Insurance Industry Archives - Interpretation Services

There’s no stopping the globalization train. It’s already here and it’s going to go further and wider. How has globalization affected the insurance markets and insurance companies all over the world?

Competition in the Insurance Markets

First and foremost, local insurance companies started facing more widespread competition – not only from within the country, but also from the region and from international conglomerates. Now, this is great news for the customer. After all, they now have the opportunity to choose from a range of products and services that are best suited to their individual requirements.

To sharpen the competitive edge, insurance firms have also tweaked their offerings to make them more tempting. This can range from improving coverage to reducing premiums.

With competition comes greater challenges. Insurance companies now look beyond the local market to acquire customers. In addition to a comprehensive suite of products, they strive to give their brand an international outlook while paying attention to local context and cultural sensitivities.

Growth in Opportunities

The thing about globalization is that it has caused other industries to expand as well. This has resulted in a plethora of opportunities for insurance companies. Today, a standard insurance firm doesn’t have to limit itself to a limited number of products or services.

With globalization, consumers’ demands change and their needs become more varied. There are also more opportunities for wealth creation and preservation. For instance, more organized labor means more healthcare coverage for employees. Wider globalization means more opportunities for overseas investments, and thus more investment-linked plans.

Globalization has also caused immigration numbers to rise. There are more people within the population who will be looking to sign up for insurance products, and thus more opportunities to do business.

New Industry Trends in Insurance

Insurance companies are also beginning to experience centralization processes, thanks to partnerships with banks and reinsurance companies, and mergers with smaller or larger competitors.

There’s a growth in the type of insurance services and products as well. For instance, we are seeing insurance products for newer risks such as informational risk, political risk, security risks, and even military risks.

Just as FinTech is changing the banking world, InsurTech is transforming the industry. As the insurance industry starts embracing technological innovation and eCommerce, we’re also looking at more insurance products being sold via the Internet.

Increased Consumer Demand for Insurance

As more and more foreign insurance companies enter a local insurance market, customers’ awareness tends to grow. Their knowledge of possible insurance and investment plans becomes richer. Needless to say, this creates a demand for more products. Consumers are not willing to make do with what was available anymore. They expect comprehensive coverage plans, low premium rates, and flexible policies.

Some countries are experiencing higher economic output due to globalization and international trade. Economic growth in these countries has boosted affordability, allowing most consumers to go in for high-end insurance and investment-linked plans.

Increased Customer Satisfaction

With globalization, there’s a renewed focus on customer satisfaction and trust. As customers get savvier and educated about insurance products, the need to gain their trust and build strong relationships becomes imperative to the top line. In the name of competition, insurance firms are putting in extra effort to provide better products and clearer communications driven towards meeting the expectations of both local and international customers.

To borrow the words of Kofi Annan, the Former Secretary General of the United Nations, “It has been said that arguing against globalization is like arguing against the laws of gravity”, globalization has impacted every aspect of our lives and the insurance industry is not exempt from it. The sooner insurance markets embrace the effects of globalization, the better are their chances in ensuring consistent growth in the face of this unstoppable force.

If you’ve been following the latest headlines on the insurance sector, you would have read that insurers are having a hard time in this Age of Globalization. They’re dealing with regulatory problems, geopolitical risks, demographic shifts, and low bond yields.

However, the good news is, they aren’t backing down. Armed with unique products, reduced handling charges, and technology, they are facing head-on the challenges of surviving in a globalized business landscape.

Is your insurance company just as prepared? If it isn’t, it’s time to start taking the necessary steps.

Research New Markets

A targeted marketing approach can help insurance firms achieve the intended results, especially if they are on a tight budget. The benefits are tremendous for insurance agents who specialize in a new market and for those who can adapt to the consumer behaviors in emerging markets. Of course, the trick lies in targeting the right market.

Take time to identify new markets that are opening up in your respective regions. Research consumer trends, needs and aspirations in these markets before adopting strategies to target specific customer pools. There are plenty of resources that can help you with this, like the local chambers of commerce, trade associations, business news, and financial research papers.

Localize

Localisation plays a key role in tapping into new markets. If you can connect with the local customer base, half your work is done. One way to do this is by understanding the local culture.

When AIG entered China with its subsidiary, AIA, in 1992, they tried to leverage on the Chinese’s moral code on responsibility and love to make inroads. However, this failed because the Chinese do not take well to discussions surrounding premature death.

So, do your research. Interpret the local culture. Pay attention to customs and sensitivities that might affect your strategies. Hire localization and translation experts.

Innovate

Whether you’re in a developed market or an emerging market, one essential tool for surviving in the globalization era is innovation. Insurers must focus on research and development, agility, and analytical decision making.

Traditional insurance products don’t have a bright future anymore. Therefore, it is necessary to focus on developing risk management services and value-added loss control. Think about re-engineering your products and evaluating the values they seek to fulfil.

Leverage On Existing Capabilities

Apart from innovating and creating new products, insurers must focus on making the most of their current capabilities, such as their product portfolios, talent, capital, and customer relationships. These capabilities must be introduced to markets that are identical or similar to your current market. You might even need to reshape certain business processes and retrain your talents to create a positive impact on your overseas markets.

As stated earlier, do not fear localization. Expand into newer territories and customer segments to market your current products. Identify new distribution channels to connect with a fresh customer base.

Whether you are a global insurer, an annuities specialist, or a retirement provider, you need to transform in order to thrive, succeed, and grow in the age of globalization and fast-paced technology disruptions. As you plan for your customers’ future, you need to plan for the future of your insurance company too.

Elite Asia

5 Impacts of Globalization on Insurance Markets