Transforming Life Insurance

in Financial Services, 25.02.2015

Recent discussions with leading figures in the life insurance industry showed, how companies here are responding to a market characterized by increasing regulatory pressures (the reform under Altersvorsorge, FIDLEG, to name just two) and low interest rates. While it is clear that political lobbying is core to the CEO’s job description, encouraging a change in mind-set among insurers’ workforces has to be integral as well – a mind-set change that could be summed up in the phrase customer-centricity. Of course the often discussed digital revolution is an enabler here, but equally important is the management challenge of getting workforces to think in terms of customer needs – be it fast and efficient claims handling, be it products developed by salespeople and not just actuaries for customers, be it finding touch-points to keep customers up to date with a company’s product offerings, serving them throughout their lives not just at moments of stress or financial and family change.

Building and maintaining trusted relationships are critical for all the incumbent life players in the Swiss market – I think the building has been taking place over many decades, the importance of maintenance is just now coming to be appreciated, as industry players think about the possibility of technology-enabled disruptors coming into the market.

Observers have commented at length on the impact of the appreciation of the Swiss Franc against the Euro and other major currencies. While the media concentrated on the dramatic shifts in exchange rates, it might be that the continued fall in interest rates has a greater influence – at least on life companies’ results, solvency and business models, and especially for those companies exposed to interest rate guarantees that must have seemed affordable 25 years ago. For those who believed that discount rates, guarantees and asset-liability management are best left to a select group of actuaries, this was another reminder that stubbornly low interest rates are a Board topic.

Of course, these macro-economic shifts will affect companies in different ways, and we are beginning to see this in the disclosures that companies are making in their 2014 annual statements (exchange rate sensitivity tables were rarely so interesting!). I wanted though to highlight one topic. Insurers seeking to innovate and keep close to customers will need to invest in people and systems – but those companies that are part of international groups now face two issues: IT and similar developments are more likely to be diverted away from Switzerland due to the increased costs in non-Swiss Franc terms. And it is becoming increasingly difficult to hire temporary support into Switzerland because of the quota arrangements for work permits – the first quarter 2015 L-permit quota for assigned EU nationals was already exhausted in the middle of February. These are further challenges facing life company executives eager to build for the future.

 

 

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