Life insurance executives across the globe are grappling with change management as they work to help their organizations keep pace with and adapt to a rapidly evolving business environment, according to a report conducted by LIMRA and Boston Consulting Group (BCG).

One-third of executives, across 62 countries, cited change management as their greatest challenge in the biennial survey. In fact, change management was among the top three challenges for all surveyed regions. This, the report noted, represents a departure from prior studies in 2015 and 2017, when executives cited talent management, technology and distribution as their biggest challenges.

The report, "What’s On the Minds of Life Insurance Executives: Managing Change in a Customer-Focused World," polled on more than 500 C-suite life insurance executives, nearly one-fifth of them CEOs or presidents, who identified their greatest challenges and the biggest external forces affecting their business and their priorities for the future.

“In today’s business environment, executives are realizing that having the right talent is not enough to address the external forces transforming the business landscape,” Alison Salka, senior vice president and director of LIMRA Research, said in a statement. “To transform their entire organizations, executives must cultivate corporate cultures that not only fully embrace change, but can also sustain it over the long term.”

The report said life insurers must cope with an ongoing global environment of “lower for longer’’ interest rates, which have depressed investment returns and made it more difficult to deliver a guaranteed-return product. It also noted that tighter capital requirements in Europe, China and other markets place additional pressure on the bottom line.

The report noted that ownership of conventional life insurance policies in many countries is at a historic low, in part because the value proposition no longer resonates with as many consumers. It explained that advisors are no longer in a position to encourage people to buy insurance during a life event that introduces risks such when they get married, have a child, buy a home, because these milestones are occurring later in life reflecting a change in demographics. And as a result, people tend to turn to mutual funds, defined contributions plans like a 401(k), and IRAs when planning for their long-term financial goals. 

“Despite this, a majority of insurers still focus on manufacturing traditional life products, instead of using this opportunity to create holistic solutions that fit customers’ evolving needs,” the report said.

Also posing big challenges for insurers are external factors that are beyond their control. The report found nearly two-thirds (64%) of executives surveyed said technology such as artificial intelligence, automation, and customer-service tools, would have the greatest impact on their company in the next five years, followed by customer behavior (54%) and regulations (45%).

Digitally-advanced companies, the report said, are making moves that are shaking up the industry. China’s Ping An Insurance, for example, offers a full suite of financial products, including banking services, home loans, securities, health insurance and life insurance.

And while other life insurers around the world are investing in artificial intelligence, automation and data analytics, they are doing so at a slower pace than other financial services sectors. Moreover, the Internet technology staff at most of these companies have been in their roles for more than a decade and are not up to date with new ways of working such as using agile practices, and recruiting such talent is difficult because of intense competition for these skills, the report said.

Similarly, the distribution side of the business also has its challenges in that nearly 400,000 employees are expected to retire from the insurance industry workforce in the next few years, and many of those positions could remain vacant as the industry struggles to attract younger talent.

Also adding complexity is the global regulatory environment. The report pointed out that the strong focus in many countries on conduct regulation and greater price transparency adds increased pressure on commissions. In addition, the push for greater fiduciary and sustainability standards also contributes to advisors’ reluctance to offer insurance products, the report said.

In fact, 47% of executives worldwide cited customer best interest as the greatest regulatory challenge they face. This was closely followed by analytics/modeling in risk compliance at 46%, data privacy at 45%, cyber security at 42% and market conduct rounded out the top five at 30%.

Additionally, fraud concerns increasingly has been on the minds of life insurers. More than three quarters (79%) of executives indicated that fraud is a concern for themselves and their companies.  Sixty–nine percent consider claims and disbursements as the most worrisome type of fraud. And executives in every region, ranging from 57% to 80% cited this type of fraud as the most concerning.

Other frauds that insurers lose sleep over are new business fraud (37%), account takeover (17%) and beneficiary designation (11%).

The widespread incidence of fraudulent activity in the life insurance industry prompted Limra to develop FraudShare, a new tool to help insurers better detect and prevent account takeover attempts, Salka said.

And as life insurer realign, reimagine, and transform their companies for the future, the report suggested that they instill a pro-change culture, focus on the customer and think strategically about technology.