Canadian life insurance outlook 2014
Encouraging signs, but will insurers seize opportunities?
The 2014 Canadian life insurance market is expected to build upon the positive economic factors that appeared in 2013. To seize opportunity, successful insurers need to leverage the operational flexibility they’ve developed over the last few years. Innovative improvements to internal operational fundamentals are essential. But those life insurers that positioned themselves purely for operational survival during the global downturn may be slow to react to this improving economic climate.
In 2014, life insurers must continue to closely monitor interest rates and the equity markets, as well as the ongoing economic recovery in employment, housing markets, consumer confidence and personal wealth. Some markets like the US are showing signs of recovery. But in Canada, interest rates remain low, though steady, and equity markets have grown at a slower pace compared to the US.
Canadian employment and the country’s housing market remained relatively robust throughout the downturn, contributing to higher consumer confidence than in other economies. These conditions helped Canadian life insurers react quickly to the downturn through de-risking and re-pricing programs, and their more recent rebalancing of product offerings has helped to address evolving customer needs. Insurance consumers are more empowered today, thanks to advances in technology and communications, including faster access to informative product data and market information.
Successful life insurance companies — those with strong, comfortable capital positions and improved internal operating fundamentals — should take advantage of this changing environment and return to a growth strategy. To do so, they will need to address changing demographics and customer needs.
This, in turn, requires improvements in data analytics to deliver the right product at the right time through the right channels to the right customers. By relinquishing legacy systems that hamper growth and investing in increasingly sophisticated technology and data analysis techniques, insurers can streamline operations and improve their value proposition.
Upcoming regulatory and accounting changes also require insurers to invest in new technologies and related methodologies, processes and people. New regulations address insurer risk analysis, distribution oversight and information transparency. While investments in technology add significant complexity and risk to the business, the rewards should be significant.
To successfully position for growth in 2014, Canadian life insurers will need to achieve the following:
- Maximize return on market improvement
- Harness the power of digital technology and big data
- Address changes in the consumer demographic landscape
- Position the business for regulatory and accounting change