In many ways, the life insurance and annuities industry is on more solid footing entering 2015 than it has been in a long time. As the US economic recovery gains momentum, unemployment is falling and consumer confidence is on the rise, creating a more conducive environment for carriers to market their products and services. Discover the bigger picture issues likely to have a significant effect on life and annuity insurer operations in 2015 and beyond. Read the full report here: http://www2.deloitte.com/us/en/pages/financial-services/articles/2015-life-insurance-and-annuity-outlook.html

1. 2015 Life Insurance and Annuities Industry Outlook
Taking the longer-term view
In many ways, the life insurance and annuities industry is on more solid footing entering 2015 than it has been in a long time. As the US economic recovery gains
momentum, unemployment is falling and consumer confidence is on the rise, creating a more conducive environment for carriers to market their products and
services. Discover the bigger picture issues likely to have a significant effect on life and annuity insurer operations in 2015 and beyond.
Transforming for growth
The L&A industry is overdue for a
reinvention, given historic lows in
individual life insurance ownership
and ongoing misunderstandings
about annuities. Carriers need to
rethink how they interact with
consumers to achieve more consistent
growth. They should consider:
• More innovative business models,
policy designs, and marketing
approaches
• Developing more precision around
who the consumer is and specificity
with regards to their needs
• Fostering a more educated
insurance consumer market,
facilitating a shift from products
that have to be aggressively sold to
those that are actively sought out
by new buyers
Bottom line: Rebrand the business to
emphasize insurers not just as product
sellers, but as a long-term partner on
which consumers can count to help
them meet evolving financial needs
over time.
Addressing longevity risks
Longer life spans and fewer defined
benefit plans will prompt more
consumers to seek out new lifetime
income options, as well as solutions for
related problems such as long-term care
financing. Carriers should consider the
following:
• Demographic and economic trends
could make longevity protection the
industry’s biggest growth opportunity
• The risk’s long-tail and investment
market uncertainty could make
longevity the industry’s biggest
challenge as well
• Carriers will need to carefully
consider how they design, model,
and distribute longevity products to
meet economic targets and reduce
downside risk over the long term
Bottom line: Longevity insurers should
stay engaged with the customer to
manage expectations and product
features as mortality trends play out,
rather than just treat longevity policies as
a one-time product sale and hope their
assumptions turn out to be profitable.
Achieving information
fluency
Data is the life blood of LA
insurance, yet many carriers are
suffering from a hardening of the
arteries. The full value of data is
rarely optimized by insurers because
information often remains isolated
in siloed, legacy tech systems and
operating structures. To make data more
fluent throughout their organization,
insurers may want to consider:
• Making information more easily
accessible and translatable across the
enterprise
• Strategically transforming the way
they amass, store, define, govern,
analyze, and disseminate information
• Turning proprietary information into
a strategic asset and competitive
advantage.
Bottom line: While many carriers may
be information rich, all but a few will be
knowledge poor until they revamp how
they process new types of information
from emerging sources, while better
capitalizing on the wealth of data
already in their systems.
Overcoming regulatory
challenges
Insurers can rely on regulatory
uncertainty as an ongoing way of life
rather than a passing conundrum as
multiple overseers — state, federal, and
international — sort out new standards
and rules. LA insurers will want to
look out for:
• The potential for new group capital
requirements
• The first Own Risk and Solvency
Assessment filing
• The fate of life insurer-owned
captives in the face of increasing
regulatory scrutiny
Bottom line: It may be time for
insurers to consider compliance
transformation, to facilitate the
ongoing process of planning for
change, and create value from
mandatory regulatory exercises.
Upgrading capital
management
LA insurers will need better frameworks
and models to meet the increasing
demands of stakeholders for more robust
stress testing and scenario planning, as
well as to support growth needs. Carriers
may want to think about:
• How to maintain, let alone improve
ROE at a time of persistently low
interest rates
• Establishing a more robust internal
risk-adjusted capital framework that
incorporates a multitude of approaches
• How advancements in modeling
technology have made projection of
capital requirements and understanding
of the intersection of different capital
frameworks more manageable and
efficient
Bottom line: A growing number
of insurers will look to follow the
lead of other financial institutions by
implementing an internal risk-adjusted
capital adequacy framework that accounts
for economic as well as regulatory factors
under one integrated system.
As used in this document, “Deloitte” means Deloitte LLP and its subsidiaries. Please see www.deloitte.com/us/about for a detailed description
of the legal structure of Deloitte LLP and its subsidiaries. Certain services may not be available to attest clients under the rules and regulations
of public accounting.
Copyright © 2015 Deloitte Development LLC. All rights reserved.
Member of Deloitte Touche Tohmatsu Limited