Beyond 2020: The future of Life, Pensions and Health

Future skills

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Those looking for a long-term successful career in insurance will need to consider their aspirations in the context of these changing requirements.

I. Marketing skills and function will become more important than sales.

Insurance firms will move towards anticipating and meeting customer needs as a core competency. Marketing must drive this change and become a strong voice of the customer within successful insurance firms, effectively policing organisational behaviour. The marketing function must demand, and have the ability to enforce, continuous improvement in customer experiences and outcomes.

What will be needed in 2020 and beyond?

  • Two to three times more marketing professionals
  • Developing a digital personality
  • Intervening in all customer impacting designs (and the authority to veto where necessary)
  • Ensuring relationship management and research are at the heart of the company
  • Participating in sales channel decisions with joint accountability for sales results and sales direction
  • Integrating key processes i.e., product development in multi-disciplinary teams to help reduce product development and life cycle times by 80%
  • Aligning all propositions with brand values: marketing must have the final say on what goes to market
  • Extensively using, but enforcing a clear policy on, social media
  • Better use of public relations
  • Rapid changeover of electronic content with required personality
  • Retaining its compliance role

II. Digital design and innovation will become integrated into everything.

Digital channels offer new ways of interacting with consumers across the entire “customer journey”. There is an opportunity to improve the insight available on customers, influence their buying behaviour at an early stage and bring new propositions to market more rapidly. As a minimum, customers expect basic functions without human interventions. However, the skills to do this effectively are likely to have to be bought in.

What will be needed in 2020 and beyond?

  • Firm’s must have gained skills not currently found in insurance firms. For example, usability design skills to create far more advanced client portals and digital experiences
  • More streamlined processes to allow faster adoption of new products and ideas
  • New digital distribution channels to connect with the customer
  • New data protection protocols and online security to support these new distribution methods
  • New technology to give Insurers the ability to receive instructions from customers in response to increased demand for digital interaction
  • Generalist and specialist qualifications
  • Web design and search engine optimisation
  • Digitising the interface with legacy systems to aid cost and retention
  • Accurate data that enables better pricing and marketing reflecting the brand ethos and your company’s personality

III. Big data must be embraced and made to work for the organisation and its customers.

Availability of big data is reaching a tipping point where there is sufficient information to underwrite products personally but also to understand the needs of clusters of people and serve them with more tailored products. By 2020, firms will need to be managing, analysing and interpreting the data using the right technology, processes and people – this is the only way to ensure competitive advantage.

What will be needed in 2020 and beyond?

  • Constantly scanning for new data opportunities as they emerge
  • Knowledge of privacy and security rules
  • Control processes over data driven experiments in taking on underwriting risk
  • Establishing clear dividing lines with re-assurers and distributors over data links
  • Fostering links internationally and with the health industry (availability of customer data profiling technology will make this more feasible)
  • The capability to administer big databases
  • More effective policy holder data quality
  • Simplifying how the data is stored and managed (verifying of the truth)

IV. The learning and development function will become vital in equipping the workforce.

Local recruitment is incentivised and re-onshoring of roles will put pressure on companies learning and development functions. The learning and development function will need to expand and partner to achieve its goal. This market will become a competitive place for talented and ambitious people.

What will be needed in 2020 and beyond?

  • Government incentives to keep jobs onshore, sponsor apprenticeships, and partner with schools and universities
  • Investing in local academy schools on a charitable and commercial basis
  • Partnering with learning institutions and other life offices to create educational facilities
  • Building community good-will by providing financial education to 16-18 year olds
  • Providing some pro bono services to assist those in financial difficulties
  • Pooling formal apprenticeship schemes with competitors and partially pooling with other institutions
  • Understanding the implicit differences in communities and approaching them in the right way - this includes speaking the appropriate languages
  • Institutes will be points of connection rather than competitors
  • Participating in developing industry computer-based learning
  • Establishing apprenticeship schemes for client service functions

V. Understanding and participating in retirement market re-regulation will be key for future opportunities.

As access to housing equity becomes essential for retirees, the market will grow - being a major participant means communicating a view on, as well as being involved in, re-regulation and keeping an unblemished reputation. Strong demand exists for innovative products and services. Sponsorship and publications will need to be re-orientated into the market the Insurers are targeting.

What will be needed in 2020 and beyond?

