Tech will redefine the life insurance business this yearpar Andrew Rickard | April 13 2016 01:39PM
Management consulting firm Ernst and Young (EY) believes there are six trends that will dominate the life insurance business in 2016, and technology is at the top of the list.
In its most recent outlook report for the Canadian Life insurance industry, EY has identified six external forces that it says will shape the life insurance sector this year and ranked them from 0 to 10, with 10 indicating that something has a very high potential to affect the way insurers do business.
Robo-advisors and omni-channel access
Technology sits at the top of the list with a 9, as EY says that new trends such as robo-advisors and omni-channel access will redefine the industry in 2016. "Insurance firms reluctant to embrace innovations for fear of cannibalizing their own market space may be overtaken by more nimble firms able to capitalize on a shifting insurance landscape," reads the report. "Also, legacy systems are no longer viable with digital trends and increased complexities. This requires insurers to rethink strategies, business models, product offerings, and distribution channels."
The next two high-ranking forces are closely related to technology, namely customer expectations and cyber risks, both of which received an 8 in level of importance. EY predicts that the demand for customized services, digital platforms, and personalized support will grow sharply in 2016, but also warns that this digital transformation will expose insurers to higher risks from fraud, data theft, and political activism. Competition was not far behind these two issues with a score of 7; the report suggests that competition will heat up as established insurers act to capitalize on game-changing market shifts.
Regulation and economic conditions
The last two areas of import were regulation and economic/financial conditions, which were assigned influence levels of 6 and 4 respectively. EY warns that insurers will need to stay on top of changing regulations and start planning for the risk-based capital requirements that are expected to come into force in 2018, and that slow economic growth, the decline in the Canadian dollar, and a weakness in the oil and gas industry also pose major downside risks.