To improve profitability and value of life insurance products, life insurers have been effectively leveraging reinsurance and capital markets by transferring longevity risk exposures, according to Swiss Re’s latest sigma report.
Reinsurance and capital market solutions have made life insurers more competitive, improving profitability through reducing mortality, morbidity and longevity risk exposures.
By transferring risks to reinsurers or capital markets, life insurers free up trapped capital, reduce reserves, and improve value of future profits.
The report notes that life insurers have become increasingly focused on improving customer experience for existing business, as opposed to emphasising growth of their customer base.
Reducing operational costs by updating database portfolios has been a further key growth area for reinsurers looking to improve consumer relationships.
“Providers have increased their emphasis on customer engagement and tailored add-on services such as prevention, disease management, and rehabilitation.
“Traditionally, life insurers have focused on growing new business, but many are currently paying increased attention to enhancing the value of existing portfolios.
“To do so, they are applying different levers for a more effective management of in-force books (ie, existing business) with the aim of increasing customer satisfaction. For example, insurers use new technologies to detect issues and trends early on,” said Swiss Re.
Swiss Re’s Chief Economist, Kurt Karl, added; “New technologies such as wearables can be used to strengthen customer engagement and incentivise policyholders to help monitor and ultimately manage their own health status.”
Insurers have placed a renewed emphasis on cultivating stronger relationships with existing policyholders, steering consumers toward products that are more tailored to specific needs and improving claims management processes.
“Operational inefficiencies are often driven by legacy IT systems, overly-complex business plans and inefficient operating models,” Swiss Re said.
However, as firms learn to incorporate data analytics and Artificial Intelligence (AI), they’re becoming more efficient at managing existing portfolios, and this combined with effective capital management with reinsurance risk transfer is all ultimately working to help facilitate lower premiums and drive competitiveness.