The business model of many of the UK's life and pensions companies is no longer sustainable due to the over-dependency on the high-commission, IFA channel. For many years the issue has been slowly growing in significance, but often ignored.
The industry cannot afford to wait any longer if it wishes to remain a force in the UK financial services arena. It is imperative that life and pension companies act now due to the collision of three major factors:

• The economics of channels is changing rapidly making life and pension providers increasingly uncompetitive due to their reliance on high cost distribution channels, contrasted with rivals use of new lower cost distribution formats.
• The cumulative effect of regulatory upheaval over the last decade has placed a heavy cost and operational burden on life and pension providers.
• Insurance companies face a real and credible threat from banking institutions. Our research found banks have developed much more sophisticated strategies on how to grow revenues in life and pensions markets than the present incumbents.

However significant the challenges ahead, our report Face to face with the future (PDF, 518 KB) outlines four strategies -

• product propositions
• alternative distribution formats
• operational excellence, and
• regulatory improvements
  

- which may allow life companies to undertake a reversal of fortune. All in all, the UK life and pensions providers today stand very much face to face with their future.