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Ernst & Young: Life insurers rethink strategies

By Rob Starr, Content Manager,

“Successful players are introducing or re-positioning product offerings that are attractive to consumers and profitable to insurers,” according to Doug French, Principal, Financial Services and Insurance and Actuarial Advisory Services at Ernst & Young LLP. “Insurers are reexamining and strengthening the customer value proposition by leveraging technology to improve business models and gain a competitive advantage. By restructuring operations to respond to the converging forces of demographics, consumer needs and product distribution, they can communicate and engage with customers on their terms.”

French was commenting on Ernst & Young’s new Global Insurance Center US Outlook.

Ernst & Young has identified several market forces that are of key importance to U.S. life and annuity insurance companies in 2013:

  1. Rethink business strategy for a sustainable competitive advantage: As the competitive landscape changes, new players are entering the market, the largest carriers are gaining market share and distributors are consolidating. To obtain a sustainable advantage, carriers are evaluating books of business in terms of their ability to generate profits and diversify risks, regardless of the macroeconomic environment. Meanwhile, regulators are evaluating suitability standards that could alter distributor and insurer sales practices. The goal for many companies is a balanced product portfolio, in which no single line dominates the business.
  2. Respond to consumer needs and changing distribution to grow: The average household expenditure for life insurance has declined 50 percent in the last decade; therefore, insurers should consider new offerings of simpler products, such as term and whole life insurance, to younger consumers through digital marketing and mobile distribution strategies.  Insurers need to reexamine the value proposition to consumers, addressing the converging forces of demographics, consumer needs and product distribution. Greater attention must be accorded the risk transfer and savings needs of young people, while continuing to build a case for retirees and pre-retirees.

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