Global Retirement Services SurveyConsumers see the light asretirement shortfall loomsPensions crisis an opportunity foremb...
Strong demand for retirement services –but are life insurers ready to respond?The conventional wisdom explaining the relat...
As the world slowly comes to termswith the damage caused by the sub-prime mortgage debacle, many financialanalysts are war...
Accenture research finds consumersare ready and willing to actIn order to gain a clearer understanding of what people     ...
Figure 2To what extent will you need to self-provide for your retirement?98%        97%       97%      96%       96%      ...
While 95 percent are willing to put aside           In addition to any public pensionmoney for their retirement, the amoun...
While consumers all over the world          universally – only in the US, India andhave always been slow to save for      ...
To obtain the information they seek,                  brokers (61 percent), banks (58 percent)most people (51 percent) wou...
A huge opportunity for insurers,but how to unlock the potential?There can be no doubt that a dramatic opportunity has aris...
Segmentation: the keyto effective engagementAlthough wealth is used by many insurers as the predominantcustomer segmentati...
However, many insurers have taken the         acquiring the abilities that are neededconcept further, matching their produ...
1 Complex needs, customized adviceInformed by a richer, more sophisticated segmentation thanwealth tiers alone, the likeli...
Innovation will play a key role in empoweringadvisors, thereby raising both the efficiencyand effectiveness of advice-led ...
2 Diverse needs, scaled adviceMost insurers acknowledge that there is currently littleperceived differentiation in product...
New approaches to product development are alsohelping to unlock the potential in this segment, bycoming up with relevant f...
3 Simple needs, advice on savingIn future years, much of the growth can be expected from thelarge number of consumers who ...
Innovation will play a big role in keeping pacewith a rapidly evolving market and achievingclear differentiation:•  A digi...
A new approach for a new marketReports have warned that certain state and employer fundsare in danger of having insufficie...
But insurers must share the blame.          sectors, but will focus most of their fire-    from independent advisors toAs ...
Authors                                     About AccentureMark Halverson, Global Distribution Lead,   Accenture is a glob...
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Global Retirement Services Survey: Consumers see the light as retirement shortfall looms

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More than four out of five people (82 percent) are worried about their financial situation after retirement and almost nine in ten people (89 percent) say it is important for them to start saving now, according to a this global Accenture survey of more than 8,000 people from 15 countries.

The survey also reveals that more than half (53 percent) of the respondents believe they lack the necessary information to prepare for retirement and the financial capacity (57 percent of respondents) to invest in private pension.

Highlights of geographical differences

Compared to the global average of 82 percent, Britons, Germans, Australians and Americans are the most optimistic with 65 percent, 66 percent, 69 percent and 70 percent of respondents respectively who say they are worried about their financial situation after retirement. South Koreans (95 percent), Mexicans (92 percent), Russians (92 percent) and Spanish (91 percent) are the most pessimistic.

