Life and Pensions providers are receiving on average 1 in every 2.6 transactions electronically, according to The Focus Quotient – A Review of 2006, a research report by Focus Solutions Group plc into electronic trading activity within the Life and Pensions industry. Electronic transactions in the life and pensions channel as a percentage of total New Business has increased to 38%, which is great news for the industry as we look to further reduce costs in the customer acquisition process whilst regulation costs continue to impact on us all.
The Focus Quotient has now grown to 1152 in 2006 from 1091 in 2005 (2001 benchmark set at 100 to realistically represent electronic trading activity). Now in its sixth year, the Focus Quotient is well established as the industry benchmark study for the growth of electronic trading and represents over 75% of the leading UK insurers. The new results for the year-end December 2006 were launched this week.
The key theme throughout the findings of the research was that regulation is a key challenge for providers and is having a major impact on working practices – according to 58% of insurers, changing regulation is lowering consumer confidence in the market and is affecting the use of technology, 55% of providers IT budgets have been increased due to regulation costs.
Providers are developing their business to consumer channels, in response to the new self serve initiatives, either directly through a consumer website, transactions through which increased by 150%, or by third party relationships with the emergence of Affinity Groups (established consumer brands) this year.
The research also highlighted the key challenges for providers, coping with constant regulatory changes and developing straight through processing models, enabling a ‘touch free’ sales process providing cost reductions, which is another key issue for providers.
Richard Stevenson, Chief Executive Officer, Focus Solutions Group plc, commented:
“2006 has been another positive year for electronic trading as providers develop new direct distribution channels to market, responding to consumer requirements to provide access at any time. The IFA channel is still a key distribution channel for providers, but the way in which they conduct business in the future will change, as more providers are developing their products on wrap platforms and with the emergence of new regulation affecting distribution. 2007 promises to be an exciting year as the main stream providers continue to invest heavily in ecommerce whilst the specialist providers have started to truly embark on their e-commerce strategies.”
The survey concluded that optimism for electronic trading still remains high within the provider community as more providers are investing in their e-initiatives, but there are a number of key challenges for providers in the year ahead including increasing maintaining market share and reducing customer acquisition costs, all whilst responding to changing regulation. Providers are continuing to expand their distribution networks to deliver business across a multitude of channels, which is great news for the consumer and the intermediary as they can purchase products through a wider choice of channels.