A Bravura Solutions’ snap online poll of the Australian life insurance industry has revealed the highest priorities for life companies over the next two and five years, as well as their preparedness to respond to key trends.
Conducted in conjunction with the Financial Services Council (FSC) as part of Evolve, FSC’s 2015 Annual Life Insurance Conference, the snap poll asked life companies to rate the importance of four key trends facing the life insurance industry over the next two years, and in five years’ time. These trends were: (i) Capital management challenges resulting from legislative requirements, sustained low industry rates and a volatile investment environment, (ii) Increased role of advanced technology such as predictive modelling, digital and big data, (iii) Shifting demographics including increased longevity and the rise of the Millennials (Gen Y), and (iv) Increasing power of the consumer as a result of social media. Respondents were asked to rate the trends as high, medium or low priority.
In two years’ time, the trends ranked as the highest priority by life companies were the increased role of advanced technology (62.5%), followed by shifting demographics (45.8%). The trends ranked as the lowest priority by respondents were the increasing power of the consumer, followed by capital management challenges.
In five years’ time, the increased role of advanced technology (66.7%) and shifting demographics (54.2%) – remained the highest priority trends for life companies. Notably, shifting demographics increased in importance by almost 10 per cent, when compared to three years previous. Five years on, the lowest priority trends continued to be the increasing power of the consumer, followed by capital management challenges.
The Bravura Solutions’ poll additionally sought the respondents’ views on how well prepared they felt they were to address these trends in five years’ time. Respondents were asked to rate their preparedness for each of the four key trends as follows: (i) Ready to manage and achieve competitive advantage, (ii) Plans in place to position for managing the trends, and (iii) Not currently prepared and are unlikely to be prepared in the near term.
The poll found that respondents felt most ready to manage and achieve competitive advantage in the area of capital management challenges (41.7%), followed by the increased role of advanced technology (25.0%) and shifting demographics (20.8%). Some respondents felt unprepared for the increasing power of the consumer as a result of social media (29.2%), the increasing role of advanced technology (25.0%) and shifting demographics (16.7%). Capital management was the only trend where no respondents felt unprepared.
Generally, however, the respondents were positive about the five year outlook, with responses suggesting greater readiness within this time frame. The poll found that in five years’ time, 62.5 per cent of respondents felt they would have plans in place to manage the increasing power of the consumer, 62.5 per cent to manage shifting demographics, 58.3 per cent to manage capital management challenges, and 50.0 per cent to manage the increased role of advanced technology.
Overall, the poll results clearly indicate that the increased role of advanced technology will be the top priority for Australian life insurance companies, both in two and five years’ time. With 25 per cent already comfortable with advanced technology and a further 50 per cent indicating they will have a plan in place to manage advanced technology within the next five years, the poll reveals the industry’s desire to unleash and leverage the many benefits of modern technology in the digital age.
The results suggest that life companies recognise that capabilities such as big data and analytics, predictive modelling and digital service delivery will prove vital to achieving a sustainable competitive advantage and long-term business success in the years ahead. For many life companies, transitioning to a modern, next generation technology platform in partnership with an experienced, expert and trusted software vendor, will be the first step in this journey.