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Global Retirement Services Survey: Consumers see the light as retirement shortfall looms

  1. 1. Global Retirement Services SurveyConsumers see the light asretirement shortfall loomsPensions crisis an opportunity forembattled life insurers – if they canrespond effectively
  2. 2. Strong demand for retirement services –but are life insurers ready to respond?The conventional wisdom explaining the relatively lowpenetration of retirement products is that consumers arelackadaisical when it comes to providing for their old age.Accenture’s latest Global Retirement Services Survey1shows, on the contrary, that they are fully aware of the riskof outliving their income and are ready now to invest. Theproblem for life insurers, it seems, lies instead with theirproducts, their distribution and their reputation.This report presents the findings of the survey, and discussessome of the implications for insurers. It examines the needfor more sophisticated segmentation, and for products,advice and engagement strategies which are more relevantto the respective customer segments. Not all insurers willhave the capability, or the appetite, to compete across thefull spectrum of the market and across all functions — weconclude by exploring the kinds of specialization whichare likely to become more prevalent.1
  3. 3. As the world slowly comes to termswith the damage caused by the sub-prime mortgage debacle, many financialanalysts are warning that an evengreater economic threat is looming:the massive shortfall in funding forworkers’ retirement.In the US, consumers and governmentorganizations would need to add $6.6trillion to their existing funds to allowpensioners to maintain their standardof living2. A report commissionedrecently by the European Central Bank3states that across 19 of the EU nations,state-funded pension obligations totalapproximately €30 tn ($37 tn), aboutfive times more than their combinedgross debt.Commentators and industry playershave long lamented that consumerseither don’t understand the need tosupplement the public or employerpensions which they may expect toreceive, or believe they have more thanenough time to save. But it seems theyare turning back from the brink: acrossthe globe, they recognize they urgentlyneed to take individual responsibilityfor their retirement, because delegatingit to someone else will leave them shortof the mark.Life insurers are the traditional providersof advice and products for the retirementmarket, but the indications are thatconsumers are turning to others for help.The big questions are: what do insurersneed to do to assert themselves as thepreferred provider, and are they up tothe challenge? €30 tn €6 tnMany countries are struggling to meettheir public pension-fund commitments. State-funded pension obligations of 19 EU nations3 Combined gross debt of these nations 2
  4. 4. Accenture research finds consumersare ready and willing to actIn order to gain a clearer understanding of what people Figure 1think about the retirement crisis, and their intentions 82% of respondents are worriedto make provision for it, Accenture recently carried out a about their financial situationsurvey1 of more than 8,000 consumers in 15 countries. The after retirement. 82%study found that 82 percent are worried about their post-retirement finances, and 57 percent believe their standard ofliving will drop when they stop working (Figure 1). However, 18%the overwhelming majority appreciate the problem and areprepared to address it without delay.Ninety-three percent realize they are varying levels of self-reliance differreliant, to a greater or lesser degree, on from country to country*, but the impacttheir personal savings and investments is similar: state and employer schemes(Figure 2). This is most strongly felt in in many parts will fall short of meeting Most consumers believe theirIndia, where 52 percent of respondents people’s needs. standard of living will dropare totally reliant on their own resources, Sixty percent of those interviewed when they retire. 13%followed by those in Russia (36 percent),Mexico (34 percent) and the US (30 recognize the need to increase their levelpercent). At the other end of the of savings to meet their financial needsspectrum, only 12 percent of Poles, when their employment income ceases14 percent of Brazilians, and 18 percent (Figure 3). The figure should probably be 30%of Chinese and Britons believe they are higher, as 67 percent admit they do noton their own when it comes to financing know how much they should be savingtheir retirement. The reasons for the now to maintain their standard of living when they quit working. 57% Only 29% believe a government scheme will allow them to maintain their standard of living. 29% 71%* The Accenture Global Retirement Services Survey provides detailed country-specific data. This iscomplemented by our Pensions Maturity Index, which evaluates the opportunities for insurers by ratingthe maturity of the different countries’ pension funds as well as the presence of insurance companiesin the respective retirement markets.3
