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.