Life insurers must focus on products that reduce volatility for
TORONTO, Feb. 5, 2014 /CNW/ - Despite signs of improving market
conditions on the global scale, a new EY report suggests - in Canada's
continuing low interest rate environment - life insurers should be
focusing on their product offerings to make up for subpar yields, while
giving customers what they want and spurring growth.
"During the downturn, most insurers reviewed their existing product
portfolios to re-price or eliminate their high-risk, capital-intensive
and low-margin products," says Doug McPhie, EY Partner and Canadian
Insurance Leader. "Now, even though we're seeing signs of market
improvement, they're continuing to focus on growing non-traditional
areas that are lower risk and less capital intensive, like savings- and
The 2014 EY Canadian life insurance outlook notes that in order to improve profitability, companies must continue
to focus on asset and wealth management, while developing more
innovative, attractive products for consumers.
"Being product-oriented will help to limit insurers' capital and
economic exposure," explains McPhie. "And it's a win-win, because it
also helps them better deliver the services their customers want."
McPhie adds those insurers that are growing their top-line are focused
on marketing simpler, flexible products with clear, comprehensive value
"Whole-life and term-life insurance continue to be popular with
consumers because they're products that are fairly easy to understand,"
He suggests companies also harness their creativity to improve
profitability through things like better tax strategies and sales force
In addition to maximizing the return on improving market conditions,
EY's report advises insurers also need to focus on the following to be
successful over the next year:
Harness the power of digital technology and big data to improve underwriting, reduce costs, analyze consumer behaviour and
Address changes in the consumer demographic landscape to capitalize on market opportunities.
Position the business for regulatory and accounting change, using the opportunity to improve things like modeling capabilities,
data quality and governance.
"Canadian life insurers remained relatively robust throughout the
economic downturn by focusing on the fundamentals. Now, with signs
economic conditions are improving on the global scale, those companies
here in Canada with strong, comfortable capital positions and a
creative, product-focused mindset will be well-positioned to return to
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SOURCE: EY (Ernst & Young)
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