  5. 5. Figure 2To what extent will you need to self-provide for your retirement?98% 97% 97% 96% 96% 95% 95% 94% 94% 93% 93% 93% 91% 90% 89% 12% 85%23% 24% 18% 14% 21% 27% 25% 18% 34% 25% 18% 36% 30% 52% 26% 40% 38% 54% 45%52% 41% 46% 58% 44% 45% 27% 61% 48% 42% 41% 35% 42% 36% 28% 30% 28%23% 25% 23% 25% 25% 19% 18% 18% 10% 12% 14%Japan India South Mexico Italy France China Spain Poland Russia AVG Brazil Germany US UK Australia Korea I am totally reliant on my personal investments My personal investments must cover more than half of my financial needs My personal investments must cover less than half of my financial needsFigure 360% do not believe that their current How much are you willing to invest for your retirement?level of investment will be sufficient Percentage of respondents’ pretax monthly incomefor retirement. South Korea 27.5% 16% China 24.2% India 22.9% Brazil 19.8% 60% Italy 18.3% USA 17.5% 24% Mexico 17.3% Average 17.2% Australia 16.2% Japan 14.4% Germany 14.0% Spain 13.6% Russia 13.5% Poland 13.2% UK 12.2% France 11.2% 4
  6. 6. While 95 percent are willing to put aside In addition to any public pensionmoney for their retirement, the amount schemes or employer funds from whichdiffers considerably. Approximately they may benefit, 29 percent of allone in two respondents would allocate respondents have private investmentsbetween 1 and 10 percent of their aimed specifically at addressing theirpre-tax income, 23 percent would go as retirement needs. Thirty-two percenthigh as 20 percent, and about the same have no such investments, but plan tonumber would be prepared to invest remedy this in the next three years. Themore than 20 percent. The preferred two reasons most commonly offered forvehicle (Figure 4) is a bank or savings not having invested are unaffordabilityaccount (64 percent include this among (57 percent) and conflicting investmenttheir top three options) followed by a priorities (49 percent). In third place,private investment (45 percent) and real at 27 percent, is “I wouldn’t know howestate other than their primary residence to go about setting up a retirement(30 percent). investment.”Figure 4How do you plan to personally address your retirement needs?Included within top three choicesSave money in a bank or savings account 64%Invest in a private retirement product 45%Invest in real estate other than my home 30%Buy my home 29%Invest in a life insurance product 29%Invest in a pension provided by my employer as part of my employment contract 27%Invest in stocks & bonds 27%No real plan yet 16%5
  7. 7. While consumers all over the world universally – only in the US, India andhave always been slow to save for China do the majority of people believetheir retirement, the rising clamor they have adequate information aboutaccompanying the pension shortfall crisis steps they can take and products thatseems to have spurred many of them, at might address their needs.the very least, to begin contemplating anapproach to saving. However, few have a When it comes to the role of lifeclear idea of how best to proceed. insurers, only 14 percent say they have a good awareness and understandingThe reason could be that they are of insurance companies’ retirementpoorly served with information about products (Figure 5). This is hardlytheir choices and the amount they surprising, as only 39 percent have everneed to save. Fifty-three percent of been contacted by an insurer to discussrespondents say they lack the necessary saving for their retirement, and only 32information and understanding of the percent by an independent advisoroptions available to them as they plan or broker.for retirement. This applies almostFigure 562% have little awareness of Why do you have limited or no awareness of life insurers’ retirement products?retirement products offered bylife insurance companies, and I have never received simple information24% have none. on retirement from any life insurer 45% 14% No life insurer has ever approached me to discuss retirement options 20% 62% I cannot recall any advertising by life insurers about retirement 18% 24% None of the above / Don’t know 17% 6
  8. 8. To obtain the information they seek, brokers (61 percent), banks (58 percent)most people (51 percent) would approach and comparison websites (57 percent).an independent financial advisor orbroker. Friends and family (44 percent) In the midst of these blurred perceptions,come next, followed by life insurers (41 insurers do have an inside track. Theypercent) and banks (39 percent). No rank above all their competitors for theirfewer than 84 percent would consider wide range of retirement products, thethe recommendations of others on social sophistication and innovativeness ofmedia sites. these products, and for having a solid brand reputation in the retirementHowever, they are less sure about the market. The latter is particularlytype of institution or advisor they would important, as 82 percent of respondentsturn to for help in actually setting up who have purchased a retirementtheir investment product (Figure 6). product say they were influenced byThere are four leading contenders: the brand strength of the financialinsurance companies (61 percent include institution. For 51 percent this wasthem in their top three choices), financial their most important criterion.advisors, insurance brokers or stockFigure 6Who would you contact to help you set up a retirement product?Life insurance company 61% 17%Independent financial advisor or stock/insurance broker 61% 23%Bank 58% 18%Price comparison website/aggregator 57% 21%My employer 26% 8%Don’t know 13% Included in top three choices First choice7
