Gujarati (2007) argued that the problem of multi-collinearity exists if the correlation between independent variables is above 0.8. lshammari, Alhabshi, and Saiti (2019) examined the impact of competition on the cost efficiency of conventional insurance in the Gulf Cooperation Council (GCC) countries for the period 2009 to 2016. Similar was the case in the advent of the internet where newspapers didnt pay heed to the potential impact of the availability of online news. The government should put in place pro-growth policies to ensure insurance companies thrive. which can lower the manufacturing cost over the other competitors and can provide cost-benefit to the customers. The competition in the market can increase when the products of the insurance firms become close substitutes that is when increases but remains below . Alternatively, competition can increase when entry costs decline. Resource Based View suggests that the organizations within an industry possess identical resources and pursue similar strategies thats this kind of environment does not accelerate competitive advantage as the resources even heterogeneous in nature are mobile so can be easily bought and sold. Some of the non-life insurance firms were deregistered over the period with a few amalgamating. Scantlebury from Aqilla explains that automation, artificial intelligence, and machine learning within finance functions can help accounting teams considerably. At the end of the day, it is the sustainability of the business and profit that matters the most. Compliance as a Competitive Advantage in the Insurance Industry Submitted by: Teresa Settas. The term millennials has been used to describe young people (most of them born after 1980) who hold a strong influence over older generations and are paving the way for their elders to be just as digitally savvy. The firm profit function is given by (2) i=pimciqi2, The firm is therefore supposed to choose the optimal level of output qi. 10. The study shows that marketing innovation and creativity are crucial in organisational success. These insurers will have distinctive customer insights, risk assessment, product development, and underwriting capabilities with privileged access to distribution (either affiliated or independent). Rather than going toe-to-toe with its competitors, Pinterest accepted its core user base and strategized its business accordingly. On the other hand, the amount of non-life insurance firms declined significantly from 28 in 2012 to only 16 in 2018. 5 Howick Place | London | SW1P 1WG. For instance, a car owner will buy gasoline from a gas station that sells 5 cents cheaper than the other station in the area. We empower our insurance carriers, marketing companies and their producers with patented DataIntelligent solutions that provide them a strategic competitive advantage in the marketplace. The penetration rate indicates the level of development of insurance sector in the country. To stay competitive, insurance carriers and agents are being forced to rethink how they interact with their digitally savvy consumers and redefine customer centricity. The amount of insurance pay-outs has been perceived to be low as compared to the premium consumers are forced to pay monthly. Criticality and complexity should determine when to migrate to the cloud and the effort required to do so. Of novelty to the study is the use of the Boone Indicator, one of the new empirical industrial organisation methods which has not been applied in the insurance market in Zimbabwe. They also adopted the Boone indicator method for measuring competition. Save my name, email, and website in this browser for the next time I comment. There are no hidden fees or Greater focus on training and skills development is also helping.. The government should put in place pro-growth policies so as to ensure insurance companies thrive. Competition should take place systematically since it can potentially lead to insolvency (J.A. Insurance Industry Strengths Some of the internal strengths are as follows; New Products Technology and industrialization are working in collaboration and introducing new products or models every year. Customers can initiate a claim at the time and place of occurrence with near-real-time visibility of status along with the EOB. Competition in the insurance sector An . 2. The sector has not been spared from the economy-wide challenges; low economic growth; lack of fiscal space; the rapid growth in the fiscal deficit, which left public finances with a borrowing requirement of US$1.4 billion; negative balance of payment owing to poor export performance; limited development finance; increasing unemployment, which reduced household consumption by 11.8%. The number of players has been a moving target since the regulator has registered and deregistered players in the industry. In the microfinance sector, Kar and Swain (2014) measured competition using the Boone indicator. It is well advised to get ahead of the game in building accountability and tolerance against potential operational disruption, not only to meet incoming new legislation but to be ready for potential disruptive events that could be on the horizon.. (6) ln[TC/w3]=0+1lny+1/22(lny)2+3ln(w1/w3)+4ln(w2/w3)+5ln(w1/w3)ln(w2/w3)+1/26[ln(w1/w3)]2+1/27[ln(w2/w3)]2+8lnyln(w1/w3)+9lnyln(w2/w3)+(6), The model assumes the cost function has one output yrepresenting gross premiums and three input prices (w1 = Price of labour, w2 = price of physical capital, w3 = price of borrowed funds). There has generally been a steady increase in insurance penetration from 3.35% in 2012 to 4.7% in 2016. As such, insurers should approach an implementation in phases, beginning by asking themselves several key questions: Taking stock through an assessment will help senior executives understand the point of departure, their overall ambition, and what it will take to deliver results. Figure 1 shows insurance penetration in Zimbabwe between 2012 and 2018. Penetration rate is measured as the ratio of premium underwritten in a particular year to the GDP. Troy Fine, Director, Risk and Compliance, Drata With the accelerating pace of regulatory change and operational resilience policies, organisations As we enter 2023, many business leaders may be experiencing feelings of uncertainty and apprehension. 