OLDWICK, N.J.--(BUSINESS WIRE)--Results of an AM Best survey show that U.S. life/annuity insurance companies understand that meeting the demands of changing customer behaviors, attitudes and expectations in an evolving distribution landscape is critical for them to expand market share.
The Best’s Special Report, titled, “Distribution Enhancements Remain Important, Life/Annuity Insurers Continue Improvement Efforts,” states that nearly 25% of survey respondents said improving the customer experience is the most crucial factor for their success over the next 24 months, while approximately another 25% of the respondents said product distribution is a top priority. Furthermore, more than half of the respondents said that it is either extremely necessary (13%) or very necessary (41%) for them to make innovation improvements to distribution over the next three years, highlighting the importance of distribution effectiveness in the future for life/annuity insurers, particularly as lines of business see premium volumes shift. Overall, the life/annuity industry has seen the sale of group products increase steadily while the sale of individual products has declined.
Nearly four in 10 respondents (38%) allocate more than 5% of their annual budgets to distribution channel improvements, while 18% of respondents allocate more than 10%. Conversely, 62% of respondents spend less than 5% of their annual budgets on distribution enhancements. This reflects the challenges the industry continues to face in budgeting for future enhancements while also acknowledging and acting on the urgency to improve distribution systems today. Some small-to-midsize insurance carriers may lack the resources to invest in technological innovations that will be necessary to compete with larger organizations.
Many life/annuity companies still view the underserved and often elusive middle market as a critical avenue for growth, while simultaneously looking to tap the millennial demographic with a quicker, more streamlined underwriting process. Insurers recognize that the direct-to-consumer approach will remain the millennials’ preferred method of purchase for life/annuity products due to the ease of use. This approach also may prove to be a more cost-effective way for insurers to reach this demographic. A majority of survey respondents (60%) said they use automated underwriting for less than 10% of their new business, compared with 17% that said half their new business came from automated underwriting.
Whichever method life/annuity writers decide on, AM Best believes the gap between the need for distribution innovation and actual implementation will need to narrow for life/annuity providers to remain relevant and profitable in the future.
To access the full copy of this special report, please visit http://www3.ambest.com/bestweek/purchase.asp?record_code=281233.
AM Best is a global rating agency and information provider with a unique focus on the insurance industry. Visit www.ambest.com for more information.
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