  9. 9. A huge opportunity for insurers,but how to unlock the potential?There can be no doubt that a dramatic opportunity has arisenin the retirement sector. The need is real, and customersrecognize it. If there is a constraint on the side of thecustomer it is, in the majority of cases, one of affordabilityrather than a reluctance to invest. The other obstacles – lackof awareness and understanding of retirement products, andconcern about the safety of their money – are issues whichinsurers need to fix. The ball is in their court.Life insurance products are traditionally Insurers need to recognize theviewed as having to be sold, rather than opportunity, as well as the fact thatbought. This is despite the fact that for it won’t fall into their lap. Customers’those customers who have spent the requirements, preferences and behaviormost on their products – their high-net- have changed radically over the past fewworth customers – this distinction is the years, rendering old, proven strategiesweakest. Not only do they often initiate and business models obsolete. Crudethe purchase of insurance and retirement segmentation based solely on customerproducts, but they also buy the advice wealth, and generating half-a-dozenwhich accompanies them. strategic segments, is dead. The notion that a single set of back-end operationsHowever, the majority of customers will is sufficient to address the entire market,not or cannot afford to buy advice. They with only different veneers neededfind the array of retirement products for different customer segments, is aand offers bewildering, and the products fallacy. Certainly the sales channels,themselves complex. And as our research the treatments and the types of adviceshows, insurers have generally failed to which are effective for all of thereach them with product information segments which make up the retirementand guidance. It is no surprise that the market will vary. The products, theproducts are not being “bought”. underlying operations and the cost base too will be very different.In the meantime, new competitors arecircling. Banks and investment advisors Insurers must decide whether theyare chipping away at insurers’ market have the capabilities and the appetiteshare. Unlikely entrants are coming up to pursue the opportunity. If they do,with unconventional products to help they need a clear growth strategy whichconsumers provide for their retirement – begins with sophisticated, nuancedan example is the tax-free ISA (individual segmentation. Because the approachsavings account), in the UK. Leaders they take, and the mindset, the operatingin other sectors are partnering with models and the infrastructure they need,insurers to leverage their combined will be profoundly influenced by thestrengths. And new technologies, segments they pursue.such as price comparison services, areenabling the more responsive carriers todramatically increase their market share. 8
  10. 10. Segmentation: the keyto effective engagementAlthough wealth is used by many insurers as the predominantcustomer segmentation variable, its usefulness is diminishingas customers demand more relevant, personalized interactionand services. At the highest level of segmentation, it remainsan important predictor of the types of products and serviceswhich are likely to be required. It also enables insurers todifferentiate between those who are able to invest sufficientlyfor their retirement, and those for whom affordability is aconstraint. The former need advice on how best to invest,while the latter need help managing their finances to makeit possible for them to save.9
  11. 11. However, many insurers have taken the acquiring the abilities that are neededconcept further, matching their products to treat multiple customer segmentsand their treatment strategies to five or differently, to measure the effectivenessmore wealth tiers. They will have found of each treatment, and to continuouslythat the approach has its limitations – adapt them to build on past success.someone earning $300,000 a year mayvery well want the same treatment and The task is too ambitious to beproducts as one who earns $1 million, undertaken manually; what is requiredwhile two customers earning the same is an industrialized experience engineamount may want very different things with strong analytic and predictivefrom their insurer. modelling capabilities. In addition to the normal customer data whichOther factors, such as the source of insurers collect, the engine would utilizewealth, lifestyle and behavior, life stage, external consumer data, and moredemographics and psychographics have personalized, impressionistic data whichproven to be more reliable predictors of agents would provide to flesh out theirwhat customers want and how they like customer profiles. A constant streamto be treated. Customers’ investor style of hypotheses would be generated,– whether they are self-directed, prefer proposing offerings and actions acrossto validate the advice they receive or are the spectrum of