Over the past several quarters, the life and annuities (L&A) sector has emerged as a beacon of growth and potential within the broader insurance industry. This segment’s expansion, while promising, raises pivotal questions about the readiness of life carriers to scale effectively, given their historically antiquated systems and complex operational landscapes.
Growth his here, but are L&A Carriers Ready?
The rapid growth of many life carriers is a testament to the vitality of the L&A sector. According to a report by McKinsey & Company, life insurance and annuities have seen significant growth, with global life premiums growing 2.9% annually over the past decade. This outpaces the growth in property and casualty insurance, underscoring the potential of the L&A market. However, this growth also brings to the fore the critical issue of scalability. Many life carriers have traditionally relied on outdated systems, hindering their ability to expand efficiently. A survey by EY found that 70% of insurance executives believe their technology infrastructure is an obstacle to achieving their business objectives, a sentiment acutely felt in the L&A sector.
The challenge is compounded by the presence of multiple life solutions within many carriers. This fragmentation leads to operational inefficiencies and complicates efforts to modernize. The EY report highlights that 60% of insurers struggle with legacy systems that are not conducive to the agility and responsiveness required in today’s market. This technological stagnation has been a significant impediment, especially when considering the rapid advancements in other sectors.
Consumer expectations are driving the need for modern capabilities…
Consumer expectations are another driving force necessitating change. The recent lull in the market, partly due to global economic uncertainties, was a missed opportunity for many carriers to modernize and prepare for what is shaping up to be a period of heightened demand. Deloitte’s 2021 Insurance Outlook report indicates that 48% of consumers are more likely to use digital channels to engage with insurers compared to pre-pandemic times, highlighting the shift in consumer preferences towards more modern, digital experiences.
There are new technology options worth considering…
The silver lining in this scenario is the advent of new technologies and bespoke solutions that offer alternatives to traditional, monolithic core system replacements. Platforms like Salesforce are at the forefront of this transformation. These solutions reduce risk and deliver incremental value faster, enabling carriers to modernize in a more agile and cost-effective manner. According to Salesforce’s “State of the Connected Customer” report, 56% of customers actively seek to buy from the most innovative companies, a trend that life carriers can capitalize on by embracing these new technologies.
Data will still be an obstacle to modernization…
Despite these advancements, many carriers still face significant hurdles due to disorganized data environments. Years of neglect in data management have resulted in siloed and inconsistent data, posing a substantial challenge to carriers’ modernization efforts. A study by Accenture revealed that only 27% of insurers have fully integrated their data across the business, which is a crucial step in leveraging these new technologies effectively.
In conclusion, while the L&A sector presents promising growth opportunities, life carriers must address the legacy challenges of outdated systems and fragmented operations. The rising consumer expectations and technological advancements offer a pathway to modernization. However, success hinges on their ability to overcome the longstanding issue of disorganized data environments. As the sector stands at the cusp of what appears to be a boom period, the time for life carriers to act and adapt is now, leveraging the tools and technologies available to transform and thrive in the evolving insurance landscape.
