Becoming innovators

June 2016  |  Life & Health Reinsurance

By Mark Prichard and Rick Flaspohler: Download

Life & Health reinsurers are broadening their offerings to cope with changing demand and shifting perceptions as a consequence.

Life insurance executives, like all executives, view the tech giants as today’s paragons of innovation. When it comes to their own industry however they are less generous: the overwhelming view is that the life insurance industry has generally resisted innovation, and many are privately circumspect about the prospects for current Fintech investments. And historically, when insurers comment on innovation within the life & health reinsurance industry as a whole, the feedback has usually been short on superlatives (despite increasing satisfaction ratings generally). Insurance executives have been, fair to say, a ‘difficult audience’ to impress in this regard.

Which makes it all the more interesting that in a recent study of reinsurance branding from NMG Consulting, the picture looked quite different. Reinsurer brands have distinctive associations with ‘being innovative’ – possibly for the first time.

‘Top of Mind’ Brand Associations – 2015/2016

Source: NMG Consulting, Global Life & Health Programme. Life insurance executives were asked to provide brand associations for the companies they rated as being a ‘Top 3’ brand (2015/16)

The leading take away is that in the minds of their insurer clients, reinsurers individually were more likely to be associated with the word ‘Innovative’ than any other. This result was unexpected and as such warrants further consideration.

It’s a reasonable assumption that individual brand associations are likely to be more favourable than a generalised view of the reinsurance industry as a whole. As might be expected, within the study there are clear associations with areas in which reinsurers are more traditionally linked, such as technical capability (evidenced by the use of words such as ‘Expertise’, ‘Professional’, ‘Knowledgeable’), and also ‘Financial Strength’. Although brand linkages to customer-centricity (including partnership) while prevalent are less common. And it is also noticeable that ‘Conservative’ was cited almost as often as ‘Innovative’. As ‘Conservative Innovation’ is oxymoronic, it would appear that what lies beneath these observations is more nuanced.

These brand associations are sourced from more than 600 interviews with life insurance executives. This scope represents a good weighting across Anglo Saxon and Asian markets sourced from: United Kingdom & Ireland, Canada, Asia (14 countries), Australia, New Zealand, South Africa and Mexico. It’s possible that the balance may shift when feedback from the USA and the Continental European markets is also included in our year-ending 2016 report. Our expectations however are that the picture will remain broadly similar. Even if more traditional impressions emerge from Continental Europe, the current dynamism of the US market provides ample opportunities for reinsurers to demonstrate their new capabilities and expanded focus.

These associations reflect the reality of the competitive landscape in life & health reinsurance today. Reinsurers have had to shift from their historical stance, which was more narrowly technical and mostly reactive to insurer needs, to one today where successful reinsurers additionally need to anticipate the current and future requirements of their insurance clients. This has in turn led to significant levels of new investment in technologies and intellectual property by reinsurers. Reinsurers are hoping to play a hand in transforming the way life insurance is sold/issued and priced globally, focused upon the total customer experience and with an increased weighting towards digital.

Reinsurers also differ significantly in terms of their brand associations. Competitors lie at various points across the brand spectrums of innovation, technical capability, and customer focus. While several reinsurers began the process of business transformation many years ago, others have yet to begin and may choose not to.

It is also true that brand associations differ significantly at the market level, reflective of the fact that reinsurers are able to change their emphasis based on market conditions. For example, in markets where the motivations underlying reinsurance placements are about reducing exposure to unattractive risk classes, reinsurers display a different face and are considered conservative with a reduced emphasis on the customer.

Reinsurers also face the challenges associated with rising customer expectations and their ability to deliver consistently in a fast-moving space where customer requirements are shifting. For example, in the case of automated underwriting systems, insurers report that many features of the new technologies on offer are not in any way relevant in their market, and in several cases there are unresolved questions about hosting strategies and participation strategy (both pertaining to decisions about business model). As investments made by reinsurers continue to climb, senior executives at reinsurers will continue to track carefully the benefits of these new initiatives relative to the costs and investments made.

The thought that they might be increasingly seen as innovators offers exciting prospects for reinsurers and the industry, and these brand associations should be a boon for several companies. Of course it is still possible that a few years from now, should there happen to be a lack of any notable success stories, that the image of reinsurers might return to that of yesteryear. Which would be seen by many as proof of ‘a reversion to type’, and potentially quite limiting going forward.

More likely however given the achievements to date, is the scenario where a handful of reinsurers realise an early economic or brand return on their investment in technologies and intellectual property thereby forcing other reinsurers to keep up. This in turn could allow reinsurers to play a large role in the reshaping of the life & health insurance industry.

Note that ‘Life & Health’ and ‘Life’ are used to interchangeably with reference to insurance and reinsurance.