Major forces reshaping the life insurance and retirement market have been identified in EY’s latest NextWave Insurance paper.

The low interest rate environment means product-driven business models of the past cannot keep up with evolving demand, and so insurance companies must “redefine their role with innovation at the forefront” if they want to be successful, EY stated.

The professional services company has highlighted what it said are six megatrends defining the next wave of life insurance and retirement.

David Brown, senior partner at EY Bermuda, and regional insurance leader, said: “Success in the next decade and beyond requires thoughtful action and consideration from insurance companies. Consumer expectations have been evolving for some time, and Covid-19 further accelerated these expectations, identifying gaps for insurance companies. To meet these demands, the appetite for operational and technological transformation has increased tremendously.”

According to EY’s megatrends report, some 40 per cent of young people who are Millennials or ’Generation Z’ (born from mid-1990s to 2012) expect financial, health and wellness guidance from their insurer. EY said insurers and retirement planning companies will need to make offerings that are more flexible, forward-looking and goals-based, and reflect that more people work for themselves of participate in the gig economy.

EY also found that when determining investment decisions, 98 per cent of institutional investors evaluate a company’s stance on global challenges and societal issues. It said such things as intellectual property, talent, brand reputation, innovation and ESG impacts [environmental, social and governance], now carry greater weight.

Another megatrend is the need for collaboration between insurers, governments and regulators in the face of underfunded government and retirement programmes and intense regulatory security, such as around data security.

Technological advances, creating ecosystems and omnichannel engagement with the applications programming interfaces, and microservices, will also be critical for success in the future, according to EY.

Mergers and acquisitions and reinsurance will be important as the sector deals with low interest rates and competitive factors. EY expects sector convergence to accelerate among life and health insurance, retirement planning and wealth and asset management.

The sixth megatrend EY identified is commoditisation and customisation, noting that consumers perceive value through rich experiences and trust-based relationships, and that insurers can use technology to combine simpler components into “personalised solutions”.

Chris Maiato, principal at EY Bermuda and regional consulting leader, said: “With today’s economic, technological, and societal shifts amid the global pandemic, insurance leaders must be prepared for immediate change, new challenges, and opportunities. The trends uncovered in this report will help insurance companies reposition themselves for the future, with a focus on tomorrow’s consumer and their priorities.”

The full report can be found on EY’s website at https://go.ey.com/2HTFiBJ