The life insurance industry has always tended to be conservative—that’s what customers have wanted of the people who are safeguarding their financial future. But times have changed, and insurers have to think hard about what they need to do to remain relevant and successful.
This is the first in a series of posts in which I’ll share the findings of Accenture’s Insurance 2020 studies across a spectrum of developed markets, together with our views on what high-performance insurers need to do to achieve profitable growth in the years ahead.
Seldom if ever before have insurers been confronted by such a confluence of headwinds. From stubbornly low interest rates and sluggish demand to rising customer expectations and ever-tightening regulations, these and other factors declare loudly: “What worked in the past will not ensure success in the future.”
Weakened by years of recession, the industry—at least in developed markets—has little prospect of relief anytime soon. The projected average compound annual growth rate for premiums through to 2020, in the United States, is a meager 1.9 percent, while average profit margins are currently under 4 percent. The equivalent figures for France are 3.9 percent growth and 9.3 percent return on equity.
Of the four scenarios our analysts considered, the second is believed to be the most likely one: growth will be low and premiums under pressure, yet consumers will be willing to pay a premium for insurance that meets their specific needs.
The industry as a whole will continue to struggle. But that doesn’t mean the individual carrier cannot buck the trend, grow at 10 percent and achieve a return on equity of 13 to 15 percent. Several firms are doing just that.
In my next post I’ll look at the key areas that life insurers need to address, and some of the steps they should consider if they intend to join the ranks of the high performers.