Deloitte’s 2024 Global Insurance Outlook covers, among many other developments, the transformation now underway at life and annuity insurance companies. The report references the sector’s strong growth and cited the drivers which will prompt additional growth in the year ahead. They included “the impact of inflation on discretionary consumer spending” which it projected will pressure individuals to make life insurance purchases in the United States and Europe. Another driver for growth will be the increasing demand for financial protection by younger, digital consumers who are growing aware of the benefits term life products can provide.
New Demands for Digitalization
The report also discusses what it called “the tipping point for the sector as the world becomes increasingly digitized and customer and agent expectations escalate.” In response, we are seeing carriers reviewing what transformative processes should be implemented to meet growing expectations from both consumers and distribution channels. Insurers are turning to digital tools and advanced analytics in a move toward an expanded relationship-based, consumer-centric model. While not abandoning their legacy systems, they are applying more advanced technologies, leveraging Artificial Intelligence (AI), Machine Learning, and predictive analytics to provide greater customer personalization, improved underwriting and processing, and seamless cross-selling.
Collaborations with Industry and Non-Industry Partners
Some insurers are also looking to enhance their connections and collaborate with partners within the insurance industry and other industries as well. They are recognizing the value these collaborations have in generating leads and introducing new ancillary products that meet consumer needs and enable them to provide coverage relating to health, wellness, and wealth. Some insurers are partnering with technology providers, banks, and other product marketers to achieve these goals.
The Challenges Insurers Face in Their Digital Transformation
Going digital is a huge undertaking and insurers face various challenges which may explain the slow progress being made in this area. According to the findings of Deloitte’s Insights, June 15, 2023, for which 100 U.S. life and annuity Chief Information Officers, or their equivalents, were surveyed, fewer than one-third of them said they had completed their digital initiatives (i.e., 20% said only some had been completed and just 12% said all had been completed). The same survey found that two-thirds of CIOs reported digitalization projects were underway or planned.
The challenges faced, when transitioning toward digital processes includes both the associated cost, and the wide range of alternative system enhancements and strategies to review and consider. This can be daunting and very time-consuming. For those who rise to the challenge, there are benefits to derive (e.g., increased opportunities with existing customers and within underserved markets such as gig workers, increased productivity, lower operating costs, and greater agility in meeting evolving market demands).
Culture Change Is Essential
To gain the most from digitalization, it is important that insurers also make the necessary cultural change within their organization. Employees should understand that, while the initial changes may be overwhelming, they will lead to their ability to better perform their tasks or job with fewer low-level repetitive tasks and more higher-level functions. Companies should implement employee-centered training programs that cover the new technologies and how they work, as well as the value and benefits of digitalization. Employees should be given the opportunity to ask questions as to how the transformation will affect their jobs, the company’s growth, and future outlook. Given the focus on AI today, guidelines relating to its responsible use should be provided. Insurers can find resources on this topic in many leading business and trade publications, as well as through various government agencies.
