No “spring” for the life and pension industry?
One of the realities of the life and pension industry is that the time spans of organizational strategies do not always align with the time spans of the products produced to support those strategies.
The average tenure of a FTSE 350 CEO is around six years, but many insurance products are designed to last 30+ years. The clear conclusion is that the key strategy drivers within an insurance organization often move on before the products designed to support those strategies fully mature.
It’s no secret that the life and pension industry is essentially a long-tail business. Insurers are in the business of protecting and investing for a lifetime. And yet changes – in economic means, legislative requirements, and consumer behaviors and needs – mean that yesterday’s product is not always fit for today’s consumer. In the 1980s, for example, profit endowments were the product du jour, so most insurers sought a product of that ilk.
But the mortgage review and subsequent market reaction meant that it was difficult to sell a profit endowment by the year 2000. And yet those products are on the books today, and they still need to be supported until their maturity dates (sometime in the 2020s!).
This is an inevitable outcome of the simple fact that individual lifestyles evolve over generations, and therefore the insurance products that fit those generations must also evolve. But this puts the insurer in the difficult position of essentially selling one set of products, while supporting several, potentially very different sets of older products. It positions the insurance world in a fundamentally different place from the high street retailer who can simply clear old stock at the end of a season and start fresh in the spring. The insurer’s spring never comes…
How should insurers in the life and pension industry handle this conundrum? Our white paper, Old Co – New Co, show how there are forces inevitably leading towards a logical separation of the new business that an insurer is selling (New Co) and the old books that they continue to support (Old Co). And then we explain how an organization can use new systems, together with best of breed processes, and how its own people can benefit from such a logical separation.
Stuart Hayman, Sapiens senior business consultant, is a successful executive with over 25 years of experience in Life and Pensions. His most recent roles have focused on sales and business development, new contract negotiation and solution design.