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FORECAST 2024: Impactful Forces

Author

Tammy M. Appel
Contributing Editor
LIMRA and LOMA

January 2024

We asked Forecast survey participants which trends they believe will have the greatest impact on their organization over the next two years. Information technology, regulatory pressure and customer expectations continue to be at the forefront, according to these executives. The war for talent, changes in workplace culture and the economy are also in the mix of top concerns.

How are these factors impacting the insurance and financial services industry?
“The pace of change in technology, and how we use it, will continue to accelerate,” says Mark Holweger, President & Chief Executive Officer, Legal & General America. “The future is going to be quicker than five — 10 years. It will be like the Industrial Revolution on steroids and will be measured in months, not years. We must leverage technology and the digitization of our processes for the good of those we wish to serve — individuals, families and businesses that need the protection life insurance can provide.”

Wade Harrison, EVP & Chief Retail Officer, Protective Life, concurs: “Over the next two years, technology and digital capabilities will continue to be a strong influence on our business and the industry as a whole and allow companies to have greater competitive positioning,” he says. “We continue to see how insurers are investing in more technology and adopting artificial intelligence (AI) capabilities to allow for more automation in underwriting and claims processing, support customer needs more quickly and cultivate learnings from data.”

Executives noted the far-reaching effects that technology continues to have on the insurance industry. “Our ability to create new digital capabilities that improve the experience of our employees, field and clients, while effectively fostering their adoption, will prove key to both our short- and long-term success,” says Kamilah Williams-Kemp, EVP & Chief Insurance Officer, Northwestern Mutual. “We believe that an exceptional client experience requires us to provide an exceptional experience to the advisors and employees who support them. Automation and generative AI have the potential to transform those experiences in ways never thought possible — and all for the better — ultimately enhancing the long-term relationships we build with our clients.”

Mike Simonds, Chief Operating Officer, Unum Group, agrees: “Technology continues to grow in importance. AI, digital and automation are all helping to open new channels, deliver better customer experiences and increase productivity.”

“We’ll need to continue investments in technology to best match consumer demands and expectations in our industry,” says Joe Monk, SVP, Financial Services, State Farm. “Digital modernization will be absolutely necessary. At the same time, new capabilities and technologies, such as AI, will become more normalized and integrated into business practices.”

“Enhanced technology and data utilization will continue to have a significant impact, along with the evolving needs of consumers across different generations,” says Caroline Feeney, EVP & Chief Executive Officer, U.S. Businesses, Prudential Financial. “More comprehensive and holistic use of data will give us a better picture of our customers and give us an opportunity to offer financial solutions tailored to match their needs. It will help our customer service professionals be better positioned to offer our customers the opportunity to speak with a financial advisor, so we’re caring for our customers’ immediate needs and their long-term needs.”

Legislative initiatives are always top of mind in the C-suite, given that insurance and financial services companies are among the most highly regulated companies in the world. Many of the executives we spoke with mentioned the impact of the regulatory environment, noting the Department of Labor’s (DOL) proposed fiduciary rule as a particular concern. Editor’s Note: The DOL floated this proposed rule on October 31, 2023. It redefines who is an investment advice fiduciary under the Employee Retirement Income Security Act (ERISA). It is the DOL’s fourth try since 2010 to expand investment advice fiduciary status. Earlier attempts were abandoned due to industry pressure and court rulings.

“The regulatory environment continues to impact the industry,” says Ron Herrmann, EVP, Head of RGA Americas, RGA. “We are actively involved in shaping future regulation through advocacy with the American Council of Life Insurers (ACLI) and National Association of Insurance Commissioners (NAIC).”

Adrian Griggs, EVP & Chief Operating Officer, Pacific Life, agrees that regulation stands out as a top area of impact and listed the following as particularly noteworthy: “Regulation, with a focus on the DOL fiduciary rule, data/cybersecurity/AI regulation, and capital requirements — more specifically, National Association of Insurance Commissioners (NAIC) work on structured securities — as well as long-duration targeted improvements (LDTI) implementation,” says Griggs. Editor’s Note: LDTI is a new accounting standard under the U.S. generally accepted accounting practices (GAAP) system. Broadly speaking, this new standard makes substantial changes to the way a company values and reports its obligations.