segments. Agents wouldhappy simply to delegate the task – has need to personally reconfigure theira big impact on the way relationships approach for every customer, combiningshould be managed. When all of the their individual sales technique withrelevant attributes and their values are the prescribed treatment for thefactored in, it is likely that well over relevant segment. And as always, the50 distinct segments will emerge. The key to this test-and-learn method isquestion is: what can anyone do with that the success of every engagementthis level of granularity? would be measured and fed back into the experience engine so that theLearning from online retailers segmentation and the recommended treatments could be evaluated andInsurers need to take a page out of further refined.the online retailer’s book. The most While customer wealth defines twosuccessful businesses optimize their broad sectors – those who have amplewebsite on a daily basis, making subtle means to provide for their retirement,changes to their product offering, their and to pay for advice, and those forwording and their page layouts, and then whom affordability is a constraint –measuring the impact of each change. when other factors are considered itInsurers operate in a more physical, is useful to divide this analysis intoface-to-face world, but they too need to three basic market segments: those withmove away from the inside-out approach complex needs who require customizedof imposing certain treatments on advice, those with more common needscustomers because these are what they who require scaled advice, and thoseare capable of. An outside-in approach with simple needs who require adviceimplies, firstly, gaining an understanding on how to save their money.of what customers prefer, and thenFigure 7Complexity of needs is a useful way of viewing the retirement market Customized1 Complex needs High Paid investment advice Wealth accumulation Configured2 Diverse needs Medium Product selection advice Balanced insurance/investment Standardized Embedded product advice3 Simple needs Low Insurance How to afford to invest 10
  12. 12. 1 Complex needs, customized adviceInformed by a richer, more sophisticated segmentation thanwealth tiers alone, the likelihood is that insurers’ retirementproducts, and the advice which accompanies them, will forma spectrum ranging from complex and highly personalized tosimple and commoditized.In developed economies, the complex Within the top end of the personalend of the market is well catered for and market, insurers will enhance theirreasonably fully exploited. In emerging customized advice to achieve a favoredmarkets, the rapid growth of the middle position with their customers. The nextclass and the creation of many new step is to create a social network ofmillionaires have created strong demand “others like them” who share commonfor expert investment advice and suitable interests beyond retirement planning,products. Across the globe, this broad such as art collection. An ecosystemsegment contributes a significant share of specialist providers will engageof insurers’ and their agents’ revenue, the network, informing the members’which is why the competition for these interests and offering to help meetvaluable relationships will always their needs. The hub of this brokeringbe intense. It is also why there will mechanism – which has been usedcontinue to be a demand for innovative, effectively in the private banking andcustomized products that require a high family office sectors – will be thelevel of technical excellence. insurer. Together this group of providers will seek to satisfy a higher and higherThis is true not only for carriers which percentage of the customer’s needs, intarget individual customers, but also effect becoming a collective “life coach”.those serving the commercial sector: An important priority for the insurer,taking over employers’ defined-benefit as a valued source of information andschemes. In this case their success expertise, will be to monetize its abilitydepends largely on their longevity risk to own relationships.management tools and experience. Theyalso need specialized account teamswhich can handle complex negotiationswith their corporate customers, andpension advisory teams which canprovide an ongoing consulting serviceto the pension fund members.11
  13. 13. Innovation will play a key role in empoweringadvisors, thereby raising both the efficiencyand effectiveness of advice-led distributionin this segment:•  The well-established face-to-face sales model willincreasingly be replaced or complemented by the latestcollaborative and other technologies such as online, mobile,social, chat, tablets and call center video, all designed to helpthe advisor be where the customer is while balancing thewisdom of the expert with the wisdom of the crowd. “Find theexpert” locator tools can help advisors find and communicatewith the appropriate specialists, irrespective of where they arebased. A variety of other technologies can be used to bringspecific expertise to the sales situation earlier, provide instantanswers to customer concerns, overcome objections on thespot, and advance the opportunity to a quicker decision.•  The advent of the experience engine will have a profoundeffect on insurers’ marketing departments. The traditionalcreative brand-promotion teams will need to be supplementedwith hard-nosed number crunchers who can analyze thesegmentation and treatment data, recommend refinementsand track their impact. Managing these disparate groupswill be a challenge.“Find the expert” locator tools can help advisorsfind and communicate with the appropriatespecialists, irrespective of where they are based. 12
