McKinsey: three priorities for modernising life insurance
McKinsey & Co has released a new report exploring the ways in which life insurance can meet the challenges of a rapidly transforming sector.
Stating that this specific aspect of the industry has suffered from poor growth and profitability in recent years, the company points out market swings (particularly the growth seen in Asia) and the advancement of data analytics and artificial intelligence (AI) as destabilising factors.
Furthermore, global penetration has fallen by 3% over the last 10 years, and the COVID-19 pandemic has led to a depression in global interest rates, which has had an aggravated effect on the deterioration of life insurance stock.
However, McKinsey believes that a three-point roadmap for improvement could see life insurance revitalised for the post-COVID-19 era:
Personalising the customer experience
- Shift toward health and wellness management: An increasingly elderly population (by 2030, McKinsey estimates a 50% global increase in people over 60 by 2030, from 900 million to 1.4 billion) means that strictly coverage-based insurance is no longer sufficient.
Instead, the report advocates policies that incentivise healthy living and mental wellbeing, such as those pioneered by Vitality (FinTech Magazine’s profile of Vitality will appear in its new edition released in October).
- Continuous underwriting: Specifically, the report envisages a four-stage evolution: 1) automation, 2) digitally submitted applications, 3) personalisation using advanced data sets, and 4) dynamic adjustments to cover based on customer behaviour.
Developing flexible product solutions
- Customising solutions: With destabilised economic and social conditions disrupting the rigid frameworks of the old industry, life insurance needs to take into account more bespoke personal circumstances in order to remain relevant.
- Value-added services: As previously mentioned with regards to Vitality, insurance companies should consider enriching their products and service, as well as building profitable partnerships with other companies.
Reinvent skills and capabilities
- Embracing the ‘new workforce’: “By 2030, 44% of insurance work activities have the potential to be automated,” states McKinsey. Therefore, a new emphasis on fluid, tech-based roles focused on qualitative work will take precedence.
- Expand via M&A: The rise of insurtech means that life insurance incumbents have a faster route to modernisation. By partnering or even acquiring these innovative startups, legacy companies can imbue their established brand with cutting-edge digital technology, ready to meet the needs of modern customers.
In many ways, McKinsey’s report is reminiscent of Swiss Re’s clarion call to the industry in August: life insurance can be a strong force for support and stability in an uncertain world. Modernising established practices is the linchpin of achieving this potential.
