Life insurance companies must refocus on their strategic strengths amid technological disruption, regulatory changes and eroding public trust, according to PwC.

Customer profiles are changing as older generations retire and Millennials come to dominate the workforce, it says in a report on the future of life insurance in Australia.

Millennials expect a smooth digital experience and are accustomed to online transactions.

They are highly educated and care about a company’s social impact, PwC says.

Life insurers that want to focus on the Millennial market must consider significant infrastructure investment and a rethink of the customer experience. A focus on digital experience may lead to lower operating costs long term.

New technologies and increasing penetration of wearable health-tracking devices will shift insurers’ focus from managing risks and processes towards digital capabilities, data and analysis, according to the report.

Non-traditional players are already looking to use technological advances to create more valuable customer propositions and efficiency.

Incorporating digital customer-focused solutions, based on analytical models, will be key to building sustainable businesses with a Millennial-dominated customer base, PwC says.

The report says trust has been eroded significantly: 78% of Australians believe insurance is important, yet only 42% believe their insurer will be there for them in a time of need.

Rebuilding trust is critical to encourage people to take up life insurance.

Regulatory oversight will intensify as governments focus on conduct in addition to financial risk. This will lead to increasing compliance costs for insurance companies, PwC says.

Upfront sales commissions for life insurance, which have already been capped, are being progressively lowered until 2020.

Industry bodies such as the Financial Planning Association and the National Insurance Brokers Association have suggested changing standard product definitions and eliminating exclusions from fair contract provisions.

Insurers must have clarity about where they sit in the market, and build the capabilities necessary to attract clients in their segment, the report says.