The pandemic, which is now approaching its first anniversary, has transformed modern life and accelerated existing trends for annuity insurers. We discussed the challenges and emerging opportunities facing annuities insurers during Novarica’s annuities Special Interest Group meeting on February 18th.
Self-Service Capabilities
Self-service as a key for cost containment and customer satisfaction was a focal point for our discussion. In a world where consumers have increasingly become comfortable with self-service representing the best service, insurers are coming to understand that there are both cost and competitive advantages to investing in this space. The pandemic has accelerated the importance of these digitally driven capabilities.
As product margins have been compressed and alternative approaches to compensating advisors have become more prevalent (e.g., driving things off fee-based income), the size and nature of the producer workload helps encourage self-service capabilities for simple transactions, allowing time to be freed for managing more complex aspects of larger books of business. Ongoing compliance issues and an increasingly complicated set of regulatory environments are fueling a need to focus on data strategies that help expand digitization efforts across the annuity value stream.
Advanced self-service capabilities improve producer satisfaction and increase operational efficiency; they can also attract and retain the next generation of agents. As insurers look toward the middle part of the decade, it will be increasingly important to proactively address the competition for shelf-space with producers.
Demographics
Millennials have very different brand expectations and experiences than the generations that preceded them. That is bad news for companies waiting for them to grow into old experiences. Younger market participants expect products to be digital and personalized, with direct engagement capabilities being the norm. Many industries, such as banking, are ahead of annuities in their modernization efforts and have trained customers to expect certain self-service capabilities.
Millennials, who will represent 75% of the US labor force by 2025, are far more tech savvy than prior generations—and far less likely to make accommodations to legacy processes. Things need to be relevant to them and how they live their lives. Innovative ways of communicating with current and potential customers will increase the likelihood that Millennials will engage with life and annuity providers.
Over the longer term, providing these customer experiences will mean upgrading core capabilities, since changes that appeal to younger consumers come with an array of product implications for insurers. Annuities may not have been top of mind for this generation historically, but with the oldest Millennials about to turn 40, that could change quickly if products are tailored to be relevant.
Fraud and Account Security
As opportunities for digital account interactions grow and annuity account values rise with the economy, fraudulent account activity is also increasing. We discussed technologies that insurers are using to improve fraud protection.
Banks and traditional financial record keepers have strengthened their fraud detection capabilities through advanced analytics. Carriers should consider strengthening their approach with similar models. Insurers have thus far used a blend of people, process, and technology to combat fraud. The discussion highlighted a number of commercial solutions carriers have expanded their use of in an effort to overcome account takeover and other types of fraudulent activity.
With virtualization now firmly part of Novarica’s organizational tool kit, we have an array of Special Interest Group sessions planned for 2021. Details and registration can be found here.
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