Creating a strategy for growth in life insurance requires a multi-faceted approach, one of which is customer-centricity. But what quantum of growth are we talking about here?
In a piece for the US market, Getting to 2020: Strategies for profitable growth in US life insurance, my colleagues Pat Lyons and Brian DeMaster argue that 13 percent return on equity was possible, some 5.2 percent more than the 7.8 percent that a business-as-usual approach was expected to yield.
To achieve this, life insurers must understand that they need to balance cost-cutting or operational excellence and new business. In this blog, I want to look at the latter.
My main point is that life insurers are going to have to take a much more lateral approach to their businesses in order to uncover new sources of business. This is a cross-industry trend: as our report Remaking customer markets: Unlocking growth with digital, makes clear. One key finding was that 60 percent of the 500 executives surveyed plan to pursue growth in, or in collaboration with, other industries.
For a discussion of this type of mindset, please read the recent blog by my colleague Thomi Meyer, “Convergence and the new (digital) insurance business model.” Using examples drawn from the life industry, Thomi argues that by looking at the needs of its customer base, the life industry should be considering leveraging its extensive property investments to provide retirement lifestyle options for its own policyholders.
Indeed, the whole retirement industry provides a huge pool of potential new profits for life insurers who are prepared to look more broadly at what their business model is. One such example is a diversified antipodean insurer with a uniquely nuanced portfolio of offerings (health, ravel, home, auto, investment and financial advice) plus retirement homes, allied health services and care of the aged.
There are also plenty of opportunities emerging from the new health legislation in the United States, popularly known as Obamacare.
My colleague Mark Halverson says that regulation is actually the handmaiden of innovation because without it, innovations simply don’t become reality. He argues convincingly that insurers have a great opportunity to position themselves as partners of regulators in bringing new innovations into the mainstream, and this would certainly be true in the highly regulated life insurance industry. Read his current blog series to explore this intriguing argument still further as you think about new growth.
One final point: the search for new profit pools will only be fruitful if it follows faithfully where a detailed customer/ consumer analysis leads—and insurers may find themselves quite far out of their comfort zones!