“We’re continuing to closely monitor the legislative and regulatory landscape,” says Feeney. “At Prudential, we fully support regulations that provide consumer protections, while ensuring that Americans continue to have access to the products and services they need for their financial security.”

Insurers must respond to the ever-changing needs and expectations of customers or risk persistent or even growing coverage gaps. Many of the executives we spoke with mentioned changing customer expectations as an area of impact.

“We must recognize generational differences and preferences — as well as anticipate their future preferences and needs — when developing and offering financial solutions and services,” says Feeney. “For example, Millennials and Generation Z tend to prefer self-service and digital options, are more comfortable with AI and chatbots, and consult multiple resources, such as family, friends and social media, before making a purchase decision. Whereas their older counterparts, Generation X and Baby Boomers, in general, still prefer live interactions and phone support and are less comfortable with chatbots. What we do see across generations is a continued interest in speaking with an expert just prior to making a decision. Having a combination of live support and offering access to advice and solutions on the customer’s terms — when, where and how they want it — is table stakes.”

As the competition among organizations to attract and retain top talent heats up, executives say that employers are facing many challenges. “Talent is another area we need to remain focused on, and here too, we must recognize generational differences,” says Feeney. “For example, we’ve seen generations that live to work, and we’re now seeing a shift to employees who work to live. This means that hybrid work arrangements for most people will remain, and we, therefore, need to continue to care for culture, foster an environment for learning and development, and enhance our capabilities to make both the in-person and remote experience even better.”

“Recruitment, retention and ways of working will be key to winning top talent,” says Joe Monk, SVP, Financial Services, State Farm. “Competitive business packages — and likely as important, flexibility in working — will be necessary.”

Part of attracting top talent today is being able to effectively address the ever-changing workplace culture. “Continuing to bring more awareness and opportunities to careers in insurance will ensure we can build more sustainable businesses with top talent,” says Harrison. “The way we work looks much different now than it did a few years back, so we are finding ways to connect and engage our robust virtual workforce, allowing them to build a stronger community with peers, develop professionally and perform meaningful work that benefits our company and communities.”

Amy Friedrich, President, Benefits and Protection, Principal Financial Group, notes the importance of investing in workplace culture: “With five generations now in the workforce, combined with work trend shifts, I see employers investing more in their workplace culture than ever before,” she says. “Not only are they considering how they can attract and retain talent through things like their benefits offerings, they are continuously assessing how engaged their employees are and trying out things like hybrid working arrangements to find what works best with their teams. I think we’ll continue to see increased personalization in all facets of workplace benefits offerings in order for employers to cater to the incredibly diverse workforce that we see today.”

The current economic environment is quite volatile, with high inflation, a tight labor market and tighter financial conditions on the minds of many executives. “Economic uncertainties make planning more difficult,” says Gordon Watson, Chairman, AXA Asia. “Hands down, the economy and interest rate environment will impact consumer interest and purchasing decisions across the board, including financial products,” says Paul LaPiana, Head of Brand, Product & Affiliated Distribution, MassMutual.

“Inflation’s impact on expenses will continue to be an area of focus for many insurance carriers, fueling interest in more automation, adoption of AI and scaling efficiencies throughout their respective businesses,” says Harrison. “Higher interest rates will provide some relief for certain product lines and will likely shift the product mix of new business in the industry. At the same time, this will create the possibility of some disintermediation risk for certain in-force blocks of business.”

“From a macroeconomic perspective, there is uncertainty and volatility that will encompass our industry over the next few years,” says Monk. “Impacts from inflation, amidst rapidly rising interest rates, will be key trends we’ll need to manage.”

Change will continue to disrupt the industry, but insurers remain up to the task. “Broadly speaking, I think the pace of change spanning products, services, client expectations and all other facets of life will continue to accelerate and, as a result, impact our organization — and each of our lives,” says Williams-Kemp. “And with each of those changes, we’ll have an opportunity to accelerate our company’s transformation, provided we stay agile, adapt and follow our ultimate purpose: acting in the long-term best interests of the policyowners we proudly serve.”

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