When we think about addressing growth in the U.S. insurance market, we often look at what the competition within our own geography is doing to see where opportunities lie. However, there are many insights that can be gained from looking beyond our borders to other geographies—especially their successes and challenges in dealing with growth and how they are connecting to evolving distribution channels.
During the Women in Insurance Leadership conference, a panel discussion on the “Global View of Growth” highlighted many opportunities for growth and distribution management from across the globe. Several of them could have an impact in the U.S. market.
The panel consisted of Celent analyst Catherine Stagg-Macy, who represented the activities in Western Europe, Wenli Yuan, also from Celent, who represented Asia, and Marie Carr from Diamond Consulting, who represented Latin America. During the discussion, three main topics emerged as being of significant importance: distribution channel changes, microinsurance growth and PAYD (Pay-As-You-Drive) initiatives.
1. Distribution Channel Changes
The common theme in all the presentations was that the distribution channel is driving changes in the way that products are consumed, delivered and developed. One example is the use of mobile phone apps. There is a high adoption rate in Asia due to the significant percentage of the population that uses mobile phones. In the UK, insurers view the use of mobile phone apps for insurance sales as more of a fad. Perhaps the most interesting market is in Latin America where insurance is seeing significant growth. Insurance companies are newer and typically not burdened by legacy applications, and because of architectures that are more modern, they are able to distribute products at a low cost via mobile apps. In this geography, mobile phone use is on the rise, creating a growth opportunity as reach extends to a middle class that is expanding at a rate of 40% to 50% in key countries.
A lesson learned from the UK market focuses on the role of aggregators. The UK market is saturated with aggregators that play a central role in all personal lines transactions. Consequently, insurance products have become more like commodities. In a market that is unregulated, rates might be modified several times during the day, and consumers race to the lowest price.
2. Microinsurance Growth
A second key discussion area dealt with the concept of microinsurance and its growth. Microlending is creating new small businesses that will need to be insured. Traditional insurance products would appear to be too expensive for this niche market, thus creating a need for a different insurance product. With the emergence of microlending opportunities in the US, the demand for microinsurance will result as well.
3. Pay-As-You-Drive Initiatives
The third discussion topic was focused on PAYD (Pay-As-You-Drive). Of special interest was how PAYD programs have been refined within the UK market. Although we have seen the beginnings of these programs in the U.S., the UK has taken the concept much further. All new cars are being delivered with black box devices that track driving habits. Insurance companies are using the data to develop automobile rates that are directly correlated with driving exposure. For example, some youthful operators might not be considered a high risk if they are driving mainly between 7:00 a.m. and 7:00 p.m. The facts related to driving behavior and habits provide insurance companies with the necessary information for pricing the risk according to the exposure, rather than classifying all youthful operators in the same risk category.
These discussions certainly support the idea that if we “look up and out,” we can gain greater vision, insight and direction than if we just keep our eyes focused on the road right in front of us.
Karen Furtado is a partner at the Boston-based SMA Strategy Meets Action, a strategic advisory firm offering research, advice, and consulting exclusively to the insurance industry.
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