Writing in InvestorDaily's sister publication Risk Adviser, Bravura director, product management and strategy Darren Stevens said the life industry could soon be turned on its head.
It is understandable that the industry has been preoccupied with poor claims experiences, high lapse rates and regulatory demands, Mr Stevens said.
But a number of key trends affecting the life insurance industry are here already, and others are just around the corner, he said.
“To remain relevant in the new social and digital age, life insurers must prepare their businesses to cater for these trends – not next year or in five years’ time – but right now,” Mr Stevens said.
Whereas the superannuation industry is fretting about the ageing population, insurers have another demographic headache: the rise of ‘Millennials’, he said.
“Recent research by Gen Re found that the Millennials will represent 75 per cent of the global workforce by 2025 and their spending power will surpass the baby boomers by 2018,” Mr Stevens said.
With 90 per cent of Millennials researching products online and 50 per cent using their smartphones to do so, insurers must be “digitally aware”, he said.
Mr Stevens also stressed the importance of ‘social capital’, ie. the high value placed on social networks like Facebook, Twitter and consumer review websites.
“In the digital age, reputation and service excellence at every point in the user journey are critical.
“Insurers must cultivate a deep understanding of social capital as well as a dedicated social media presence and strategy in order to thrive in this new landscape,” Mr Stevens said.
Predictive analytics is another area where insurers will find themselves left behind unless they learn to combine and scrutinise data from a range of sources, he said.
“Insurers must move beyond the rhetoric and make big data and analytics a priority within their business,” Mr Stevens said.
Direct-to-consumer distribution models, including the relatively new concept of peer-to-peer insurance, are rapidly emerging as a threat, he added.
“Insurers can no longer afford to rely on traditional operating models and business processes,” Mr Stevens said.
More immediately on the horizon, he added, are some “very real” innovations that may have seemed “the stuff of science fiction” until recently.
These include wearable technology that will give insurers access to more data, genetic testing, medical advances that could eliminate or greatly reduce common health risks and safer lifestyles thanks to automated transport, Mr Stevens explained.
As counter-intuitive as it may sound, the answer to the growing wave of innovation may be for insurers to simplify their businesses, he said.
“Insurers need to get rid of the legacy and complexity associated with old technology and outmoded business processes,” Mr Stevens said.
“They must switch now to technology and business processes that genuinely and effortlessly support real-time multi-channel interactions, predictive analytics and the digital and mobile service delivery experiences their customers – in particular the Millennials – have come to expect,” he said.
The prospect of non-traditional players like Google, Facebook and Amazon disrupting the life insurance market spur traditional life insurers into action, Mr Stevens said.
“The spectre of these non-traditional players entering the global life insurance space provides an urgent incentive for life insurers to make the leap into the social and digital age.
“If traditional providers are to successfully defend their market, they must become socially aware and tech savvy without delay,” Mr Stevens said.