  14. 14. 2 Diverse needs, scaled adviceMost insurers acknowledge that there is currently littleperceived differentiation in product. This is confirmedby Accenture’s research4, which found that 75 percentof consumers think all insurers offer basically the sameproducts and services. The perception is likely to becomeeven more widespread in those segments where simpler,more commoditized products are becoming the norm. Thishighlights the importance for insurers of distinguishingthemselves through an actionable understanding ofcustomers, relevant advice, a superior customerexperience, and a strong brand.Consumers in the mid-market or mass- Banks have succeeded in doing so, byaffluent sector have the disposable utilizing customers’ account data to gainincome to invest for their retirement, an understanding of their circumstances.but have generally been poorly served An experience engine with a strong databy insurers. As the research shows, the collection and analytic capability wouldmajority have no relationship with an give insurers the insights into individualagent, have only a vague idea of the customers that would enable them toretirement products they offer, struggle develop meaningful recommendations.to understand the information relatingto these products, and therefore lack Insurers could also secure agreementsthe confidence to choose between them. with corporations to address the adviceFar more than the wealthy who retain gap in the workplace. Direct accessadvisors, and those who struggle to find to employees, to advise them on theirthe money to save, these customers are options for tackling their pensionprevented by the advice gap from buying shortfall, would be a cost-efficientinsurers’ products. channel providing wide reach and the opportunity to engage frequently withThe challenge for insurers is to find prospective customers.cost-effective ways of closing the gap.13
  15. 15. New approaches to product development are alsohelping to unlock the potential in this segment, bycoming up with relevant features which overcomecustomers’ constraints:•  Insurers are looking at ways to increase the level of annuitywhich a customer’s retirement assets can buy, by includingunconventional assets such as the paid-off portion of a homemortgage. They are also improving their understanding of risk,making it possible to introduce products such as impaired lifeannuities for customers with chronic illness or disabilities.•  Social media is an unstoppable phenomenon which canhave a powerful influence on insurers’ brand reputations andcustomer selections. Consumers are using it to make senseof the deluge of arcane information confronting them on theWeb and elsewhere – Nielsen5 reports that 70 percent trustrecommendations posted online by people they have never met,while 90 percent trust the opinions of those they know. As theirimpact is unlikely to diminish anytime soon, insurers shouldurgently develop the ability to track and manage exchangeswhich affect their brand, and explore novel ways of engagingconsumers in a discussion about the impact of the pensionscrisis on the individual. Their ability to package and presentadvice which incorporates both the wisdom of their expertsand the wisdom of the crowd will be key to the reach, theongoing credibility, and ultimately the success of their agents.•  After social networking, gaming is the most popular onlineactivity. A number of insurers have already discoveredhow powerful an educational tool it can be, and howeffective it can be in establishing strong customer bondswhich are both rational and emotional. Games or lifesimulations can capture the imagination of consumers,allowing them to enact highly personalized scenarios thatprovide fun over an extended period, and at the same timecompile the data needed to calculate their retirementneeds and to explore options for addressing them.70% of consumers trust 90% trust the recommendationsrecommendations posted online of people they know.by people they ’ve never met. 14
  16. 16. 3 Simple needs, advice on savingIn future years, much of the growth can be expected from thelarge number of consumers who might have expected publicor employer schemes to take care of them. They acknowledgea serious shortfall in the provision for their retirement, andhave expressed the intention to initiate or increase theirinvestments. However, they are constrained by a lack ofdisposable income. But even if they could afford insurers’products, and were able to evaluate them, they would likelyfind them poorly suited to their needs and difficult to buy.To compete for these customers, insurers developed to provide personalized,will have to create simple, cost-effective complex advice, are unsuited to thisproducts which are easy to explain and and militate against the productsell. Ideally, they would