By Tom Murray, Head of Product Strategy LifePlus Solutions, Majesco
And given that these convulsions have been kicked off by energy shortages resulting from a war that is likely to continue for some considerable time, it does not seem that the situation is going to abate soon.
In such a dynamic market place, life insurers need to be able to respond rapidly to changing circumstances. Customers are demanding information on their financial position very frequently as they seek to understand their position and where they can make changes. Insurers need to be able to provide their policyholders with real-time information on their investments so that they can make informed decisions. Policyholders also need to have the ability to make adjustments to their investment plans as their situation changes. For that, they need the ability to perform scenario planning to see the range of possibilities available to them.
For those looking to start investing or increase their range of products, the uncertain state of the economy will make them reluctant to take on fixed financial commitments. They will be looking for flexible products, which will allow them the freedom to alter their commitment level as their situation changes. Products that empower the customer to make adjustments quickly and easily will give insurers a premium advantage and allow them to attract new customers in this more unpredictable market.
Given that this market turbulence is likely to be with us for a considerable time to come, insurers need to abandon the slower processes of the past, which will not suffice in an environment where customers need flexibility. People are searching for ways to make their savings safer or seeking to exploit the dynamism in the market. This can only be achieved by allowing them to switch their funds and alter their plans and benefits more regularly than they did in the past.
The emphasis on the flexibility comes in tandem with the need for economy. Providing increased levels of service and allowing customers to make more frequents adjustments to their products comes with a price attached. Low cost products will dominate the market and insurers’ costs can only be restrained if these products can be delivered and serviced with minimal human intervention. This is a dilemma for many insurers, whose legacy systems do not provide them with the ability to support the automated digital services that are needed for customer self-sufficiency.
Without a strong digital platform upon which to base their product and service offerings, the insurer is constrained from being able to offer customers the degree of control needed to manage their finances in these more turbulent financial times. Neither can they provide these products and services at low cost-levels that support the delivery of cheaper financial products to the market.
Moving to a digital platform requires investment. Yet without that investment, the insurer faces being left behind, unable to respond quickly to the new services introduced by competitors nor able to produce financial products with a cost base sufficiently low to compete against the more nimble of their rivals.
The temptation to reduce investment during a downturn may appear tempting in the short term but it could well be catastrophic for the business in the medium term. Insurers should be formulating a strategy to minimise their own costs whilst expanding their ability to compete. Otherwise they could well end up as one of the casualties of the shift in the economy.
Insurers who didn’t move to a more digital approach during the pandemic may have been feeling that normality was returning. The sudden switch in the economy again, this time for a completely different reason, shows that forward planning should also assume that a large degree of flexibility is going to be needed for every industry. Digital platforms give insurers the ability to respond rapidly and cost-effectively to the changing environment and a better ability to cope with whatever hits us next.
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