Canada’s life insurance industry needs to do a better job of catering products and services to middle market clients and members of Generations X and Y in order to achieve a higher level of growth, according to EY’s 2015 Canada life – annuity insurance outlook.
The report, released on Wednesday, notes that although the life and annuity market has been a low-growth to no-growth market for several years, there are various underserved markets and developing areas of opportunity for the industry. It highlights four areas in which insurers should focus their efforts in 2015.
Address underserved markets
Insurers are failing to effectively meet the financial protection and savings needs of the mid-market segment and generations X and Y, according to EY.
“Traditional insurance products and distribution channels aren’t well suited for Generations X and Y – a market segment that continues to grow,” said Marc-Andre Giguere, EY’s national insurance leader. “They look for simplified products that deliver value and are easy to understand.”
The report suggests that insurers should focus on developing simplified products that appeal to these markets, and delivering these products in ways that resonate with clients. Specifically, to satisfy the younger generations’ need for convenience and better customer experience, EY urges insurers to embrace a multi-channel approach, including online sales and self-service options, in addition to traditional channels.
Within the advisor channel, EY recommends that insurers equip agents with powerful technology tools and enable interaction at multiple touch points.
“Insurers that stay on the sidelines as others make these investments to serve next-generation markets risk losing existing customers, while limiting their opportunities to connect to new customers,” Giguere said.
Invest in digital and analytics
Digital practices are driving major changes in consumer expectations, and the insurance industry should invest in stronger digital capabilities in order to keep up, according to EY. Specifically, the report urges providers to make key operations and back-office functions more efficient and agile.
Insurers should also find ways of tapping into analytics and big data to create more personalized client experiences, identify hidden revenue opportunities within the client base and retain high value clients, the report says.
Proactively address the new regulatory regime
As the regulatory environment continues to evolve, EY says insurers must be able to demonstrate that they have comprehensive corporate governance, compliance and risk management programs in place.
Although these functions increase the cost of doing business, EY notes that they also create the opportunity to improve operational risk management.
Enhance data security
Cybersecurity has become a strategic issue for the life insurance industry in Canada, and as the industry embraces the use of mobile and digital devices and new distribution channels, the risk and impact of cyber theft continues to become more problematic, according to the report.
It urges insurers to transform and improve their existing security programs and invest in cutting-edge security software and systems to protect against this key risk.