include some ever being “bought”.form of protection against marketvolatility – such as a guarantee that The delivery of basic, inexpensivethey will always be worth more than products depends on efficient processes,the sum of the contributions; as well standardization and scale. Most carriers’as a no-regrets feature – the ability to business and operating models doswitch without being penalized should not lend themselves to creating andtheir circumstances change or they distributing mass-market products. Onediscover they have bought the wrong solution is the collaboration of groupsproduct. Structuring them in this way of insurers to create manufacturingwould unlock much of the demand which utilities that address simple needs inis being kept in check by the difficulty simple ways. While most insurers willof comparing products and the fear of choose to pursue cost-efficiency onchoosing the wrong one. their own, the experience of European carriers which have taken the utilityBasic selection advice and configurability approach is instructive: the mostmust be built into the product options, successful have managed to reduce theirsimplifying choice and enabling mass- annual per-contract fee to as little ascustomization on the basis of a few five basis points. The impact of chargingkey parameters. Banks in France have approximately half the rate which themastered this approach. Their insurance average UK insurer does, can be theapplication forms contain relatively doubling of the accumulated long-termfew, simple questions. The answers value of the investment.automatically determine which of threeor four basic products is best suited to The overwhelming majority of customersthe customer’s needs. in the mass market prefer to insure against, rather than accumulate for, theirThe challenge will be to provide retirement. Excellence in risk assessmentcustomers with the advice they really and pricing are therefore essential, toneed: how to arrange their finances minimize the additional risk taken ontoto make the products affordable. Also, the balance sheet, while a sophisticatedto ensure they are easy to purchase investment capability is key to achievingvia convenient low-cost channels. superior risk-adjusted returns.Traditional channels and processes,15
  17. 17. Innovation will play a big role in keeping pacewith a rapidly evolving market and achievingclear differentiation:•  A digital channel strategy which allows simple productsto be sold quickly, easily and cheaply, and which dispensesbasic information and advice, will be a decisive competitiveadvantage.•  Many organizations outside of the insurance and assetmanagement sectors are attracted by the sheer size of theretirement market. They recognize they have a piece of thepuzzle – an accessible customer base, a large agent network,a popular social network or search engine – and are eager tocollaborate with partners that can bring insurance expertiseand capabilities. To make the most of these marriages, insurersneed to open themselves to their partners’ view of the worldrather than impose conventional industry thinking onthe venture.•  One possible solution would be to create a vibrantecosystem of non-competing retailers and other providers, allof whom would offer the customer discounts for sales volumesor share of wallet. Instead of being reimbursed, these discounts– together with, potentially, the rounded-up balance on allpurchases – would be consolidated in a retirement accountwhich would reward customer loyalty, and would benefit fromthe enhanced returns of a group investment (see illustration).•  The Internet has enabled many online entities to build largecustomer bases, powerful brands and frequent usage.A number – Amazon is an example – have proved it is possibleto broaden their product offering without harming theirfranchise. Innovative partnerships with credible players suchas these could go a long way to providing the growth insurersdesperately seek.Retail loyalty-scheme discounts could be consolidated in a group retirement investment. 16
  18. 18. A new approach for a new marketReports have warned that certain state and employer fundsare in danger of having insufficient money to meet thecommitments which have been made. Individuals, themselves,have failed to take the necessary steps to ensure they don’toutlive their money. This could place the average consumerin a difficult situation.17
  19. 19. But insurers must share the blame. sectors, but will focus most of their fire- from independent advisors toAs a group, they have not succeeded power on the segments which offer the aggregators. A vital attribute will bein positioning themselves clearly as greatest potential for growth. the nimbleness to rapidly shape newtrusted, authoritative advisors and products at the behest of distributors,providers of suitable retirement products However, most insurers have business particularly complex products aimedand services. Few have invested in and operating models which do not at the high-customization end of thesophisticated segmentation capabilities, lend themselves to scaling an advisory market. They also need to ensure theyallowing them to understand their experience, at least not across all are easy to do business with. While theircustomers