2020 Insurance Noon LLC. For instance, if a company advertises a lesser price for a product that has a higher cost in the market, it will definitely attract more consumers and will gain a comparative advantage but if it is advertising higher prices but the features of the product are unique that the competitive product, it can still gather more customers that will be willing to pay more. In the aforementioned scenario, for example, the target market of the newspaper shrank to an old population who didnt have easy access to news or they were not too comfortable getting it. One bad review on Yelp or Twitter can send the masses fleeing from an insurance company in seconds. The comparative advantage does not imply a better product or service instead the focus is on gaining goods or services of the same value at the lower price. Having a strong commitment to privacy. Some businesses are still working through customer issues caused by the pandemic restrictions. Hence, their findings provide support for the competitionstability view for Turkish life and pension insurers. The results further revealed that there was no significant difference in competition in the periods 20132017 and 20102012. AIA in Hong Kong recently launched a blockchain-enabled bank assurance platform, and AXA in Europe is offering flight delay insurance cover through a blockchain platform. They also invest a lot in training the employers when they initially join the company and throughout their career hence providing the company a skilled and committed workforce. The insurance sector has been facing a number of industry-specific challenges since 2008. As one of the 32 foreign trade zones (FTZs) in Texas, several distribution centers in Dallas-Fort Worth can assemble, manufacture, process, or InsurTech innovators are looking to disrupt not only how policies are currently offered to consumers but also tapping into new niche markets, some of them not pre-existing. Transforming data into meaningful information is critical to managing a successful business. He has received various certificates over the past few years and helps his clients and readers by giving them a realistic outlook on what they can expect to achieve within their set targets. 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. Industry-wide challenges include managing risk, recruiting and retaining customers, and now, for health insurance providers, implementing the provisions of the AHA (Affordable Healthcare Act). 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. Podcasts in this series: Episode 13: Reshaping of the UKs Solvency II and wider changes post-Brexit. Embrace an omnichannel approach. 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. Customers can join the program online or using their app. The benefits of competitive markets can be inferred from the negative social welfare effects of monopoly (Guzman, 2000). Of interest is the evolution of competition during the transition period from hyperinflation (2007/2008). Its a win-win for the Government so I think it is inevitable that the ICO will be hot on the tails of companies that fall foul of permitted data use., 2023 is going to be all about doing more with much less, notes Bruce Martin, CEO of Tax Systems. The 201012 period was mostly affected by the lack of confidence in the market mostly as a result of the hangover the people had from hyperinflation period when people lost the majority of their savings as most insurance policies were rendered valueless. Now they are back and looking to do the same thing again. They also remove much of the grind and monotony freeing up the time of skilled professionals to add value to the business. The study period spanned between 2001 and 2006 and applied the Panzar and Rosse model to evaluate the competitiveness of the industry. An example of this real-time, as and when needed self-managed coverage is Trv. Insurance also inspires creativity, innovation, entrepreneurial activities and trade that are vital for sustainable economic growth (Billah, 2014; Cristea et al., 2014). Customer expectations and demands are growing. They are already on the brink and the rise in the energy price cap next April could push them over the edge.. 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. Tony loves the outdoors and most sport events. All the correlation coefficients between the independent variables were less than 0.8. (2020) explored the relationship between competition and financial stability in 10 countries in West Africa over the period of 20002014. Whilst we wont see immediate application of blockchain, the industry is set to undertake more meaningful and tangible blockchain initiatives that will completely change the scale and shape of insurance operations. Establishing a competitive advantage can be a decisive move in the success of your business, but before planning to develop it, you need to know the: In his book, Competitive strategy: techniques for analyzing industries and competitors, Porter states that there are five competitive forces which if identified on time can benefit an organization to direct its efforts in the right direction. However, since 2011 the sector has begun to experience receding growth, recording an overall growth rate of 22.1% in 2011 which ebbed to 7.6% by 2014. Not only does this cut back operational effort but avoids the likelihood of manual errors and process related incidents. 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. To effectively support an omnichannel approach that meets the needs of millennials, insurers need to modernize their technical spine. This means updating legacy systems to ensure the organization can access data as necessary to present a single view of the customer across all channels and lines of business. That being said, how does an insurance carrier go about mobilizing their large, geographically dispersed force of agents and brokers, and why does it matter? By leveraging data and analytics, life and health insurers can capture customer information and make it available to all corners of the organization that touch the customer from sales and marketing to call-center representatives, actuaries, and claims adjusters. During times of economic hardship, credit managers have a particularly challenging, frontline role to play in helping businesses to protect cash flow, while mitigating financial risks. 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. Captive agents, who only work for one carrier, may need to access company-wide CRM data or account history for existing customers, requiring tie-in to the carriers back office. Using average cost, intense competition was registered in 2014 when the indicator score was 0.4005 after which competition declined (Figure 2). 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. 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