Global insurance outlooks 2013
US life-annuity insurers face significant demographic, macroeconomic and regulatory challenges to their business models and operations. Successful players are repositioning or reinventing product offerings to make them more attractive to consumers.
Here are a few of the pressure point that insurers face:
- 50% decline in average household expenditures on life insurance over the past decade
- Changing consumer preferences in a prolonged low-interest-rate environment
- Modest growth in GDP through 2013, with volatile equity markets
- Potential increased regulation by the Federal Reserve to improve risk management
- Possible action by the new Consumer Financial Protection Bureau
- Emerging US and international accounting standards
Insurers can respond to these challenges in several ways. All insurers should consider the risk transfer and savings needs of young people (while continuing to appeal to retirees and pre-retirees). Some firms might consider offering simpler products.
Insurers are competing in a market where average household expenditures on life insurance have declined 50% over the past decade, a decrease most noticeable among younger consumers.
Low interest rates, reduced demand for insurance products and compressed margins can be met with expense efficiency, improved underwriting and sustainable cost reductions. Outsourcing and shedding of non-core businesses will also continue to be cost-effective strategies.
Regulatory demands particularly are driving investments in IT infrastructure, digitization, predictive modeling and consumer analytics. Delivering sophisticated modeling techniques will require investing in highly sought-after talent.