2023 has started with interest rate volatility, 40-year highs in inflation, and continuing health and mortality strains. All this in addition to regulatory and accounting developments and continuing uncertainties for the economic outlook. Life insurers face a number of common business challenges, but also specific opportunities in the four segments of: Accumulation and Savings; Decumulation and Retirement; Protection; Legacy and With Profits.
Matthew Edwards, Proposition and Innovation Lead for WTW’s UK&Ireland Life business, covers the common issues that life insurers face in 2023, including the potential impacts of the Financial Conduct Authority’s Consumer Duty standard and the need to integrate IFRS 17 into business as usual. He also highlights post-pandemic mortality and longevity assumptions and the use of predictive analytics to unlock patterns in data as potential areas of focus for insurers.
Phil Tervit, Accumulation and Savings Segment Lead, hones in on the ongoing challenges of customer engagement and members needing to save more for their retirement, given that WTW research shows that improving customer engagement and value is the top priority for defined contribution schemes. From an investment perspective, he touches upon opportunities for improvements in the areas of default fund quality, sustainability and fund rationalisation.
Waheeda Narker, Decumulation and Retirement Segment Lead, foresees a year of high growth and returns due to interest rates and inflation. In particular, she flags opportunities linked to the introduction of collective defined contribution (CDC) schemes and improvements in the affordability of bulk annuity transfers, attracting a wider group of potential investors. Set against those, she assesses the potential for re-establishing interest in retail annuities and the product innovation that may entail.
Alastair Black, Protection Segment Lead, considers the dual impact of the cost-of-living squeeze and pressures on the National Health Service (NHS) on the protection market. How, for example, might NHS treatment delays and long waiting lists influence the approach to demographic assumptions? And he talks about some of the proactive measures, including greater product agility, that he feels may help insurers combat the effects of the economic climate on affordability of cover and a potential increase in policy lapses.
Trevor Fannin, Legacy and With Profits Segment Lead, discusses the segment’s challenges and the three areas where he believes insurers have the most to gain in light of those. As part of opportunities for improving overall operational efficiency, including the roles for technology and outsourcing, he points to the product rationalisation and investment optimisation. Counter-intuitively, legacy and with-profits business lines could lead the charge in value-adding proactive business transformation.
