No one’s got this figured out yet…
March 17, 2014Earlier this month, I attended the A.M. Best Review and Preview Conference, an annual gathering of hundreds of top executives from some of the world’s largest life, health, and property/casualty insurers and reinsurers. It was the first time I had been invited to attend the event, and I was pleased to see that executives from a couple of Alliance member societies were there, too. It looked and felt like most insurance industry conferences – the audience was overwhelmingly white, overwhelming male, and overwhelming dressed in the “business casual” uniform of blue blazer, open collared dress shirt, and gray or tan slacks. And, with the exception of expanding regulation and unpredictable interest rates, the number one discussion topic for this group of middle-aged, higher income, Anglo-Saxons – including yours truly – was how to make our products and services more relevant to the “middle market” and Generation X, Y, and Millennial consumers. I couldn’t help being struck by the incongruity of it. How in the world were we going to crack that code? Especially when my answer to the question of “What kind of life insurance products do my 30- and 27-year-old sons and their spouses want, and how to they want to purchase them?” was “I have no idea.” But that didn’t stop us from trying. Here is a brief summary of the topics on the mind of virtually every life insurance company executive at the conference:
- My vote for Quote of the Conference: “Regardless of the regulatory environment or the direction of interest rates, we need to find a way to get our products to people who need them. If we don’t do that, our worries about regulation and interest rates are moot.”
- No one’s got this figured out. Even the largest, most profitable, and most sophisticated insurers are struggling with the same problems that fraternal life insurers face: relevance, appeal and affordability of our products to younger consumers, ineffective distribution systems, competition from non-traditional sources.
- The traditional sales model of an agent selling products to consumers in their homes makes no sense to younger consumers. There seems to be universal agreement that multiple distribution channels – agents, on-line, direct mail/call center, retail – are necessary to attract the diversity of consumers needed for insurers to remain sustainable.
- Investment in technology – from enhanced administrative (back office) systems, to social media (for improved customer experience and affinity relationships), to data analytics (for instant underwriting and to replace the need for applicants to submit blood and urine samples) to Big Data (knowing more about your current customers and using that to find new ones) – is absolutely necessary to streamline operations, control expenses, build customer relationships, and identify new consumers. As one executive told me, “No data, no sales.”
- In addition to worrying about the next generation of consumers, insurers are concerned about the next generation of products. Some see opportunities for “combination products,” e.g. life insurance and long-term care policies, or life insurance and critical illness policies. Others see opportunities to develop and market “pension replacement” products to younger consumers whose knowledge of pensions died with their parents and who have no faith that Social Security will be there for them when they retire.
- Many commercial life insurers are finding more success in “emerging markets” like Brazil, India, China, and Africa. Given that the fraternal model only exists in North America, I kept asking myself, “What are our ‘emerging markets?’” I have some ideas on what these might be, but would love to hear your take on them.