The life insurance industry needs a revolution which means an increase in non-traditional firms and a whole new way of thinking. While other companies have changed and evolved over the years, the insurance business has basically stood still. Technology has played a huge role in these changes, however insurance companies seem to have been left behind.
The entire insurance industry is getting too old, including the advisors. According to Paul Tsourounis, Director, Agency Development GTA at Gryphin Advantage, “The average age of an advisor is mid-to-late 50s. They can’t relate to new clients – people in their 30s or younger raised on computers and accustomed to having the world handed to them at the click of a button. The industry needs younger advisors capable of using and making the most of new technology.”
Most of the trends in the insurance industry are related to technology or are driven by technology in some way. The majority of these trends are currently not too popular and will take a few years to be adopted by the mainstream. The Internet of Things will have a huge impact on the insurance industry with the potential to transform many parts of the process.
Big Data and non-traditional insurance practices are expected to complement the insurance industry by making the entire process more efficient. They will have a significant impact on insurers and customers, alike. Trends such as the growth of peer-to-peer insurance and customer adherence apps with the use of wearables will have a moderate impact at first, but are expected to play a larger role in the future.
The use of technology will help firms get away from paper and provide more efficient, instant results. Implementing big data and Internet of Things to create new products, help in pricing and develop customer adherence apps can make the entire process from start to finish run smoother.
The Internet of Things (IoT) refers to a network of physical objects that contain embedded technology to gather information about specific objects with the added ability to transmit information. The data transmitted by IoT can be analyzed deeper using data processing techniques for more helpful insights.
In the insurance industry, forms of IoT such as connected home technologies and wearables haven’t seen much popularity so far, but they are expected to be widely used in the future. A decline in the cost of sensors, improved methods of communication and increased data processing power have been driving forces behind the widespread use of IoT.
Mimi Cheng, Business Development Specialist at BMO Insurance, sees this as an emerging trend vital to the industry, “More use of technology to support new business straight through processing. More use of technology to support risk profiling of clients (e.g. Fitbit, wearables); insurers offering discounts for clients as a result since they will have access to big data.”
The Financial Services Commission of Ontario (FSCO) is accountable to the Minister of Finance. It regulates financial entities such as the insurance industry, loan and trust companies and the mortgage brokering sector.
Lawrence Ian Geller, President – L.I. Geller Insurance Agencies Ltd. says, “My guess would be that, in Ontario, FSCO may be replaced by a Regulator that is more like the OSC than a Commission, as it is now. I would guess that this Regulator may be staffed with lawyers with no experience in or of insurance, other than as marginal consumers. I would also guess that those individuals might be more inclined to prefer that agents be, as in the OSC / MFDA / IROC environment, employees of dealers or other financial entities, with a preference for bank owned entities.
I would also guess that those individuals would be more inclined to wish to eliminate all commission and incentive income for agents and advisors (although not for banks and other financial institutions or brokerages that they might own).”
As Paul Tsourounis, Tim Landry, Living Benefits Consultant, QTR Solutions also believes the industry is getting too old and outdated, “…concerns I have are the rapid aging of the industry…”
Trends towards a younger, fresher industry is definitely something leaders in the insurance industry would like to see and believe must happen in order for the business to survive.
Mr. Landry goes on to say, “[A trend I see is] the move to companies who are more concerned with corporate profits than customer protection. Frankly I think that the move away from mutual to stock companies is definitely not good for clients. I hope to see a move to requiring specific training in living benefits so that an agent who is licensed to sell these products is also specifically trained in them. I hope the banks are forced out of this market. Do I actually believe that will happen? Not likely. I am hoping more women will be approached to buy these products.”
The premiums you pay to your insurance company are not held in a special account, waiting for you to make a claim. The money is invested. A trend seen by many insurance experts is the use of more derivatives, options, and hedging strategies to help support lagging bond yields as interest rates bottom out and trend up again. Sustained low interest rate environment on the in-force block will impact pricing on new products.
The peer-to-peer method is a trend expected to be widely accepted in both emerging and mature markets. In emerging markets, the reduced cost of premiums will be a powerful incentive and in mature markets, the key drivers will be commoditized insurance product lines.
The premise is that premiums will be reduced because of a drop in fraud cases. All members are connected, therefore will not try to defraud one another. Policyholders will use their private information to decide whom to connect with, rejecting anyone they feel is a bad risk.
Processing costs can be reduced because small risks can be handled with the payback network and the cost of sales for the business model can be reduced because of the ability to onboard new clients through the network. Administration costs are expected to decline because of the reduced number of sales agents.
Prices are expected to rise because of more competition and the emergence of more non-traditional firms. Customers are expected to benefit from the this increase in competition and the trend seems to be heading towards a better customer experience.
Insurance companies don’t seem to want change. They strive for mediocrity. Consumers have more say in how companies run these days, and they will force a revolution in the insurance industry. Millennials, people typically born between 1980 and 2000, are not buying insurance as much as older demographics. According to a recent LIMRA study, less than 20% of people between the ages of 18 and 34 are likely to buy life insurance. Insurance distributors will eventually be forced to design products and distribution models to cater to this group’s buying habits and needs.
Millennials are a hugely underserved market which has yet to be effectively targeted by life insurance carriers. Our Director of Marketing Syed Raza, recently wrote in Forum Magazine “Most people don’t know where to start when it comes to searching for life insurance and as a result many never embark on the process of getting adequately covered. There are several possible reasons for their procrastination. It could be that consumer ignorance has led to general misconceptions regarding the actual cost of life insurance, with people assuming premiums are out of their budget without ever looking at accurate quotes. According to the 2015 Insurance Barometer Study, Millennials overestimate the cost of life insurance by 213% and Gen X overestimating the cost by 119%.”
We live in the world of “now.” Insurance companies are still still living in the past. Customers want results in an instant. Big Data analytics can help enable insurance companies to identify and report events in a fast and effective way. Further, leveraging advancement in predictive analysis can better help insurers get a better grasp on pricing risk. Insurance firms have to improve their data storage and processing capabilities. Future trends will lean towards firms picking data from the right sources and using new models and tools.
Senior staff will get together with MGAs and advisors to find the best solution for the future of the insurance business. Change is needed, but it will take a team of industry leaders to make the necessary changes. One group can’t find the solutions alone.
