Life insurance
policies pay upon the death of the policy holder and provide essential funds for burial expenses and to help survivors through the difficult transition period. The challenges of the life insurance industry in extending these policies are both demanding and multifaceted, with companies forced to keep pace with continually changing regulations and market demands while continuing to remain personable.
Regulatory Requirements and Disclosures
State and federal regulatory requirements for the insurance industry are constantly updating and becoming more demanding. The challenge for the life insurance industry is keep pace with changing requirements as they become mandated so agents can keep generating policies and companies can remain compliant. Agencies are often forced to devote whole sections of staff to monitoring government requirements so management personnel can be advised of policies that may need changing. Disclosures of premiums both to the state and federal government---as well as to consumers---also require close monitoring. Some states require insurance companies to submit proposals before rate changes can be approved. A life insurance company that does not adhere to these requirements could easily lose its license to write policies.
Costs and Risk Assessment
The Baby Boomer generation is a large reason behind the cost increases in the life insurance industry, according to money management website Financial Web. The challenge for life insurance companies is to develop strategies that allow them to continue to write policies for this generation of Americans while factoring in the risk involved with the payout that is obligated with the death of a member of the country's largest age group. The cost of managing this risk is ultimately passed on to younger policyholders who can be expected to live longer---and therefore return higher premiums over a longer period of time.
Evolving Business Models
The industry must continue to evolve with improving technology and consumer needs. According to financial management firm Price Waterhouse Coopers, life insurance companies must learn to incorporate new software programs for advanced risk modeling and develop policy-writing strategies that are specific to the client rather than an age group. They must also begin to infuse themselves into multiple markets as opposed to working in just one niche. Without these efforts, a company cannot remain viable in the modern global economy and will not see the returns necessary to sustain long-term growth and stability.
