technology by insurers is going to be a crucial factor. Consumers have become accustomed to the ease, intuition and elegance of digital retail interaction and want the same experience from life insurers. As smartphones and other mobile devices proliferate, customers will increasingly demand to be able to buy what, when and where they want. Insurers need to look at how best they can use technology to assist their customers and also consider simplifying products so that customers feel comfortable buying from them.”
Other findings from the report include:
• 70% of insurance leaders said they expected public health provision to worsen and 40% believe social security systems will be drastically pared back over the next ten years. State support for ageing populations in many markets is being eroded by a combination of government debt and a decline in the ratio of working people to retirees and governments are looking to insurers to fill in the gaps in public
provision.
• 50% believe that harnessing “big data” developments will provide a key source of competitive advantage and increased market share.
• A third (34%) expect that consumers will turn to their social networks to obtain advice and share information, reinforcing the demands for greater transparency.
Androulla Pittas added:
“There is no certainty that existing players will be in the best position in five years’ time; indeed, with technology set to have such an impact, unwieldy legacy systems in many life companies could put them at a competitive disadvantage. There is however a great opportunity for life insurers to play a part in resolving current issues. Finding a vision for the future that responds to some of the new macro trends will help demonstrate the value and purpose of insurance and also have a significant impact on how the industry is perceived.”
A new PwC report, “Life Insurance 2020: Competing for a future”, says that emerging markets (South America, Africa, Asia and the Middle East - SAAAME) are seeing rising demand for insurance products as their economies expand and their consumers acquire more wealth to protect. Further, almost 50% of insurance industry leaders see emerging markets as more important than developed markets to their company’s future. Life insurance is a shrinking market in some countries like US, while pensions and retirement income is a growing sector for developed nations and China due to the changing demographics. Demand for pension products in emerging markets is likely to catch up with the West as health improves and consumers live longer.
Life insurers are likely to make significant changes to their business models over the next ten years. The cap on financial advisers’ fees in many countries, including India, and planned elimination of commission for advisers in the UK will bring the value policyholders receive from these charges further into the spotlight. Further, technology will have an increasing influence over the purchase of insurance.
As direct to consumer life insurance, and the use of virtual networks and multi-channel interaction increase, the value chain will become more and more fragmented and insurers will need to adapt their business models to remain competitive.
The report also found that half of insurance leaders believe that a combination of inflation, rising government debt and economic turmoil threatens the business of smaller insurers, particularly those in Western markets.
Androulla Pittas, Partner in Assurance Services and Insurance Responsible Partner at PwC Cyprus said:
“The old adage that insurance is sold, not bought is being challenged. As customers use the internet and their own social networks to gain knowledge about the kinds of products they need and use technology to determine the affordability and worth of insurance products, life insurers will need to adapt accordingly.
“The growth agenda is being shaped by the very different economic prospects and demographic profiles of emerging and developed markets. As urbanisation and longevity are increasing in emerging countries at a faster rate than in developed economies, there is enormous potential for life insurance businesses to grow in these markets.
“Insurers, particularly smaller ones in Western markets, need to be brave enough to look beyond the short to mid-term problems facing their businesses and position themselves for the future. That means mapping the potential impacts of social, technological, environmental, economic and political change. The amount of information and change out there is overwhelming but getting to grips with what the life insurance sector will look like in 2020 will help define a vision for the future.
“Effective use of technology by insurers is going to be a crucial factor. Consumers have become accustomed to the ease, intuition and elegance of digital retail interaction and want the same experience from life insurers. As smartphones and other mobile devices proliferate, customers will increasingly demand to be able to buy what, when and where they want. Insurers need to look at how best they can use technology to assist their customers and also consider simplifying products so that customers feel comfortable buying from them.”
Other findings from the report include:
• 70% of insurance leaders said they expected public health provision to worsen and 40% believe social security systems will be drastically pared back over the next ten years. State support for ageing populations in many markets is being eroded by a combination of government debt and a decline in the ratio of working people to retirees and governments are looking to insurers to fill in the gaps in public
provision.
• 50% believe that harnessing “big data” developments will provide a key source of competitive advantage and increased market share.
• A third (34%) expect that consumers will turn to their social networks to obtain advice and share information, reinforcing the demands for greater transparency.
Androulla Pittas added:
“There is no certainty that existing players will be in the best position in five years’ time; indeed, with technology set to have such an impact, unwieldy legacy systems in many life companies could put them at a competitive disadvantage. There is however a great opportunity for life insurers to play a part in resolving current issues. Finding a vision for the future that responds to some of the new macro trends will help demonstrate the value and purpose of insurance and also have a significant impact on how the industry is perceived.”
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