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Paper presented at the Encore Meeting, https://doi.org/10.1016/S0167-7187(01)00092-3, Competition in the insurance industry in Ecuador, https://doi.org/10.1016/j.qref.2018.10.001, Economic development cointegration and Malaysian life and general insurance consumption, Competition in the financial sector: Overview of competition policies, Banking competition and stability: Evidence from West Africa, Competitive advantage and competition policy in developing countries, Measuring competition: How are cost differentials mapped into profit differentials? Dynamics of the Boone indicator in the Zimbabwean insurance industry. These solutions offer rule-based modelling, expressed as configurable and repeatable rules within the application. For businesses and individuals, the cost of living and operating will go up. Attaining competitive advantage has crucial importance for the companies by applying appropriate strategies and investing in the right plans so that they can pay them off to the maximum level. Learning about competitive advantage will surely give them a great chance to make better decisions. 1 What is a competitive advantage? For in-house credit management teams, reading customer behaviour and spotting red flags is increasingly important. Insurance companies had to start afresh building portfolios after their capital and customer base was wiped away. First published at Credit Management magazine. A differential advantage is attained when your goods and services differ from your competitors in a better way and they are looked at superior by customers. 3099067 Sigma Swiss-Re (2016) notes that insurance spending is 6.23% of Worlds GDP. Phahalad and Hamel took the RBV framework a step further by enforcing the value of core competence as the leading factor in the advancement of the competitive advantage. Be it new customer onboarding, procure to pay, change of details, or new product development, process mining offers process transparency in its raw form. You are not required to obtain permission to reuse this article in part or whole. Additionally, process mining delivers an enduring connection to the core systems and dynamically visualises the impact of change. The provider has to maintain the quality and meet the demand of the customers which will give him a competitive advantage over its competitors and provide price value to its customers. The number of players has been a moving target since the regulator has registered and deregistered players in the industry. One of the main drivers for adaptability and change is the ability to deliver scalable digital capabilities at a faster pace. But keep in mind that companies willing to move quickly and take calculated risks stand to gain a competitive advantage over their more sluggish rivals. In the period 20132017, most insurance companies had fulfilled their capital requirements hence were on good footing to compete in the sector while at the same time insurance firms had opportunity to build their portfolios, hence increased competition. As a result, consumers of all ages are adopting the use of digital channels to research and review the best possible insurance options to meet their needs. Critically, insurers will need to get the basics right; embracing new technology as an enabler and designing services rather than products in a collaborative manner through the use of an ecosystem. MC=TCy1+2lny+8lnw1w3+9lnw2w37, For robustness check marginal cost is proxied by the average cost as done by other studies (Cummins et al., 2017, Shaeck and Cihk, 2014; J. Bikker & Van Leuvensteijn, 2008). If applied with proper planning, the companies can attain and maintain a competitive advantage over their competitors. According to a 2013 LIMRA study, 86 percent of consumers would prefer to conduct their life insurance research online, and if given the option, 23 percent would prefer to buy online as well. In some cases, contracts have been successfully re-negotiated or Covid credits issued. Variable costs are composed of net incurred claims and operating expenses while variable revenues are the sum of net premiums and net investment income. How do you leverage legacy assets to embrace the transition more quickly and cost effectively. Although the finance sector is currently behind the curve in adopting these technologies, hopefully, 2023 will be the year that businesses push and transform the industry once and for all.. The government should put in place pro-growth policies to ensure insurance companies thrive. The total assets held by the insurance sector increased from $4.2 billion in 2018 to $17.2 billion in 2019, phenomenal growth which is second only to the banking sector in the financial sector. Organization resources are strategically equivalent when they are used in a separate way to implement the similar strategy. The resources of an organization include capabilities, processes, assets, information, attributes, knowledge, etc that are controlled by the organization and rightly implemented to promote efficiency and enhance competitive advantage. Finance Derivative Names the Worlds Best Financial Institutions and Banks 2022 in Netherlands on December 23, 2022, Festive Fraud: How to Avoid Christmas Shopping Fraud this Year, What to expect from banking and payments in 2023, How Banking as a Service (BaaS) unlocks opportunity for the banking sector, The Future of Payments: Biometrics Within the Financial Ecosystem. Behind the scenes, adjusters are adjudicating claims at a more rapid pace due to improvements in processes and operational systems. Its global supply chain is vertically integrated which means that they have full control of every stage from moving the coffee beans from the farm to the store and there is no middleman in between. Advanced technology, patent-protected products or processes, brand identity, superior personnel are all the drivers of creating a differential advantage over your rivals. This is all good in theory, but are insurance companies really going mobile? In the business