When analysts were asked how insurers might achieve the high growth rate and return on equity, which they expected of the firms to which they gave their best ratings, they listed three key priorities: risk control, sustainable growth and cost reduction. In this post I’ll explore the potential for growth.
Analysts believe the most promising opportunities for growth are to be found in emerging markets. They expect organic growth to be prevalent among life carriers, but mergers and acquisitions to be the most effective strategy for P&C carriers.
Emerging markets present growth opportunities
With the weak demand for insurance in North America and Europe, analysts believe insurers need to look to emerging markets—although moving into these new regions will not be easy. Additional regulatory complexity and significant cultural differences will make it difficult for insurers to achieve economies of scale across borders, so they need to guard against adding only volume and complexity rather than scale and synergy.
Shared services centers could help, but the Western model, with its focus on cost reduction, often under-delivers. A better investment would be a growth-oriented center which supports M&A, customer segmentation and predictive modeling, lead conversion analytics, agent performance and perhaps direct selling.
Developed markets also have potential
To achieve organic growth in developed markets, insurers need to become more sophisticated in the ways they engage with their customers. They should focus on lead generation, close ratios, customer retention and customer penetration. Building a stronger brand will certainly help, while rich data, advanced analytics and predictive modeling will be invaluable. An integrated multi-channel distribution strategy will enable them to deliver the kinds of service their customers demand, while significantly enhancing the effectiveness of their advisors.