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Retailers a ‘threat and opportunity’ for life insurers

Retailers may provide life insurers with a new distribution channel, according to Bravura’s latest Life Insurance Megatrends report.

“Alternative distribution of life insurance is trending globally, with non-traditional firms tapping into the market through partnerships and alliances,” the report says.

“Retailers already have a profound knowledge of their customers and the analytics capability to personalise their product and service offering, representing a substantial threat to established insurers.”

The report says there are opportunities for insurers that embrace these new channels.

“Established insurers who possess the necessary technological and service capabilities will be well placed to enter into lucrative strategic partnerships with these players.”

The industry in Australia is changing as some banks sell their life operations due to low profit margins and increasing compliance. This creates opportunities to buy these life books and turn the operations around.

“For those companies inheriting these ageing books of business, a world of opportunities exists to invest and drive efficiencies to place the business into an advantageous position for the future.”

While buying an old life book is one way of growing, start-ups have the flexibility to innovate, Bravura says. They are free of legacy systems, meaning they can bring new products to market rapidly and at relatively low cost.

Increased regulation will put pressure on life insurers with legacy systems, the report says.

“Older legacy systems are struggling to keep up with the ongoing reforms, with many requiring heavy investment in piecemeal solutions to ensure they remain compliant.

“The catch-22 of regulatory change is that it creates a need for flexible systems but interferes with the actual ability to implement them – particularly where several legacy systems run concurrently.”

Bravura says system development associated with regulatory compliance has occurred at the expense of product development.

“Each new piece of regulation only necessitates further investment in these already complex systems.

“To enable regulation to be efficiently accommodated, systems need to be easily configurable so changes can be implemented quickly with limited costs, so resources can be better targeted to more productive developments.”

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