world, competitive advantage refers to all the factors that help a company to enhance its business by producing more goods and offering more qualitative services in comparison to its rival. Bringing these improvements to the product or service means you have to deliver high quality to customers. (2020) explored the relationship between competition and financial stability in 10 countries in West Africa over the period of 20002014. Proofs of concept have established the ability that DLT has, but only a few market players have gone past that stage. United Healthcare Insurance Company: 5,999,413,575: 12.16: 3: 73288: Humana Insurance Company: 5,507,460,643: 11.16: 4: 71013: Superior Healthplan Network: The government should put in place pro-growth policies so as to ensure insurance companies thrive. The results further revealed that there was no significant difference in competition in the periods 20132017 and 20102012. The number of reinsurance broking firms increased by 100% during the period from 4 to 8 which might have increased competition in the industry. The global insurance market grew from $5946.74 billion in 2022 to $6466.23 billion in 2023 at a compound annual growth rate (CAGR) of 8.7%. In order to achieve new gains for its stakeholders and fulfill their needs and requirements, organisations must continuously search for the development of its product and services through marketing innovation and creativity. Greater focus on training and skills development is also helping.. Challenges lie ahead, not least skills shortages. The insurance sector players have been experiencing increased digitalisation, paving the way for changes in business models and the development of new products. Advanced analytics, IoT, and cognitive applications demand technology capabilities that are scalable and flexible. (2017) did a cross-country study on the association between soundness and competition in the life insurance industry in 10 European countries. Required fields are marked *. Convenience when switching, which used to be a hurdle, is not considered an issue anymore with the advent and now dominance of marketplaces and price comparison platforms. Penetration rate is measured as the ratio of premium underwritten in a particular year to the GDP. In addition, because they handle many different carriers, the complex details of any given plan can be difficult to remember, and not having answers could mean losing a sale. For instance, companies that are now launching wireless chargers are working exactly on differential strategy. Competition should take place systematically since it can potentially lead to insolvency (J.A. Consumers now require more interactive and dynamic experiences and want to feel empowered to see what they want when they want it, on the device of their choice. How competition evolved during this period is of interest due to the differences in macroeconomic management styles. So, the SCP framework argues that the structure of the industry is the key parameter in determining the right direction for the success of an organization. For that businesses need to do more research, development, and design thinking to produce new ideas that attract the consumers attention and provide more facilities with the same product. When process mining addresses the need for rationalisation, standardisation is addressed with new technologies that offer configurable rules engines automating existing processes and avoiding lengthy approaches to change. For instance, Saga is now offering a three-year price promise on car and home insurance, while Aviva has introduced AvivaPlus which offers a renewal price guarantee. Technology as a competitive advantage in the insurance industry In contrast to software companies, insurance companies are rarely referred to as drivers of innovation. In contrast, life and pension insurers are more stable in a highly competitive and more concentrated market. Stylised facts about Insurance sector in Zimbabwe, https://doi.org/10.1080/23322039.2021.1974154, Medicine, Dentistry, Nursing & Allied Health. The soundness-enhancing effect of competition is greater for weak insurers than for healthy ones. How competition evolved during this period is of interest due to the changes in macroeconomic management styles that were experienced after the hyperinflation period. Building competitive advantage For insurers that no longer have captive distribution or that can no longer afford to maintain it, the focus will shift to more effectively managing third Staying dry during the recessionary storm of 2023, How new financial directors can champion change in the first 100 days, From budget cruncher to transformational leader, the role of the CFO in 2023, 2023 predictions: authentication, digital identity and in-car payments, Mizuho Bank Luxemburg upgrades anti-financial crime compliance risk management with Napier, Bahrain based fintech IPS extends its collaboration with BPC. offering a wide spectrum of financial products and services. The study employs one of the new empirical industrial organisation methods, the Boone indicator. The authors received no direct funding for this research. Another important dimension reflected in the results shows that the average Boone indicator for the period 20102012 does not significantly differ from the one for the period 20132017. Insurance industry is in a phase of digital revolution replacing the legacy systems and infrastructure to meet the demands of todays digital consumers. According to Bethan Cooke, senior lawyer at Admiral Money: While risk understanding is important, businesses should also be thinking about how they might expand products or service lines in the year ahead. Paucity in natural resources, often mentioned in reference to Japan, we note, is overstated. High take-up of Government-backed loans during the COVID-19 pandemic, has left many businesses struggling to meet their repayments with reduced revenues and depleted cash reserves, all at a time of record inflation and a war in Ukraine, which is driving up energy costs to exorbitant levels that are