Now that we’re past the first anniversary of the start of the COVID-19 pandemic, we face an array of operational, financial, and structural decisions inside the insurance industry. These changes will likely be with us long after the dust settles and the post-pandemic normal becomes the de facto operating model.
New Realities/New Customers
As we’ve adjusted to the current reality, the rapid acceleration of digital and virtual capabilities have allowed customers, employers, and employees to rethink the once seemingly unchangeable operating rules. Meanwhile, long-term demographic shifts and changes in customer preferences are also having a profound impact on what carriers need to bring to market in order to remain both relevant and competitive.
This confluence suggests some notable “sea change” events in the future for life insurers in particular. For one thing, long-standing expense challenges have become clearer and more urgent. Investment income has masked this for perhaps as much as 25 years. No more. New products generally have less fixed cost covering capability than old, in-force blocks, so the natural changes in generations of policies create their own form of expense pressure.
Demographic shifts are also in play. During this decade, the youngest Baby Boomer will reach retirement eligibility. We are but months away from the oldest Millennial reaching 40 years old. The shifts in product demands are palpable, and a strategy that suggests Millennials will turn into Boomers, aside from the graying hair, appears flawed. Perhaps fatally so.
New Priorities/New Opportunities
The spate of M&A witnessed over the past few years shows no signs of abating. This is likely a reflection of the need to generate scale in core businesses, a recognition that organic growth can be difficult in economic downturns, as well as the realization of the need to see if smaller units are really businesses, distinct from “corporate hobbies.”
The challenges, and opportunities, for carrier IT organizations are real. Clarity on the business direction for a company, agility to respond quickly to new priorities, flexibility to ramp resources up (or down) depending on circumstances, and the ability to tie IT investments more closely to the internal business cycles of an organization will be key. Business as usual is likely to take on a different meaning in the future, a reality compounded by the ever-shortening useful life of technology.
Developing an overarching IT strategy to address both the technology and human capital needs to support this could be key to how successful CIOs and their teams are at delivering successes, building on their effective responses to the pandemic’s arrival. It turns out that was the start, rather than an end, of a story.
This post is adapted from a larger article at Insurance Thought Leadership.
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