Over recent months I have seen further fragmentation of our life and pensions industry spurred on by on-going and frequent regulatory announcements. My observations and conversations have shown ‘traditional’ life and pensions players face competition from surprising sources who are installing themselves along the value-chain with new lower cost direct distribution formats. Competition across the value chain looks set to get more intense with increasing disintermediation of providers by asset managers, distributors, and platforms. Advances in technology and communication alongside meteoric growth in data and information have given rise to consumers who are more informed, proactive, and looking for self-direction. As a result the landscape now is one where life insurers are undertaking a reassessment of distribution arrangements, changing their product propositions, and showing a drive to seek operational excellence. However, embarking on any of these changes will mean a need for insurers to successfully reset existing relationships and engage with new customers – not just at the point of initial sale but over the customer lifetime.
The recognition of customer relationships over the lifetime as a major source of value will help drive profitable growth strategies for firms at a time when staying within budget is extremely difficult. Competitive advantage is going to come from:
- Product manufacturers who have superior product design capabilities that are more able to respond to the changing demands in the market; and
- Distributors, platforms, and potentially new brands that do not exist today who are able to establish long-term active relationships will drastically change the competitive dynamics of our future marketplace.
While it is easy to type about who can gain competitive advantage, my conversations with life insurers demonstrate that implementing change is not easy, especially where firms have extensive legacy systems and operations. The essential steps to start with are a focus on customer-centric operating models, the use of advanced segmentation and data analytics, harnessing digital to engage customers at a lower cost, and opening collaborations with new partners across the value chain to enable the transformation.
Technology carries on being the key to unlocking future value in the life industry and wider financial services. Carrying on the theme from my last blog of sharing great examples of innovation leads me me to IndiaFirst Life Insurance with ‘LifeStore’ – a digital do-it-yourself online store for understanding and buying insurance with product audio visuals and detailed step-by-step comparison of products for customers. Further innovation comes from a tablet-based app called ‘MagicBoard’ that automates and simplifies the sales process in a single platform connecting IndifaFirst’s customers with the distributor, employees and the insurance firm in a 360 degree integration where every stakeholder has a single page view in their tablet for real-time information, intelligence and intervention – a further great way to enhance the experience for everyone!
As I plan Accenture’s next Life & Pensions breakfast briefing on 25 November I look forward to discussing your views on the next strategic moves for the industry to truly understanding and servicing the value of customers.