The global life insurance and annuity industry has seen massive changes over the past two years. The coronavirus pandemic pushed international interest rates significantly lower than they were during the global financial crisis of 2007-08, causing life insurance stocks to underperform in the rest of the market. These new challenges have forced many life insurance and annuity providers to change their strategies to reach out to their target market. The ongoing pandemic has made clients more demanding and complicated the distribution landscape. An AM Best survey found that carriers are actively changing their distribution tactics to meet these needs. Despite these findings and a renewed focus on life insurance in planning for pandemics, rising inflation may make people think they can’t afford to buy annuity and life products, especially in the middle market. AM Best’s survey highlights of 78 U.S. life/annuity businesses are covered in the “Life/Annuity Insurers Adjust Distribution Strategies to Reach Consumers” Special Report. The survey respondents say that the middle market, which life insurers haven’t been able to reach, is very or extremely important for future growth. This is a lot more than the 70% who said the same thing in a similar 2018 AM Best study. AM Best’s Jason Hopper says that “despite these results and a renewed focus on life insurance’s role in pandemic planning, rising inflation may make it more difficult for a potential customer to buy annuity and life products, most especially in the middle market.” Other highlights from the survey include:
- Almost 60% of people say that speeding up the process of applying, getting approved, and getting a policy is the best way to enter the middle market.
- Managing general agents (MGAs) have become more powerful because the pandemic cut off face-to-face contact and set up internal rules and communication barriers.
- Most businesses were satisfied with their distribution-related innovation activities, with 10% very satisfied and 4% very dissatisfied.
According to the research, top-line growth has been a problem for the life/annuity market for several years, particularly during the pandemic, as evidenced by declines in 2020 direct premiums across all lines except group annuities. The survey results also showed that the major barriers to modernizing distribution and expanding sales are digitalization and the technology expenditures required to improve the customer experience. However, new customer approaches are being evaluated for growth prospects. Despite unanticipated budget expenses during the pandemic, several life/annuity insurers found ways to invest in their distribution capacities to keep up with the changing climate,” stated Michael Adams, associate director, AM Best. A considerable majority of respondents believe they are at least halfway to attaining their goals and are moderately or extremely satisfied with distribution innovation initiatives, indicating that more attention is being paid to reassessing and refining the overall distribution process.
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