The "Golden" Years

As more Americans near retirement age, there has been a fundamental change in the way they approach their financial future. Factors such as the insecurity of Social Security and a shift from defined benefit to defined contribution plans have driven people to take a more active role in planning for their future. To serve that market, insurers need to incorporate predictive analytics–what analyst Cynthia Saccocia calls “active intelligence”–and communicate with their customers through Web sites. Saccocia, research area director for TowerGroup, is author of the report “The Future Retired: Facts, Figures, and Issues for Insurers, Retail Brokers, and Financial Advisors.”

As retirees' disparate buckets of money eventually are combined, insurers need to be positioned with services that allow a do-it-yourself approach to the portfolio that will give companies the ability to capture more financial share than they have today, indicates Saccocia. “It's really preparing these customers for the future and being that trusted advisor where [insurers] can retain that client when [the client] moves from accumulation protection toward that payout phase,” she says.

The industry has done a good job of educating customers on how to save for retirement, Saccocia believes, but insurers now need to help investors understand how to spend what they've saved. “The key thing for institutions is somebody is going to capture the accumulated assets and spend them down with the client effectively,” she says. “If not, [insurance companies] subject themselves to a risk of attrition in assets because [the assets] are rolling out of your institution to somewhere else.”

The tools and techniques that seem to be working for carriers today are those that identify more closely with the investor–using predictive analytics and market segmentation to focus on the likely needs of those individuals that may result from potentially life-changing events, which either have happened or probably will happen in the future, explains Saccocia. A second tool is the Internet, which insurers must use more effectively to support the self-service mentality the industry has built.

Companies have done a decent job of using business intelligence, observes Saccocia, which she describes as a look back at the performance and activity within their existing customer base. She contends insurers need to incorporate new data elements they can use to predict future performance. “You actually can look at what different segments may do in the future and then create marketing campaigns or services that are in tune with the future habits of those segments,” says Saccocia. “Predictive analytics allows you to look forward at what the performance may be for your customer base. It also positions [carriers] to attract new customers, or it allows cross-sell/up-sell opportunities.”

Fidelity Investments understood early on what its customers were going to be like in the future, Saccocia points out. “[Fidelity is] uniquely positioned because of its substantial retirement business, but it has been using technology as a means to train its customers,” she says.

Insurers should push their customers to develop a do-it-yourself mentality, she maintains, and work with Internet tools and solutions. Customers then can have the opportunity to reach out and ask for help when they need it through the carriers' call centers and investment centers. “The Internet is a means by which they can do that,” she says. “Customers can get as much information as they want about new products and portfolios.”

Institutions that can consolidate for ease of use and allow customers to protect against inflation will create a source of steady income and are building a structure for how assets are going to look in the future, Saccocia believes. “The tools insurance companies are providing are educating customers to the point that even if [the customers] are working with an advisor, they have more information to go in and ask the right questions of their advisor,” she says. “Those are some of the tools that can increase awareness so the customers have a number of options insurance companies offer.”