Life insurance and annuity distribution in a digital world: four strategic shifts

Transcription

1 Life insurance and annuity distribution in a digital world: four strategic shifts

2 The impact of digital technologies on insurance products, customer expectations and distribution networks is driving rapidly accelerating change in the insurance industry. Determining your distribution strategy in an omnichannel world requires consideration of new alternatives along with traditional channels. Insurers need new insights into familiar challenges when deciding how sales teams will evolve, how processes will adapt and how key supporting technologies will be selected. The challenge is to cut through the noise and develop innovative strategies that integrate your proven traditional distribution approaches (e.g., personal interaction, phone) with new customer demands and new technology. Key questions to ask Q1 Which capabilities do we need to sustain competitive advantage? Q2 Is our mobile and digital contact environment sufficiently integrated? Q3 How will we respond to new and expanding regulatory controls? Q4 Are we operationally enabled to allow for truly innovative distribution? 1

3 Q1 Which capabilities do we need to sustain competitive advantage? Integration and simplicity are a winning combination Shortening and simplifying the issuance process will meet both your customers and your budget needs. Easy electronic transactions, real-time review, electronic applications and electronic signatures at the point of sale are all means to a very important end: minimization of the issuance time frame. The downward trend of time-to-buy transactions presents a massive opportunity for insurers to capitalize on market demand. Industry research indicates that in the next five years, the majority of individual life product sales will be based on simplified issue. With appropriate guidelines in place for rules-based decision-making (both manual and automatic), insurers can raise their risk tolerances for term life policies, policies with low face values and policies directed to specific target markets, such as middle markets, seniors and young adults. The expansion of product offerings also allows insurers to leverage broader market distribution through the traditionally transactional banking entities that are ahead in digital and mobile. More traditional distribution channels will see added benefits as well, as brokers realize the advantages of market data aggregation, available multi-platform customer information, simplified application processing and speedy policy issuance. Operationally, insurers making greater use of their rules-based systems can readily expand product offerings with simplified issue. Market leaders in the space are instituting operational changes to facilitate direct and non-direct distribution strategies to better serve the customer, whether agent, consumer or partner. For example, a long, 40-question online application may be acceptable to traditional channels, but an independent distributor or consumer is more likely to prefer a simple 4-question application. In response, the externally facing new business applications and tools are adjusted to support new processes and encourage interaction rather than deter it, thus accelerating adoption and benefit realization. On the other end of the spectrum, many insurers are continuing to operate with legacy systems that have limited capabilities or are not taking full advantage of modernized system capabilities (real-time processing versus mainframe batch). If the goal is to achieve efficient cross-platform data integration and institute simplified processes to facilitate operational alignment, insurers can no longer ignore the need to overhaul legacy systems and evolve toward more modern capabilities. Insurers continuing to operate with legacy systems that have limited capabilities or not taking full advantage of modern technology solutions are unlikely to meet market demand for real-time data management and delivery excellence. Although early in application to the life insurance industry, solutions such as data robotics and data automation hold promise for assisting insurers in eliminating repetitive, time-consuming and error-prone manual data entry. Many consider leading-edge capability enhancements like data robotics and automation a key tool for advancing speed to market and speed to issue goals. Life insurance and annuity distribution in a digital world: four strategic shifts 2

4 Q2 Is our mobile and digital contact environment sufficiently integrated? Social networking is no longer innovative it is essential The ubiquitous nature of social media is creating opportunities to strengthen brand equity, increase digital exposure, reduce marketing costs and expand sales. Enhanced coordination between insurance carriers social media advertising and their agent/ broker networks allows for more fluid client-relationship building, guiding the end client from point of first contact to sale. This is particularly true as consumers show increasing willingness to use remote and digital interactive contact channels for a wide range of tasks. This shift is driving seismic changes in the distribution landscape in some markets, confirming that a vast majority of customers are quite willing to consider contact methods other than inperson interactions for many types of inquiries and transactions. Insurers need to take the lead in incorporating the often non-structured data generated via digital sources into their existing distribution models. This requires the development of strong data analytics capabilities and accessible interaction platforms for customer and broker alike. Leading providers are rapidly designing and integrating capabilities that translate customer insights into specific product offerings, but also serve to complement more traditional customer interaction models. The goal is to enhance productivity among successful distribution partners by promoting the channels that customers want and expect. Q3 How will we respond to new and expanding regulatory controls? Forecast your budget will require more regulatory support spend than ever Upcoming regulatory changes are driving insurers to spend more heavily in the compliance space and prepare their businesses for new industry mandates. Key regulatory change areas include: The Internal Revenue Service changing qualified retirement investments and gains Fraud identification, reporting and investigation of your direct and indirect sales force Fiduciary rules administration, reporting and impact to already-aging advisor workforce Enhanced conflict-of-interest rules focusing on simplification of product design, pricing and distribution Regulatory preparedness planning is not only prudent for most insurers, it s a musthave. The sense of urgency is compounded as the regulatory environment continues to shift the burden of compliance toward the insurer. To remain ahead of costly and slow reactive regulatory impositions, carriers must develop broker data capture and analytics competencies, along with corresponding regulatory reporting capabilities. Proactive measures establishing data governance and oversight structures, integrating distribution and operations data systems, and building comprehensive compliance reporting frameworks make sound fiscal sense in light of coming industry-wide changes. 3 Life insurance and annuity distribution in a digital world: four strategic shifts