simply not sustainable for some businesses. At a recent roundtable event in Cardiff, chaired by the Chartered Institute of Credit Management (CICM) and hosted by accountancy firm, Menzies LLP, experts from across the industry discussed the challenges and opportunities that lie ahead for businesses. Last Updated Oct 23, 2013 App Management expert. On the other hand, the amount of non-life insurance firms declined significantly from 28 in 2012 to only 16 in 2018. https://www.fca.org.uk/news/press-releases/insurance-firms-failing-consider-value-products-and-services-provided-consumers. Episode 11: Emerging mortality experience in U.S. individual life insurance. The degrees of freedom for the regressions are also increased with panel data as compared to time series. This forms the basis of the ongoing war for talent., A key method that will prove crucial in doing more with less will be automation. The complete loss of insurance savings in 2008 because of hyperinflation remains the major cause of low consumer confidence. Comparative advantage, Competitive advantage vs. In the world of complex business, those who are still struggling to establish their name in the market need to learn to put smart strategies ahead. Hence, there was more competition during the period 20132017. To attain differential advantage, the companies need to make the different products that stand out from that of their competitors and provide the customers with more facilities. While PSD2 was centred around payments with data sharing added afterward, the impending updates to legislation (by the name PSD3 or otherwise) will more than likely have a broader focus on generalised data sharing, open finance, and even open data, as Europe catches up to its peers., Equally, Operational Resilience regulation is the dominant theme on the regulatory agenda, notes Gary Lynam, Director of ERM Advisory atProtecht. The Reinsurance Realignment (Inside P&C Daily lead story): The transformation in the property reinsurance landscape will have a highly skewed impact on the primary market. All of the above are topics are often discussed within the insurance world, but the broader fundamental challenge lying ahead is how insurers will create the springboard and set themselves ready for adapting and keeping up with changing customer and wider societal shifts. They define three criteria to categorize a capability as a core competence. Todays new landscape requires a holistic view of the customer and the deployment of innovative technology, yet insurance companies have been plagued by legacy systems for years and are less inclined to adopt new technologies as quickly as their counterparts in other industries. He is also recognized by the legal profession as an expert on insurance coverages. The average for the period 20132017 was 0.1969 and 0.2938 for the marginal cost and average cost, respectively. Starbucks keeps on updating itself on new innovations and bringing new ideas to the table for customers. We empower our insurance carriers, marketing companies and their producers with patented DataIntelligent solutions that provide them a strategic competitive advantage in the marketplace. Which technology providers understand and have the capability to execute? However, as the Europeans observed the successes of those that followed, notably in Brazil and the Middle East, they started to revisit their approaches. building competitive advantage in Kenya: A survey of insurance firms. Which Life and Annuity Deals Might Be Best for the Clients? One recent study, conducted in 2021, found the market is set to reach a value of $3.98 trillion by 2030. To stay competitive, insurance carriers and agents are being forced to rethink how they interact with their digitally savvy consumers and redefine customer centricity. Companies strive to build sustainable competitive advantages. The study follows the Boone et al. The insurance Profit is calculated as the difference between variable revenues and variable costs divided by total assets. Customer expectations and demands are growing. It has been shown that since the economy started experiencing moderate growth rates, there has been increased activity among insurance companies. There is no room for cutting corners. 10. Independent agents, who spend the majority of their time on the road visiting prospects, need to be able to access information while on-the-go. The study established that competition enhances stability. Product development can also be accelerated by backing InsurTechs that do not face the usual policy and legacy burdens. If you are part of the insurance producer ecosystem, and havent yet thought about mobility, it is time to get started. Customer risk isnt the only source of financial risk requiring senior-level attention. Insurance is a key instrument of risk transferring, indemnification and intermediation (Outreville, 2015). It is not necessary that your competitor can only be similar products or companies. For example, a key technology in use by health and life insurers automates underwriting processes to deliver speedier responses to customer rate inquiries. Table 4 shows that the values of the Boone indicator, which were estimated using linear regression equations 5 and 8. Typically, there will be a common path that is frequently used, but not always the most efficient. Ilovi (2011) examined sustainable competitive advantage in the insurance industry in Kenya. Its founders decided to go the niche route and develop the platforms initial user base through referrals instead of developing a fool-proof strategy to take on to the social medias juggernauts. Prior to any regression, the study evaluated the presence of correlation among the variables. There are other strategies too that help the company maintain its business alive and up-to-date such as: Competitive advantage is the capacity of the company to strategize its business in a way that stands out its position in the market and pays it off for the loner and sustained way than to its competitors. 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