The future of life insurance: Reimagining the industry for the decade ahead
Over the past decade, life insurers have struggled with growth and profitability. By focusing on three priorities, insurers can reinvent themselves and reestablish their vital role in customers’ lives.
By Pierre-Ignace Bernard, Kweilin Ellingrud, Jonathan Godsall, Bernhard Kotanko, and Andrew Reich
→ Read the whole McKinsey report
Chicago, IL (Sept. 29, 2020) – The global life insurance industry has seen significant changes over the past decade. Developing economies—predominantly emerging markets in Asia that were formerly small contributors—have become global growth drivers and now account for more than half of global premium growth and 84 percent of individual annuities growth. The availability of data has skyrocketed, and insurers have made progress in advanced analytics and artificial intelligence. Digital and mobile advances have raised the bar on transparency and service quality: customers can now file claims and access agents, insurance quotes, and policy information with a few taps on a screen.
The past decade has also introduced new challenges. Life insurers have not benefitted from the bull market. Global penetration fell to 3 percent, and premium growth within most developed markets, hovering just below 2 percent per year, struggled to match GDP. Globally depressed interest rates curtailed investment portfolio returns. More recently, the COVID-19 pandemic has depressed global interest rates even lower than those seen in the 2007–08 global financial crisis, leading to disproportional impact on life insurance stock relative to the rest of the market.
Meeting the moment across three key areas
Several trends show promise for the life insurance industry in the next decade. Customer demand is at an all-time high. Indeed, the COVID-19 pandemic has only reemphasized the need for mortality protection. Public pension replacement rates are declining and healthcare expenditures are rising—trends also accelerated by the COVID-19 crisis. Economic and demographic trends will also offer tailwinds. The global middle class is rapidly expanding, bringing higher incomes, growing financial wealth, and heightened risks to manage. By 2030, all baby boomers will be age 65 or older, and many are expected to outlive their retirement savings.
We believe the life insurance industry faces a pivotal, dual opportunity: the chance to fulfill growing customer needs while returning to profitability and growth. To achieve these goals, we expect winning life insurance companies to outperform in three areas in the decade ahead:
- personalize every aspect of the customer experience;
- develop flexible product solutions suitable for a challenging regulatory and interest-rate environment; and
- reinvent skills and capabilities.
Read the full report with additional charts on McKinsey’s website.
About McKinsey
McKinsey & Company is a global management consulting firm that serves leading businesses, governments, non governmental organizations, and not-for-profits. We help our clients make lasting improvements to their performance and realize their most important goals. Over nearly a century, we’ve built a firm uniquely equipped to this task. For more information, visit www.mckinsey.com.
SOURCE: McKinsey
Tags: Life & Annuity, Life Insurance, McKinsey, outlook / predictions
Read the original article at Insurance-Canada.ca