Despite signs of improving market conditions on the global scale, a report suggests life insurers should be focusing on their product offerings to make up for subpar yields, while giving customers what they want and spurring growth.
The 2014 EY Canadian life insurance outlook notes that in order to improve profitability, companies must continue to focus on asset and wealth management, while developing more innovative, attractive products for consumers.
“During the downturn, most insurers reviewed their existing product portfolios to re-price or eliminate their high-risk, capital-intensive and low-margin products,” says Doug McPhie, a partner and Canadian insurance leader at EY (formerly Ernst & Young).
“Now, even though we’re seeing signs of market improvement, they’re continuing to focus on growing non-traditional areas that are lower risk and less capital intensive, like savings- and investment-oriented products.”
Being product-oriented will help to limit insurers’ capital and economic exposure, he says, adding that it also helps them better deliver the services their customers want.
“Whole-life and term-life insurance continue to be popular with consumers because they’re products that are fairly easy to understand,” explains McPhie.
He suggests companies also harness their creativity to improve profitability through things like better tax strategies and sales force management.
In addition to maximizing the return on improving market conditions, EY’s report advises insurers also need to focus on the following to be successful over the next year:
- harness the power of digital technology and big data to improve underwriting, reduce costs, analyze consumer behaviour and more;
- address changes in the consumer demographic landscape to capitalize on market opportunities; and
- position the business for regulatory and accounting change, using the opportunity to improve things such as modelling capabilities, data quality and governance.
“Canadian life insurers remained relatively robust throughout the economic downturn by focusing on the fundamentals,” McPhie says. “Now, with signs economic conditions are improving on the global scale, those companies here in Canada with strong, comfortable capital positions and a creative, product-focused mindset will be well positioned to return to growth.”