Life and annuity carriers across the globe are increasingly shifting product and distribution strategies to target growing affluent and high net worth customer segments according to a new study by Conning (Hartford). The study, “Life Industry Affluent & High Net Worth Strategies: Focus on Investments, not Protection” reviews the subsectors of the high-end consumer market and analyzes the challenges and opportunities they present to insurers, as well as tracking insurer responses.

The increase in the numbers and wealth of affluent and high net worth investors represents a global opportunity for the sale of insurance and investment products, according to Scott Hawkins, analyst at Conning. “Our analysis confirms that life insurers are competing for this opportunity by diversifying their products from protection into investment, and adjusting their traditional distribution to more effectively capture affluent and high net worth investors,” he comments. “This change in product mix to a greater reliance on annuities also lowers capital requirements, giving those firms an advantage in return on surplus.”

Insurers’ performance will depend on their ability to optimize strategies to specific market segments, according to Steve Webersen, director of research, Conning. “For those pursuing developing and emerging markets with higher rates of growth, broadening distribution capabilities to capture more customers will likely be a key focus,” Weberson observes. “Conversely, in mature and slower growth markets such as North America and Europe, fighting for a greater share of the affluent or high net worth’s wallet will be more important. Importantly, however, the High Net Worth and Ultra-High Net Worth segments are truly global markets, which favors the large multinationals and changes the focus for many insurers.”

Greater Opportunities in Emerging Markets

Technology is helping insures compensate for their strategic shift to the affluent market, according to Hawkins. “First, so-called robo-advisors are filling the gap as traditional distributors move upstream,” he says. “In a similar vein, insurers are providing more financial planning and advice [capabilities] on their websites.”

The affluent and high net worth markets are growing more rapidly in emerging markets in Asia, Latin America and Africa, but there are still opportunities in more saturated markets in Europe and North America, according to Hawkins. “In our study, we see this as leading to two competitive strategies for insurers: increase wallet share in saturated markets and capture more clients in emerging markets,” he says.