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September 2020

Stability and adaptability - a cornerstone of success

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Facing a multitude of changes in the industry, ranging from client behaviour change to innovative initiatives and upcoming regulatory pressures, four key experts in the life insurance sector share their views on the trends and challenges ahead.

The yin - yang relationship of life insurance and wealth management

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Life insurance and wealth management are absolutely linked and one could not live without the other.

Florent Albert, Managing Director Europe at Lombard International Assurance and Group Chief Financial Officer

Life insurance is a fundamental component of wealth management and is an essential tool for tailoring a wealth management strategy in terms of investments and succession planning.

“Life insurance and wealth management are absolutely linked and one could not live without the other,” states Florent Albert, Managing Director Europe at Lombard International Assurance and Group Chief Financial Officer. Life insurance or insurers such as Lombard International Assurance, which was established in Luxembourg almost 30 years ago, work in close partnership the wealth management industry, building strong relationships with private banks, wealth managers, and family offices, to provide long term services, as well as specific wealth structuring expertise to High Net Worth and Ultra High Net Worth clients . Taking a step back and taking a longer-term view of the world, Albert believes that this macro trend will to continue.

“Wealth creation has never been stronger in the world than today and that pace is accelerating. Wealth needs smart investments, smart solutions and strong expertise. It is quite interesting to see a lot of tier one banks such as UBS, Credit Suisse, Julius Baer or Pictet continuing to set up ultra-high net worth desks or single family office relationships, positioning themselves to specifically serve this client base.”

Guy Van den Bosch, CEO at CALI Europe

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Private life insurance is a people business. When you are working on wealth management solutions, people don’t do business through the internet - it is people related.

Guy Van den Bosch, CEO at CALI Europe

At Sogelife, present in the Luxembourg insurance market since 1996, life insurance products offer the possibility to integrate a wide range of eligible assets into a single investment contract, such as dedicated internal funds and specialised insurance funds. Jean Elia, CEO at Sogelife, explains that on the succession planning side, the Luxembourg life insurance industry offers an extensive and solid expertise for managing sophisticated wealth structuring across borders, that very few other financial places are able to provide. At the beginning of 2015, Sogelife decided to review their business model and shift a majority of their business away from guaranteed rates to unit linked solutions, which has more than doubled since the strategic change.

Addressing the local and international markets through a multi-channel distribution, Laurent Heiles, Director at Bâloise Assurances , one of the first life insurance companies in Luxembourg and serving the local market since 1890, sees the Grand Duchy’s leading alternative investments hub in EU as a definite advantage for the national and international insurance industry. This gives different players, such as asset managers and banks, the opportunity to propose an infinite number of investment possibilities to clients. It is, however, important to make this information clear and available to the partners of insurers, in order to be able to discuss them with end clients on a timely basis.

Florent Albert, Managing Director Europe, Lombard International Assurance

Rising to the challenge of evolving expectations

Elia shares his experience: “There used to be a myth that private banking clients were not clients who expect digital experiences, but who rather sought out personal relations. In reality, these clients are very much into digital innovation and expect not just a good customer experience, but an enjoyable one. Though we don’t get to see the end client, as we are in a B2B2C model, our strategic objectives and these new digital initiatives share one common goal: make the customer’s journey a delightful one.”

CALI Europe entered the Luxembourg insurance market 20 years ago and has seen client expectations evolve over the past 2 decades.

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We are looking to simplify our client’s and partner's lives, making their interaction with us as smooth as possible, while being considered as a trustworthy and uncomplicated partner.

Laurent Heiles, Director, Bâloise Assurances

Though the basic expectations of looking for investments and financial offers corresponding to investment profile remains, with insurance companies proposing attractive legal and fiscal framework packages around it, Guy Van den Bosch, CEO at CALI Europe, has seen an evolution towards more digital solutions. “Private life insurance is a people business. When you are working on wealth management solutions, people don’t do business through the internet – it is people related. Clients, however, want to be informed. Permanently. They want to see the evolution of their assets and their contracts at all times, which is quite different to my experience 20 years ago, when it was the norm to send and discuss changes with clients every few months.”

