Insurance industry outlook
The financial and insurance industry is currently going through a dramatic transformation. Key in this transformation is the rapid advancements in new technology that feeds new customer behaviour and business needs, and this with an extreme pace of change historically unprecedented.
A high level of availability and transparency is nowadays expected by clients to the European life and pension industry, which is challenging for an industry where the incumbents run their operation based on multiple bespoke systems. For the life insurance and pension industry, the situation today and in the foreseeable future is even more challenging.
Key trends in the European life and pensions industry
- An ageing population in Europe is challenging the current pension system where the working generation of today is paying for the generation of pensioners – pay-as-you-go – becomes obsolete for every year the working generation decreases and the number of pensioner increases. A new system where each generation save for their pension has been introduced in the Nordic countries, Norway the exemption.
- The 2008 finance crises sent shock waves in the whole financial industry. A wave of regulations arised to increase control and transparency, enabling the consumer to understand better what they are buying or investing in. The regulations can be seen either as perpetual hurdles race or as possibilities to ride on the wave benefiting from the new regulations. Our regulatory commitment and collaboration with our customers strive to make them focus on the implementation and further the interpretation of the new regulations and utilise windows of market opportunities.
- The finance crises set the state of the economy in the limelight. Suddenly the pension for pensioner in Greece, Italy, France, Spain and the UK was not that guaranteed as expected by many. The trust for national pension was and is still questioned. Now, enlightened consumers start to realise that they have to acquire knowledge on how the pension system operates and how to invest either in occupational pension or already income taxed earnings.
- The younger generation has another relation to work and retirement. Defined contribution systems let the individuals take the investment risk either to invest them in the traditional life insurance or as unit-linked insurance and invested in target dated funds, or funds provided in fund markets by the insurance companies. This is why Itello is providing extensive and fully automated fund order management functionality in our PAS solution.
- Better informed clients expect aggregated view of their financial savings as well as being able to change their funds, cover or top up their saving to reach a desired financial outcome, direct or via personal or digital advisors. These needs are perfect for digitising but requires the whole pension eco-system to be connected and fully automated. Itello has over the years built a position as a hub in the Nordic pension eco-system. Now also starting several initiatives to provide closed loop functionality within Inca for many of the processes required.
- The Gig economy is reshaping the careers for the younger generation. Shorter employments, maybe all over Europe make it a cumbersome challenge for everyone to get a proper overview of the expected pension. The independent agency minPension has been commissioned to provide pension forecasts for individuals to facilitate the planning of their retirement. Itello has been highly involved in creating a new standard for getting data regarding the occupational pension schemes and calculate a forecast with given parameters and send the result to minPension. Itello has together with our customer, created an emerging standard for making pension forecasts.
The main business principles and promises to be met by the life and pension industry are, in essence, still the same as for the society outlined initially. It is about understanding the customer needs and interacting according to the customer’s choice of preference, providing relevant and appealing products and services as well as being able to deliver those in the preferred distribution channel in hard competition with other suppliers. The challenge and opportunity is to be able to provide this in a continuously and fast-changing digitalised and connected context with the industry-specific challenges outlined above.