A new report from Boston Consulting Group (BCG) on the top concerns among life insurance executives around the world hints at the growing significance of external forces acting on the industry.
According to the survey conducted in collaboration with LIMRA, BCG found that change management — defined as “actions that equip companies to successfully manage any kind of transformation, with a focus on people, processes, and technology” — was the greatest global challenge, with 32% of participants placing it among their top three internal challenges.
Customer experience came in at a strong second, cited as a top three challenge by 23% of executives; it also tied with change management as the number one challenge among presidents and CEOs. Growth took third place globally, as it appeared in the top three list of 22% of executives.
The latest results represent a marked shift from previous surveys. In 2015 and 2017, talent management consistently emerged as the greatest challenge among executives. Technology and distribution were also named as top challenges in 2017.
“Many of the most difficult challenges life insurers face are caused by factors beyond their control,” the report said, emphasizing the need to manage them successfully as firms strive to remain relevant and prosper.
Among the external challenges confronting executives, technology came out on top with 64% of global executives and 59% of CEOs and presidents citing the issue. A follow-up question revealed that 41% of executives considered artificial intelligence as critical to their success, while the same number identified automation as crucial. Other important pieces were customer service technology (33%), data science (33%), and distribution technology (31%).
“[A]s consumer expectations continue to evolve, integrating with digital solutions and tools can effectively improve client engagement,” the report said. Bolstering this view was the fact that customer/consumer behaviour, named by 54% of executives and 52% of presidents and CEOs, was the second-most cited issue.
Ownership of conventional life insurance policies has reached a historic low in many countries, BCG noted, as the value proposition no longer resonates with as many customers. With “trigger points” such as marriage, new parenthood, a home purchase, or starting a new business occurring later or less often, advisors are finding fewer opportunities to encourage people to purchase insurance.
Consumer behaviour has contributed to life insurers’ heightened focus on customer experience — a challenge for an industry that, the report noted, has long considered distribution and advisors as the primary customer. While many firms have accepted the need to grow across new customer segments and master new digital technologies, they still lag other consumer industries partly because life insurance is generally less understood by the public.
Regulation was the third most pressing external concern, with 45% of executives and 48% of CEOs agreeing on its importance.
“The strong push in many countries for greater fiduciary and suitability standards; transparency regarding pricing, commissions, and incentives; and consumer privacy protection means that the regulatory environment will continue to have important implications for life insurers,” the report said.