A study on the future of old-age pension schemes: a success factor for life insurance companies – flexible products and services

• A definition of six possible future scenarios
• A discussion between experts from the sectors of economy, politics and academia
• A survey of 300 end customers on the challenges of old-age pensions
• Recommended actions for six areas of activity in the insurance sector

Six potential future scenarios

In the enquiry, six potential future scenarios were calculated based on socio-cultural, political, economic, technological and regulatory influential factors. In the discussion, involving representatives from industry, politics and academia, the needs for action were then defined in the single stages of the value chain.

Scepticism towards the insurance sector

In addition to the general future scenario forecasts, the study design comprises a survey of 300 end customers on the challenges of old-age pensions. Result: although the insurance sector is viewed as a point of contact for the topic of old-age pensions, it is also considered with scepticism. The matter raises a lot of doubts in those questioned and is closely connected with declining trust in the state.

Armed with flexibility for the future

Based on the expected market conditions, the needs of end customers and also the identified effects, a consensus is reached with regard to the areas of activity, namely the need for flexibility.

The areas of activity are defined below, together with an excerpt from the recommended actions of the study:

• Sales and customer management: In the future, sales will have to make a greater differentiation between the target groups in order to continue to operate profitably. This will involve a digitally supported simplified (online) advisory and handling service as opposed to complex advisory services that cover different areas of life
• Capital investment management: Each life insurance company will be faced by the strategic decision of whether or not its core competence in the future should be capital investment management. Diversification in all investment classes will become essential for survival in both cases – with a corresponding development of know-how or collaborations.
• Benefit management: Benefit management will be extended to include active advice on retirement age, and therefore, due to the growing importance of this for demographic reasons, it will also be more important for life insurance companies in order to strengthen their customer management.
• Portfolio management: Also in the future, portfolio management will have to fulfil the needs of both old and new portfolios. While the efficient processing of old portfolios requires, in particular, the skills for consolidating and transferring portfolios, in the case of new portfolios, an increase of heterogeneity should be reckoned with.
• Product development / management: In the future, digitalisation will be less significant for calculating products but is likely to play a role in external communications with customers, and also internally for the handling of existing processes.
• IT and data management: In the future, the branch's IT systems must be able to upgrade interfaces and enable the insurer to network with its entire corporate environment.

"The study shows that insurers have a lot of levers to ensure a successful future. In all areas of activity, it is clear that in order to survive in the market, it is important to keep an eye on the matter of flexibility in all new measures and optimisations, for example in communications, products and systems", says Justus Lücke, Managing Director of Versicherungsforen Leipzig and author of the study.