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The future of the life insurance market

The life insurance market is preparing to solve three major challenges such as interest rates, regulatory requirements, and technological re-equipment. As insurers look for new opportunities to generate returns in the face of lower interest rates in the stock market, adjust to changing regulatory environments and adopt new technologies, they are facing multiple risks. These are operational, compliance, competitive, technological risks and risks of modern business models, writes Risk.net.
The future of the life insurance market

When the Covid-19 pandemic hit, the interest rates collapsed with benchmark 10-year Treasury yields dropping to an all-time low of 0.6%. “In the asset portfolios of life insurers there are all kinds of securities of various companies today. For example, financiers are now investing in agriculture and infrastructure projects. Expanding the investment horizon with more alternative assets allows insurers to diversify returns. However, in addition to high return, this coin has another side as new risks that insurers are only learning to manage. Balancing the transition to new asset classes and understanding new risks will be key to the market,” said Milliman's Tony Dardis.

According to expert, life insurers need to remain flexible. Then they will be able to adapt to changing regulatory conditions. “Regulatory change requires a higher level of accountability. Regulators are trying to ensure that investments in new instruments do not lead to the bankruptcy of LICs. US regulators are also closely monitoring the introduction of artificial intelligence (AI) into the work of life insurance companies. Life insurance is one of the few industries considered to be lagging behind in terms of next-generation technology adoption. Many firms are still working with legacy systems, and the transition will undoubtedly take time,” the interlocutor predicts.

Life insurers were aggressively ramping up their technology and digital capabilities before the pandemic, and the epidemic accelerated market development. “However, companies are at different stages of using technology and data science. Not everyone can implement automation, powerful analytics to manage and grow their business. AI and robotic process automation can change the way insurance industry does business. Next-generation technologies can be used in the life insurance industry to better predict outcomes, improve customer service, manage new product development, identify risks and cross-promote products,” explains Tony Dardis.

Source: https://www.risk.net/asset-management/insurance/7945691/the-future-of-life-insurance

Photos are from open sources.

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