2016 EY Canadian life insurance outlook
Canadian life insurers will enter 2016 in relatively good financial condition, but facing exponential changes from rapid advances in technology, rising customer expectations and growing competition. These market shifts will require insurers to reinvent their strategies, services and processes, while coping with nagging financial, economic and regulatory uncertainty. Furthermore, disruptive forces in other sectors are leaving insurers wondering what the impact will be on their company and what strategic response is needed.
Impact of external forces on the Canadian life market in 2016
(0 = Very low impact, 10 = Very high impact)
Digital technologies will redefine the life insurance business in 2016, as customers push for new tools, from robo-advisors to omni-channel access. These same technologies will enable insurers to transform their front and back offices.
Demands for customized services, digital platforms and personalized support will grow sharply in 2016. Insurers will need to move to a customer-centric approach built around personal relationships, better access to data and a strong service attitude.
Digital transformation will expose insurers to higher risks from fraud, data theft and political activism. With greater access to sensitive data, privacy breaches will become a bigger worry, as will reputational risks from the use of social media.
Competition will heat up as established insurers act fast to capitalize on game-changing market shifts. Challenges will also come from non-traditional sources, such as FinTechs, offering innovative digital solutions.
In 2016, insurers will need to stay on top of the potential implications of changing regulations such as modified policyholder taxation and start planning for risk-based capital requirements in 2018.
Economic and financial conditions
Uncertain financial and economic conditions will continue into 2016. Slow economic growth, decline in the Canadian dollar and weakness in the oil and gas industry are major downside risks for insurers.
Roadmap for transformation: priorities for 2016
In 2016, life-annuity insurers will need to take decisive measures to cope with market upheavals — or risk the consequences. By staying in front of change, insurers can strengthen customer relationships, build market share and gain competitive advantage. Tapping their strong capital positions, insurers will start investing in new technologies, systems and people that will allow them to capture their future.
Specifically, leading insurers will focus on the following path to change:
- 1 Pick up the pace of business transformation and innovation
- 2 Reinvent products and services for the new digital customer
- 3 Adjust distribution strategies for technological and regulatory shifts
- 4 Reengineer processes to drive efficiency and market growth
- 5 Bring in the right talent to lead innovation
- 6 Put cybersecurity high on the corporate agenda