5 Q4 Are we operationally enabled to allow for truly innovative distribution? One digital contact channel is not enough If your customers are seeing you via a social media vehicle, there is a good chance that many of them are simultaneously using a mobile device in the process. Unfortunately, that s not the only channel they will use to investigate and execute a buying decision and so insurers are faced with the omni-channel dilemma. In order to effectively execute a streamlined end-to-end customer experience, insurers and distribution partners alike must enable clients and prospects to quickly connect with relevant follow-up information in real time all across multiple potential interaction platforms. The goal is to allow customers to learn about options via a mobile-enabled website, investigate further via social media, follow up at home on their personal laptops and connect with a local broker who is ready to guide them through the final steps of their pre-filled application. Purposefully simple from the client perspective, facilitating this multi-platform approach requires careful assessment and planning, as well as enterprise-level alignment to the broader distribution strategy. To tackle these challenges, industry leaders are using advances in technology directly or finding partners with solutions that can be readily leveraged. Designing the right approach depends on many factors, including business model, operating model, product mix, customer demographics, organization size, processes, applications, integrations and corporate culture. Each of these elements must be carefully considered to avoid wasting resources and ultimately relying on processes that add additional complexity rather than customer value. Insurers need new insights into familiar challenges when deciding how sales teams will evolve, how processes will adapt and how key supporting technologies will be selected. Life insurance and annuity distribution in a digital world: four strategic shifts 4

6 Are you ready to respond? You ll face many challenges as you consider operating in an omni-channel arena, simplifying products and operations, tackling the challenge of unstructured data and social networks, navigating the evolving regulatory landscape, and strengthening your presence and brand. EY can help by working with you to provide insight, technical knowledge, industry intelligence and informed approaches. We provide strategic guidance and tactical skills to: Assess your current products, process and capabilities and benchmark you to your competition Score and prioritize your project portfolio Assist you in creating or adapting your strategic road maps to success Help select and deploy the most appropriate vendors and approaches for you Test and implement next-generation capability to support your continued success 5 Life insurance and annuity distribution in a digital world: four strategic shifts

7 Contacts Matthew T. O Mara Principal Ernst & Young LLP matthew.omara1@ey.com Frank Memmo Executive Director Ernst & Young LLP frank.memmojr@ey.com Karan Mishra Executive Director Ernst & Young LLP karan.mishra@ey.com Jill Peckingham Senior Manager Ernst & Young LLP jill.peckingham@ey.com Life insurance and annuity distribution in a digital world: four strategic shifts 6

8 EY Assurance Tax Transactions Advisory About EY EY is a global leader in assurance, tax, transaction and advisory services. The insights and quality services we deliver help build trust and confidence in the capital markets and in economies the world over. We develop outstanding leaders who team to deliver on our promises to all of our stakeholders. In so doing, we play a critical role in building a better working world for our people, for our clients and for our communities. EY refers to the global organization, and may refer to one or more, of the member firms of Ernst & Young Global Limited, each of which is a separate legal entity. Ernst & Young Global Limited, a UK company limited by guarantee, does not provide services to clients. For more information about our organization, please visit ey.com. Ernst & Young LLP is a client-serving member firm of Ernst & Young Global Limited operating in the US. EY is a leader in serving the global financial services marketplace Nearly 43,000 EY financial services professionals around the world provide integrated assurance, tax, transaction and advisory services to our asset management, banking, capital markets and insurance clients. In the Americas, EY is the only public accounting organization with a separate business unit dedicated to the financial services marketplace. Created in 2000, the Americas Financial Services Office today includes more than 6,900 professionals at member firms in over 50 locations throughout the US, the Caribbean and Latin America. EY professionals in our financial services practices worldwide align with key global industry groups, including EY s Global Wealth & Asset Management Center, Global Banking & Capital Markets Center, Global Insurance Center and Global Private Equity Center, which act as hubs for sharing industryfocused knowledge on current and emerging trends and regulations in order to help our clients address key issues. Our practitioners span many disciplines and provide a well-rounded understanding of business issues and challenges, as well as integrated services to our clients. With a global presence and industry-focused advice, EY s financial services professionals provide high-quality assurance, tax, transaction and advisory services, including operations, process improvement, risk and technology, to financial services companies worldwide Ernst & Young LLP. All Rights Reserved. SCORE No. CK NY ED None This material has been prepared for general informational purposes only and is not intended to be relied upon as accounting, tax, or other professional advice. Please refer to your advisors for specific advice. ey.com