How the Environment Will Change for Life Insurers - And Ways to Cope
The life insurance business might be seen as a steadfast boulder awash in a fast-flowing stream of change, yet the Greek philosopher Socrates taught us that the secret of change is to focus energy on building the new and not fighting the old. Indeed, new technologies, advances in medicine and the evolving demands of consumers all challenge insurers to stop wrestling with old methods and come up with new ideas. Building on innovation and disruption is the secret to coping with change.
Take innovations concerning genetics, for example. Although genetic data isn't yet part of day-to-day clinical treatment, it soon will be. The UK’s “100,000 Genomes Project” is an initiative aimed at turning the National Health Service (NHS) into a “genomic medicine service” by transforming discoveries about DNA into life-saving treatments. The positive impact is already being felt by sufferers of certain cancers and the 3.5 million people in the UK with rare diseases.
Medicine has been geared mainly toward treating symptomatic illness, but efforts will shift towards detection and prevention. While few people up until now may have taken a genetic test, this too will change as the cost of tests falls and their predictive power grows. Better use of genomic information from such tests promises targeted therapy, instead of treatment based on an average for the population. This means people will be able to avoid undergoing treatments that may inevitably be ineffective for them.
Today, the personal data economy is giving individuals control of their information and what they do with it. While most health information has been stored by medical providers, digital data that is generated using new devices will soon rival traditional health records. This increasingly digital environment also promises to change the sales dynamic of life insurance. Life insurance is predominantly sold by advisers; increasingly, however, people will want to buy cover easily aided by technology, acting on their own research, peer reviews and using the personal data they hold on themselves.
The combination of these effects threatens to create a personal information asymmetry between consumers and insurers, which could ultimately make voluntary insurance impossible.
Already insurers are challenged by low levels of trust among the general population and media. Only by more direct engagement (not simply premium collection and claim payment), along with value-added service, can insurers build relationships with consumers and change their perceptions of the industry. In addition, earning a prospective customer's trust enough for him or her to give the insurer access to personal data, and ensuring a fair price for all applicants, requires that the information sought and the processes built around it adapt to the changing environment.
The life insurance industry is open to change. We have a history of responding positively, as demonstrated when the fundamental right of European insurers to underwrite on the basis of gender was challenged. With insurance commonly perceived as a social good first and as a business only second, insurers must find a balance between these views while still finding ways to grow the market in the current environment. To focus energy on building the new and breaking the negative cycle of mistrust, insurers must be a part of the conversation about the future with customers, the regulator, the government and its representatives.
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