Stress about their financial wellbeing is a feeling that many consumers around the world are very familiar with today. According to Aon’s Global Financial Wellbeing Study, people are frequently dealing with various forms of debt, at the same time as they lack sufficient assets for retirement and face unexpected risks that could result in a major financial setback.
While multinational companies are paying attention to and implementing strategies focused on wellbeing more broadly, financial wellbeing is less embedded, with 34% of those surveyed by Aon having a wellbeing strategy in place, and only 14% of respondents having a financial wellbeing strategy.
Firms that work with their employees on a broader sense of wellbeing (that includes financial wellbeing and retirement planning) could see benefits that include lower healthcare spending and improved retirement outcomes for employees, in turn leading to a more engaged and financially confident workforce. On the other hand, the effects of the current state of financial wellbeing among consumers can negatively impact the insurance industry, and consumers over the long-term.
“We have work to do when it comes to consumer financial wellbeing,” said Bernhard Klein Wassink, EY’s global customer and growth leader for insurance. “I think that’s why providers in this space are starting to look at this as a real opportunity to both do some good and grow their business. In particular, if you think of group insurers, retirement companies, and employers, they all started to feel that some of the financial challenges that households have are beginning to prevent them from doing some of the longer term things they need to do to be financially well.”
For example, the accumulation of student debt by younger generations might prevent them from saving for retirement, but also could lead them to skimp on other insurance offerings, such as tenant insurance if they’re renting or even life insurance to protect their loved ones.
Though the traditional insurance players are looking to address the issue of wellbeing, and specifically financial wellbeing, other companies in the industry are already leading the way.
“The insurtechs and the fintechs have a much more focused approach, so you can find fintechs that help consumers with the singular task of taking control of their day-to-day spending,” explained Wassink, adding that other tech companies have focused on eliminating student debt, and have partnered with insurers and retirement firms to do so. Insurers can learn a thing or two from this approach.
“Many insurance companies have set up venture funds where they invest in insurtech and fintech firms, and the purpose is not generally to make a lot of money,” said Wassink. “The purpose is to be at the table and learn – and learn early – and I think the types of things they’re learning is fintechs and insurtechs are all about purpose and solving a specific problem, not some generality. They’re all about cool digital experiences that not just younger generations, but today’s consumers who live with a cellphone in their hand can understand and engage with simply.”
Some carriers are also tackling the problem head on by implementing ecosystems where they bring different vendors together to provide financial wellness tools to their customers, such as MetLife’s PlanSmart platform.
As more carriers jump into the financial wellbeing ring, the result is increased customer centricity. According to EY’s NextWave report on financial well-being, insurers should look for solutions that first address consumer feelings about wellness, then look for ways to offer comprehensive and integrated solutions.
“Patchworks of standalone product offerings are no longer sufficient to meet the needs of consumers. It’s clear that bundled solutions will be a bigger part of the future, but insurers must recognise the limits of bundling and where their offerings overlap with and/or complement those of other types of financial services providers,” read the report.
The opportunities, if insurance companies can bring value to consumers and support their financial wellbeing, are there for the taking.
“If you really understand the financial challenges your customer has broadly, then you have a shot of solving those for them,” said Wassink. “Companies that are serious about playing here need to have their own proprietary analytics on what that means,” which will in turn allow them to prove with data that the services being offered are actually helping consumers get back on track to financial wellness.
“I think that’s important because otherwise it doesn’t pass the smell test for consumers. You say I’m better off, but am I really?” added Wassink. “Substantiate it, including to regulators, that what I’m doing is helping people get better financially.”