Insurance Industry Overview - A Global Perspective
Posted in Finance Articles, Total Reads: 773
, Published on 13 January 2016
This article gives an insurance industry overview with a global perspective. The Global insurance industry has gone through a roller coaster ride of its own. From the economic turmoil of 2009 to the impressive year of 2014. In 2014, the insurance industry showed a remarkable growth of 6.3%, far greater than the growth of 2.8% reported in 2013. The total premium reached a whooping EUR 3.8 trillion.
As a trend in almost all sector, the emerging markets grew significantly more than the mature markets – (A 12% growth v/s the 5% growth for the latter). This growth in the emerging markets can be attributed to two main factors which are the lower penetration levels and higher nominal GDP growth. Among this, the markets which experienced the rare double digit growth were the Latin America and Asia. However, to be noted that still the penetration among the mature markets (8%) is significantly higher that of the emerging markets (3%).
1. Life: The type which is insured against the life of the person and is reaped upon the death/accident as mentioned in the mutual contact. Most of the regions performed well in the life growth in 2014, however the trend varied as per the geography. In the emerging markets, life premiums growth was 6.9% compared to 3.6% of 2013. This was mainly due to opening of different channels such as online sales in these regions. China was one of the key contributor to this growth in this region.
If we look at the advance markets, they grew at 3.8% in 2014, which continued the existing trend of highs and lows in terms of growth for this market. As per Kurt Karl, Chief Economist at Swiss Re "Despite the acceleration in 2014, overall advanced-market life insurance premiums are about the same level as before the steep drop in volumes in 2008,"
2. Property and Causality: The type which prevents our property and provides coverage to the stuff we own. The growth in this sector has been a steady (5%). The main growth driver were motor vehicles in the emerging markets which has been rising at a brisk pace. While the same was from Fire and Property in the mature markets. Again as in 2013, the main growth in P&C was driven by Emerging Asia and Latin America.
3. Health: The health market also saw varying trend as it beat the regular 5% growth as seen in 2012 and 2013 and reach an impressive 8% growth for the year 2014. Out of this the emerging markets achieved the maximum with 31% growth and the Latin America stood second with 23% growth. In this product line the United States also impacted significantly after the Obamacare (the Affordable Care Act) raised the number of people insured in the US. Globally, however the same trend as the previous product line continued as the emerging markets had the higher number than the matured markets in the health segment as well.
1. BPO for closed-book operations: Firms are moving towards lowering their operational expenses by moving towards increasing BPO (Business Process outsourcing). This is crucial as maintenance in legacy systems adds to the operational costs and maintenance challenges.
2. Self-Service: To ensure profitability and effective customer service, more and more insurers are moving towards increasing adoption of self-service for policy servicing. Since the proactive Gen X and Gen Y customers wants to be more involved and participate as co-creator this policy ensures their satisfaction while retaining profits for the firm.
3. Channels: Earlier, (especially in the emerging markets) the majority of distribution was done through the agents/agencies. However, there has been a huge shift in this trend and alternative distribution trends are coming up like NGO’s/Trusts/Societies which are increasing the penetration in the rural areas in these markets.
4. Business Intelligence (BI): Insurers are soon realizing the power of big data and are investing more and more in the technology to harvest its power and use the information to judge performance levels and trends. This is emerging as one of the major trends not only in insurance sector but also in many financial sector companies which are relying more and more on Business Intelligence to deliver superior customer value.
5. E-nsurance: The growth in internet and technology has enabled people to purchase and maintain their policy online and this has led to reduction in dependence on agents. This E-insurance has made it easier and given more power in the hands of consumers.
LEADING INSURANCE COMPANIES OF THE WORLD
This US multinational conglomerate operates in diverse business activities including casualty and property insurance and reinsurance, freight rail transportation, utilities and energy, finance, manufacturing, retailing and services.
CHINA LIFE INSURANCE
This Beijing headquartered company operates in following segments: Group Life Insurance Individual Life Insurance and Short-term Insurance.
This Shenzhen headquartered company operates in the following segments: Life Insurance, Banking, Securities Property & Casualty, and Corporate.
The insurance landscape is changing and far from settled. The Asian, African, Eastern Europe and the Latin America markets will become more and more important. However, For the coming few years the majority of primary premiums will still be coming from the industrialized countries.
The global insurance industry has its challenges, be It the Euro crises or the increasing competition from other investment products outside the sector. On the other hand, there are many promising opportunities, the growth prospect in the emerging markets and the increased focus on health instruments.
However, to capture the opportunities presented and to overcome the challenges the sector should be continuously innovating in its processes, respond to customer’s feedback, maintain a competitive edge and develop an in-depth understanding of current and future trends. Those companies that identify new developments, prepare for change and adapt to the rapidly evolving landscape may emerge as the winners!
This article has been authored by Vaibhav Singh from SIBM Pune