NU Online News Service

LAS VEGAS --Insurers focusing on younger customers must develop simplified products and rely less on their sales force and more on technology, according to a group of experts speaking here at the ACORD/LOMA Insurance Systems Forum.

Changes must also be made to reach a growing Hispanic customer base, the group counseled.

The sales focus of insurance companies is moving away from baby boomers and toward generation X and Y buyers, Matthew Josefowicz, director of insurance at Novarica, said at a session yesterday titled "Right or Wrong: Top 10 Analyst Predictions."

He said there are questions as to how receptive these new buyers will be to complex life and annuity products, particularly products that require education from a sales force.

Mr. Josefowicz explained, "One of the interesting trends we see on that side of the marketplace is that generations X and Y are not necessarily interested in being educated by a salesperson. They want to educate themselves. They feel like they should have the tools at their disposal to educate themselves about the products and services they buy."

He added, "They expect there to be comprehensible information about the product and about product value available to them without getting into a sales situation."

Kimberly Harris-Ferrante, research vice president, Gartner Research, noted that younger generations are going to the Internet for education on products and services. In particular, she said they are going on social networking sites where insurers have little to no presence.

As to the implications of this generational shift, Mr. Josefowicz said, "I think we're going to see more simplification" of products, and a greater focus on finding ways beyond a sales force to communicate the value of wealth management products to younger generations.

Insurers in both the life and p-c sectors will also need to move away from mass-marketed products and toward unique products geared more to the individual, Ms. Harris-Ferrante said.

"I think there is going to be a lot of technological business process changes that we're going to have to make as an industry to prepare for the demographic changes," she said.

These individualized products must go beyond generational differences and speak to ethnic diversity as well, according to Barry Rabkin, senior research analyst, Insurance Financial Insights.

Mr. Rabkin pointed out that Hispanics are the fastest growing population in the United States. To cater to this group, insurance companies have to go beyond just translating material into Spanish. "That's not going to cut it," he said.

Mr. Rabkin noted that the Hispanic population consists of subpopulations, such as Mexicans, Puerto Ricans, etc. Insurers have to understand the specific cultural behaviors and needs of these subpopulations to market to them effectively.

The ultimate objective is a greater segmentation of products, whether it is along ethnic, cultural, socio-economic, or generational lines, Ms. Harris-Ferrante explained. "We have to get more granular with our products," she said.

While there tends to be a technological focus in the industry on product configurators that help insurers bring products to the market with increased speed, the real issue is whether insurers are offering the right products to their customers, Ms. Harris-Ferrante said.

This includes looking at what customers want today, "but more importantly, what are our customers 10-to-20 years in the future going to want from us as an industry? And I guarantee it's not going to be what we're trying to sell today," said Ms. Harris-Ferrante.

This evolution in the industry should involve not just the products offered, but also the service, and delivery of service, according to Craig Weber, senior vice president, Celent, LLC.

He spoke of a technological industry shift toward a "global servicing model" in which language, currency and even location will not matter as services are delivered over the Web. While the industry is not there yet, Mr. Weber said, it is moving in that direction.

"A good, long-term vision is to kind of get rid of the artificial constraints of time and place and language that are there today," Mr. Weber said.

Beyond selling products, insurance companies will need to sell themselves as an industry to a new generation of workers, the experts agreed.

David West, research area director, insurance, for TowerGroup Inc., said that when insurers replace their older systems with more current technology, they are not only making business easier, but "it also creates an environment that is more attractive to younger generations coming out of college." These workers, he noted, want a working environment that is modern and exciting.

Ms. Harris-Ferrante said that technology can also play a role in helping to retain key older workers as well. For example, she noted that some workers in New York will retire to Florida, but will still be willing to work via a virtual office.

Mr. Josefowicz pointed to the need for an evolution in business culture when recruiting young talent. "The next generation of workers is not going to play the apprentice game that the industry has relied on," he said.

The industry, he explained, must evolve away from a model where a worker cannot become a commercial lines underwriter, for example, without working as an apprentice for five to ten years. Instead, the industry should move toward a culture of sharing knowledge and allowing new workers to be productive by giving them the appropriate tools, Mr. Josefowicz said.