Despite the impact of the financial crisis, Norway’s life insurance sector has become one of the fastest growing in the region. According to Reuters, the segment achieved a compound annual growth rate (CAGR) of 5.8 percent in gross written premium terms between 2008 and 2012. Although the economy remains stagnant due to low oil prices, the development of Norway’s life insurance industry is picking up speed, with demand forecasted to grow significantly in the coming years and an estimated CAGR of 6.4 percent between 2012 and 2017.
Moreover, ongoing technological advancements in mobile and internet platforms in the field are helping customers to meet their needs through simplified and more accessible services, which is also contributing to increasing public demand. Hoping to lead the entire Nordic region by example is Nordea Liv, one of the biggest life insurance companies in Norway. World Finance had the opportunity to speak with Jørund Vandvik, the CEO of Nordea Liv about changes in the growing sector and the mechanisms it has in place to meet new opportunities head on, both for the company and their customers across the country.
How has the market for life insurance changed in recent years?
The main development has been from complex, opaque, expensive products to simpler, transparent and less expensive products, and from infrequent to frequent sales. The market has moved away from guaranteed products, such as Defined Benefit pensions, to market return products like Defined Contribution pensions and investment return individual pension savings.
The main driver has been the pension reform, making corporate pension compulsory and increasing the need for individual pension savings. As a result the market has been growing rapidly, and the pressure is on the industry to make the products understandable, easy to buy and service – as well as tackling the increased volume – in an effective manner. Another important driver has been accounting standards, including IAS19 from the customer side, and especially the Solvency II regulations from the life insurance industry side. As a result, there is no longer a market for guaranteed products, and all competitors are now focusing on fast growing market return products. Another regulatory change affecting us is the Anti-Money Laundry and Anti-Terror Financing rules, which puts pressure on our ability to gather customer data and process it, without making life too difficult for customers.
What are the biggest challenges and opportunities for life insurance companies in Norway?
Looking ahead, we are expecting the demand for life and pension products to increase among our customers, which will be driven by demographic and economic developments in the coming years. At the same time, more and more customers are using new technology. Today, there are more transactions on our mobile banking app than on the internet banking portal. Therefore we are in the midst of a fundamental change, where mobile and online platforms are maturing to now create significant sales channels.
This is both a challenge and an opportunity – the key to success is to make life insurance and pension schemes relevant on these new platforms. That being said, the industry has a history of making things difficult and incomprehensible. The major challenge for life insurance companies is to engage with customers on the customers’ turf, which means keeping it simple and communicating in a way that we understand their needs and help them to achieve their future goals.
How does the life insurance market compare to neighbouring nations?
The life insurance market in the Nordic region varies in terms of social security regulations and product structure. However, we are all facing the same challenges regarding longevity, Solvency II, low interest rate environment and asset management. Fortunately, the Nordic markets are all technologically advanced and we are seeing a growth in online and mobile platforms as service and sales channels across the board.
How has Nordea Liv come to be seen as the market leader?
We are honoured to receive the Best Life Insurance Company award in Norway. I believe we are perceived as the market leader because of the way we have grown to become the number one life insurance company in the market. Our focus is on the continuous improvement of our customer value proposition and processes, with an emphasis on leveraging the potential that is embedded in new technology.
For this reason, technology is at the forefront of everything we do, including eliminating paper and using electronic signatures, which makes life easier for everyone and it is better for the environment. As a result, advisors love us, client needs are met and we are able to attract new customers. An added benefit is increased market share and interest – I believe we lead the way in Norway and that the rest will follow.
How has the bank assurance model served Nordea Liv in its growth story?
The bank assurance model is a core component in our growth story. The model provides us with access to a large customer base. In recent years, we have managed to employ more advisors to sell our products, and we have helped them to increase their sales more than ever before. We are dedicated to this model – all our sales are done through the sales teams employed by the bank and our partners. Our goal is to be the best product to them in all segments. This requires creating outstanding products and value for our distributors and their customers. In addition, it is vital that our products are simple to understand and sell.
Simplification not only makes life easier for our advisors and customers; it also makes it possible to automate and speed up the service. Another positive effect of bank assurance is the use of the bank’s asset allocation model in our products. This means that we can leverage their global asset management expertise and integrate their recommendations so that our major fund portfolios reflect their advice every month. This is valuable for both our customers – who get actively managed portfolios aligned with their risk appetite and horizon – as well as for the advisors who have products that reflects their advice.
How has Nordea Liv used automation to realise economies of scale?
Since 2010, we have increased the company’s premium income by 104 percent (see Fig. 1), reduced our staff by six percent and kept the cost base flat. Since 2006, when corporate pension become compulsory, our mind set has been fixed on automating all of our processes to tackle the increased volumes and gain cost efficiencies. We believe this is a more viable strategy in the long term, rather than to increase staff or outsource to Eastern Europe or India.
By applying technology to make things automated, we have developed a scalable and responsive organisation. At the core of our success is an all-electronic sales and underwriting process. Advisors use the sales tool when they are in dialogue with customers and customers sign using a digital signature. The application is then sent electronically to Nordea Liv. Here, it is screened in our electronic underwriting engine, where those who are ‘clean’ are issued instantly, and those who are not are then allocated to the relevant process. In total, more than 50 percent of our sales are issued on the same day.
How important is ethical management in the life insurance business?
It is crucial, as we need customer trust to succeed, particularly as we manage their future income. Therefore, we are very committed to acting ethically in our everyday business. However, we want to go even further than that and use our skills, expertise, knowledge and relationships to make a positive difference to individuals, society and the environment. Building trust, being open and approachable, as well as acting with integrity are vital to achieving this objective.
What are some of the company’s most impressive recent achievements?
We are steadily improving our digital solutions to support our journey. Among our achievements in this area this year is the introduction of electronic signatures on all of our products. This was driven by compliance, but it also makes things easier for those who sell life and pensions over the phone, through live chat or online. We also introduced an iPad sales-app for corporate pensions, which makes sales much easier for our partner sales force. It also supports compliance by including an electronic signature and documentation of ID. Finally, we launched an online sales application for life insurance so that we can offer even more support to our partners’ online sales strategies.
What are your ambitions for the future?
Our ambition is to be the best product provider to our distributors, so they can continue creating a great customer experience. We are well positioned in the advisory channels and now online sales are evolving as a crucial sales channel too. With our proven experience and competence in making services easy to use and our all-electronic infrastructure for customer services, self-services and sales, we will continue supporting our distributors to succeed in being the best for mobile and online sales of life insurance and pensions.