  • Taking a distinctive public position in support of third agers and playing for the longer game:
  • Employing mature professional financial advisors to engage face to face with third agers
  • Regularly contacting and informing all savers – increasing the frequency past age 50 - to “earn the right” to provide third age solutions when the time is right
  • Always offering spokespeople on retirement income
  • Participating in the political debate around retirement funding
  • Individually underwriting annuities and equity release income propositions
  • Totally controlling the business you participate in
  • Staying towards the top end of data tables – targeting the social media -savvy and acting as advisors to the retirees
  • Creating modelling tools for those that are beginning their interest
  • Employing actuaries who can think “outside the box” and develop innovative income solutions to third age needs by deploying pension funds, housing equity and other sources of capital

VI. Learning to live with ever-tightening capital management is essential.

As regulators continue to exert pressure, insurers will need to move back into their heartland of risk management and hone their core capital management skills to deliver growth and deliver competitive returns through effective management of the balance sheet.

What will be needed in 2020 and beyond?

  • Reviewing the corporate structure in search of improvements in capital optimisation, operational simplification, efficiency and control
  • World class asset-liability management skills in matching, hedging, diversification and optimisation against capital rules – the use of new asset categories not traditionally used by insurers
  • Ability to fully understand the risks firms want on their balance sheet versus those they want to hedge or reduce
  • Ability to effectively increase or reduce exposure to certain products or assets through entity acquisition or disposal, reinsurance, “white labelling” or direct writing of business
  • A product design approach that focusses on the key drivers of economic capital and its impact on internal rate of return
  • Being intimate with the effect of diversification benefits from originating complementary risks (e.g., longevity and mortality etc.)
  • Ability to spread risk widely so firms can achieve other solvency benefits
  • Ability to understand regulatory changes both now and in the future – firms need to be able to pre-empt the capital implications of these changes
  • Creating a compelling investor story to maximise market interest and further increase ability to raise capital

VII . Underwriting must come to the core of the life office.

Market growth will remain limited and competition is fierce. This is driven by the power of price comparison sites and large intermediaries. Price and brand are key. As in the general insurance market, low investment rates means that profit needs to come from core activities - getting risk assessment and pricing right is vital. Generating products which dovetail into the NHS (e.g., out of hours cover) will require familiarity with altogether different types of data.

What will be needed in 2020 and beyond?

  • Actuaries who are able to develop and price propositions to appeal to clearly defined consumer segments
  • Propositions must be designed, tested and refined in shorter cycles
  • Retained risks must be tightly linked to risk appetite
  • Partnerships with re-insurers must be closer and more dynamic
  • Constant monitoring of health care and competitor underwriting innovation
  • Opportunities for further risk diversification benefits (e.g., by selectively acquiring complementary risks) must be fed into proposition development and pricing procedures
  • Sophisticated analysis to segment customers by predicted underwriting outcome
  • Pricing that is more closely matched to customer data
  • Ability to re-price and communicate faster than competitors
  • More awareness of health care and underwriting innovation
  • Propositions must be more feature-rich (e.g. personalised ratings and exclusions etc)
  • Significantly higher use of enhanced and impaired annuities (>50% of market); postcode pricing commoditised

VIII. Ability to assemble services and manage partnerships is essential.

Simplifying the model will require different capabilities – over 10 years ago insurers were vertically integrated and covered most product areas. Now all pair with other partners and deliver a narrower range of products and this trend will accelerate. Delivering customer solutions at the right price and quality requires the capabilities to bring those services together seamlessly.

What will be needed in 2020 and beyond?

  • Actuaries who are able to develop and price propositions that appeal to clearly defined consumer segments
  • Increasing specialisation – this requires co-operation with others to assemble customer solutions
  • Ability to adopt multiple partnership styles and roles
  • Linking to ever more co-providers particularly re-assurers, fund managers, selected intermediaries and new distributors (such as app developers)
  • Influencing and making judgements on how to improve performance
  • Increasing dialogue across many organisational boundaries
  • Increasing transparency of pricing and reporting
  • Sharper supply chain management
  • Knowledge and active participation in the development of industry protocols
  • Taking every opportunity to sell to customers via affinity and increasing the number of affinity partnerships
  • Ability to identify appropriate solution providers and create and manage relationships
  • Ability to function efficiently around the internal changes required to meeting regulatory needs