and proactively contact customer segments. They may conclude brand may not follow their productsthem at key moments with compelling that they have not the brand, the balance all the way to the customer, they willretirement propositions. When they have sheet or the appetite to invest at a level develop specific pricing and deliverycommunicated, their information has which will make them credible and strategies which will allow them tobeen generic and difficult to understand. competitive across all the dimensions be the most selected provider.In short, the experience has done little of a fully integrated insurer. Accentureto spur the consumer to action. believes that they will need to make a Of course, for many insurers, it will not philosophical and strategic decision as to be practical to take on all the change atThe successful model calls for a new whether and how to address this market. once. With the strategic direction set, itapproach, which takes proper account Based on their capabilities, legacy, is possible to take steps in that directionof the realities of the market and of culture, creativity and execution ability, without betting the firm. Engenderingcustomers’ very different circumstances, they may have to choose different paths a test-and-learn culture will allowneeds and preferences. It must also give as well as different market segments. movement toward the target vision infull consideration to the parameters in an agile fashion, deploying small pilotswhich insurers operate – in particular, Specialist distributors and projects quickly, evaluating everythe strength of their balance sheets step of the way, and then learning andand their ability to invest in future Some may accept that there is currently adapting from success and failure alike.capabilities. In short, insurers need to little perceived differentiation in product,decide where in the market they should and decide to specialize in distribution. The retirement market has beenfocus their efforts, and what specific Their focus will be on acquiring a highly changing for some time now. The mostcapabilities they need to differentiate granular segmentation capability, and on transformative trends are clear for allthemselves and achieve success. optimizing the value of each relationship to see, and the most responsive insurers for both the customer and the firm. Like took off some time ago – and haveWhile the potential is clear, an aggregator, they will be product- agnostic and unconflicted by product already capitalized on this remarkable opportunity. Just as consumers cannotthe choice is not obvious. fulfilment. While the business model is afford to delay providing for their different, specialist distributors will retirement, insurers that take tooThe temptation for many will be simply have a similar mindset to the full- long to ponder their options willto extend their current manufacturing service digital insurer. run out of time and prospects.capabilities and agent networks to To find out more about Accenture’sbecome customer-centric and multi- Product experts Global Retirement Services Survey,channel. They will take on the challengeof providing savings and investment An alternative approach would be and how we can help you achieveservices as well as insurance products to specialize in product development. high performance in the retirementsuch as annuities. They will address both These manufacturers will seek any market, visit our website atthe commercial and retail retirement distribution and develop strategies and www.accenture.com/insurance. offers for delivery of their products 18
  20. 20. Authors About AccentureMark Halverson, Global Distribution Lead, Accenture is a global managementLife Insurance Services, Accenture consulting, technology services and outsourcing company, with more thanGordon McFarland, Global Distribution 249,000 people serving clients inLead, Insurance, Accenture more than 120 countries. Combining unparalleled experience, comprehensiveGraham Jackson, Life Insurance UK Lead, capabilities across all industries andAccenture business functions, and extensive research on the world’s most successful companies,References Accenture collaborates with clients to1  Accenture Global Retirement Services help them become high-performance Survey, 2012 businesses and governments. The2  Retirement Income Deficit US company generated net revenues of $6.6 Trillion, Wall Street Journal US$25.5 billion for the fiscal year MarketWatch, 15 September 2010 ended Aug. 31, 2011. Its home page3  Europe’s $39 Trillion Pension Risk is www.accenture.com. Grows as Economy Falters, Bloomberg, 11 January 2012 About Accenture Research4  Accenture Consumer-Driven Innovation Accenture Research is Accenture’s global Survey, 2011 organization devoted to Economic and Strategic Studies. The staff consists of 1505  Global Advertising: Consumers Trust experts in economics, sociology and survey Real Friends and Virtual Strangers the research from Accenture’s principal offices Most. Nielsen Wire, 7 July 2009 in North America, Europe and Asia/Pacific.Copyright © 2012 AccentureAll rights reserved.Accenture, its Signature, andHigh Performance Delivered aretrademarks of Accenture.

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