Bâloise follows the same train of thought, but has taken things a step further by having created an internal innovation lab several years ago, with dedicated members surveying the market and addressing client needs with innovative solutions. “We are looking to simplify our client’s and partner’s lives, making their interaction with us as smooth as possible, while being considered as a trustworthy and uncomplicated partner.” Despite the fact that up to 80% of innovative suggestions are not developed right away, concepts are kept at hand and prepared to be launched should the organisation see the need to adapt offers in a certain direction. “Innovation is in our culture and we are not afraid to take a step forward, even if the seeds we sow are reaped at a much later date. Telematics and universal life products were two such examples for the local market. Though launched some time ago, it took a little while for clients to warm up to the ideas. Nevertheless, we have been seeing a gradual upward trend, proving that we are on the right track.” Heiles underlines that taking the time to explain the differences and familiarise consumers with the tools and products offered is crucial to making clients accept new and innovative solutions.

Laurent Heiles, Director, Bâloise Assurances

Van den Bosch also notes that a simplification of processes through digital solutions is crucial in a world where information has to travel quickly. As regulation evolves, bringing along a more complex landscape, the life insurance sector needs to keep a balance of complying with the rules, while keeping client relations simple and efficient. The Covid-19 healthcare crisis has, over the last few months, further highlighted the downsides of focusing on purely face-to-face management.

“Client expectations are a function of their sophistication in terms of the assets that they want to invest in and how their wealth develops. The regulatory and tax environment also drives it and Europe has, over the last 30 years, evolved in terms of regulation, tax, demographics and also in terms of pools of wealth. We have seen more complexity emerge from the environment that we’re in.” Albert notes that one of the key strengths of the Luxembourg ecosystem is the ability to adapt, to adjust and to continue to tailor to the High Net Worth segment of the of the market. International clients seek out Luxembourg thanks to its freedom to provide services and system of protection, governed by the Luxembourg regulator for insurance and known as the “triangle of security”, which ensures the legal and physical segregation of investors’ assets on one hand and those of shareholders and creditors of the insurance company on the other.

Navigating through an adverse environment

Has the Covid-19 pandemic influenced the life insurance world? According to Elia:

Has the Covid-19 pandemic influenced the life insurance world? “At the beginning of the crisis, we were a bit worried that clients were going to shift towards guaranteed rates to secure their business. Dealing with High Net Worth Individuals (HNWI), however, has proven the opposite; they took a look at the the stock market and took advantage of its volatility to invest and move away from the low guaranteed rates. It really shows that they dictate the market and that one cannot predict their movements based on what we can expect of retail clients.”

Jean Elia, CEO, Sogelife

Fintechs and Insurtechs reshaping the insurance industry

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At the beginning of the crisis, we were a bit worried that clients were going to shift towards guaranteed rates to secure their business. Dealing with High Net Worth Individuals (HNWI), however, has proven the opposite.

Jean Elia, CEO, Sogelife

Beyond the current healthcare crisis, the rise of Fintechs and Insurtechs have been adding to the diversity of not just the life insurance industry, but the insurance industry as a whole. Van den Bosch explains that digital solutions are needed to simplify and accelerate processes and mainly sees the integration of automation and digital solutions on two fronts: the operational side of business to streamline compliance and AML activies, and on the communication side to enhance the exchange between clients, partners and insurance companies. He does not, however, believe that online sales will catch on in the HNWI arena at this point in time. Heiles agrees and sees online solutions more on the retail front, though he does specify that digital solutions are essential in all areas.

There nevertheless, seems to be a gap in the solutions Fintechs are offering and what life insurance organisations truly require, though a clearer dialogue and more frequent workshops are set to be organised to bridge this gap.

When discussing Insurtechs, all participants agreed that this progress was indeed a very important step in the insurance industry and that they consider the growth of this industry as a positive move to strengthen the market, emphasising that they do not consider Insurtechs to be a threat, but rather regard them as partners in the business.

“I believe that the future will be complementary between traditional insurance companies and Insurtechs. Insurtechs are not here to replace insurance companies, and there is room in the ecosystem for us to cooperate and support each other.” confirms Elia.