Top strategies for global life insurers
in 2013

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As the financial crisis lingers, it continues to shape the operations, growth and profitability of the global life insurance business. Given this environment, what are the top priorities for global life insurers in 2013, and where should they deploy their resources?

Global life insurers continue to reassess their growth strategies in light of significant shifts in economic dynamics, regulatory challenges, consumer preferences and profitability.

How has the industry changed?

The financial crisis was a wake-up call for the industry, reshaping the operating environment and suppressing earnings. With historically low interest rates and credit spreads, margins shrank and guarantees could not be supported.

Increased volatility in the equity markets led to higher capital requirements from regulators and customers. The result: life insurance sales declined, pressured by agency channel effectiveness and enterprise cost structures.

Currently, uncertain economic conditions and prolonged low interest rates continue to stifle growth prospects throughout the world. The slowdown is evident in the US, Europe, Asia-Pacific and even Latin America -- where only modest compound growth is forecast.

How has the industry responded?

Insurers have focused on core businesses, shedding products, cutting costs and de-risking product portfolios to protect capital. Insurers have also adopted costly new hedging strategies to combat increased equity volatility and price risk. Even so, prolonged low interest rates and portfolio turnover have depressed earnings and pushed insurers in search of higher yields.

The prevailing environment has also reduced demand for core products at a time when the middle market remains significantly underinsured. The balancing act between affordability and profitability is becoming more difficult.

What should insurers do now?

Life insurers need to focus on capital adequacy and robust risk management. Their agenda must also include stronger risk-based product design and pricing, improved distribution effectiveness and relentless attention to cost management with a strengthening of oversight functions.

Top profitability and growth strategies

Global life insurers continue to reassess their growth strategies in light of significant shifts in economic dynamics, regulatory challenges, consumer preferences and profitability.

These six strategies can give global life insurers an advantage in these challenging times:

  1. Demonstrate unquestionable financial strength and stronger corporate protocols
  2. Adopt a balanced product mix, shifting focus to protection rather than investment and savings
  3. Respond to evolving customer preferences
  4. Expand and improve effectiveness of distribution models, while investing in alternate channels
  5. Manage costs aggressively
  6. Explore expanded investment allocation strategies

Download the full report: “Global view of the life insurance market: how it is being shaped by the lingering effects of the financial crisis.”

Also be sure to check out our 2013 US life-annuity insurance outlook,where we explore how US life insurers are transforming their strategies, products and services to respond to demographic, macroeconomic and regulatory pressures.

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