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Adapting Technology to Changing Generations

Carrie Burns October 2007

Pre-retirees and retirees may produce immediate retirement planning profit for insurers, but Generations X and Y also need to start planning for retirement. So how do insurers focus on all generations? "Take a step back and develop a more client-centric approach," says David Schehr, a research director at Stamford, Conn.-based Gartner Inc. "An insurer's technology choice is a reflection of its business choice. There is a perception out there-and there is some reality behind the perception-that insurance organizations tend to approach retirement much as a product sale. In reality, the insurer should first determine its risk tolerance. If an annuity is appropriate, set goals in a retirement planning process. Ask all of the client-centric questions and, from there, if it's appropriate, develop an annuity illustration."

SEPARATING THE GENERATIONS

The younger generations are asking for, and even demanding, different technological functions be made available from insurers, including automatic plan features. America's young workers (ages 21 to 30) are eager to embrace a new approach to the design of the nation's retirement programs, believing "automatic" plan features, such as the auto-enrollment provision in the Pension Protection Act, would produce better financial results and lead to more secure retirements, according to a survey conducted by Prudential Retirement, a business of Newark, N.J.-based Prudential Financial Inc. Its "Fifth Annual Workplace Report on Retirement Planning" study found that 66% of workers between ages 21 and 30 would feel "grateful" or "optimistic" if employers automatically enrolled them in workplace-provided defined contribution plans.

"Today's youngest workers are keenly aware that the existing 'do-it-yourself' approach to managing workplace-provided defined contribution programs isn't delivering the retirement security Americans want and need," says John Kim, president of Prudential Retirement.

But others would disagree, saying pre-retirees, including the boomers, are taking education and action into their own hands. "The boomers didn't grow up to become their parents. People who are in retirement now were the core market 10 to 20 years ago when a lot of the early technologies and business models were developed," says Schehr. "Their parents were the WWII generation, a generation of conformists, deferential to authority, and we've kind of built up this advisory model known as the 'father knows best' model."

Data from Gartner research reveals that the real gap in use of the Web overall for basic financial services is between the boomers and the pre-boomers. "The boomers are quite comfortable in using the Web, and they're being trained for that by their banks, by their 401k providers, even by the insurance companies when they enable online billing and other online functions," Schehr says. "Once you move beyond the current retirees to anyone prior to retirement, from the boomer generation to Gen X and Gen Y, the Web and automated services are not a nice-to-have, but a need-to-have."

Insurers, particularly annuity writers, have received the message. Annuity writers are focusing on improving policyholder service, according to "U.S. Annuities: Market Trends and Key IT Issues" from Boston-based Celent LLC. Nearly half of the annuity respondents to a CIO survey from Celent were spending "some" or "significant" new project dollars on policyholder portals, and 40% were spending "some" new project dollars on contact centers.

Annuity insurers are being held to customer service expectations set by banks, brokerages and mutual funds rather than the traditional life insurance model in which policyholders rarely interact with their policies, according to Celent. Variable annuity contract holders expect to be able to check values and change positions as easily as they can with their brokerage accounts.

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