Our analysis explored the impact of ten rapidly accelerating trends most relevant to competitive advantage. To create a competitive advantage, for example, a business must provide vivid benefits for the products they launch in the market that have no ambiguity and provide a clear benefit to its target market that is better than what the competitor has offered. In the case of health insurance, digital consumers want to see and navigate through their explanation of benefits (EOB) dynamically and to further communicate within the context of their claim requiring insurers to be able to engage immediately via online chat or text. The study investigated the evolution of competition in the Zimbabwean insurance sector during the period 20102017. Source: Authors computation * 10% significant level, ** 5% significant level, *** 1% significant level. Simon Philpin, head of trade credit at credit assurance provider, Markel, added: We have seen increased demand for credit assurance linked to suppliers. Of novelty to this study is the use of the Boone Indicator, one of the new empirical industrial organisation methods. The results confirm moderate competition in the financial system in Zimbabwe. Figure 2. Todays Payment Landscape Enabled by huge advances in technology, our evolving payments Lionel Grosclaude, CEO, Fime As the number of devices and connected services rise, our lives are becoming increasingly digitized. Their daily lives are all about being digital. Reevaluate core systems and processes. 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. The so-called loyalty penalty has recently been under scrutiny by the FCA. The highest number of insurance firms were recorded in 2013, while the least number of 88 was experienced in 2018. Boones model (Boone, 2008) argues that efficient firms achieve higher market shares and/or profits and the effect is stronger in the environment where competition is more intense. The equation shows that profits depend on marginal costs in a quadratic way. All Right Reserved. Technology as a competitive advantage in the insurance industry In contrast to software companies, insurance companies are rarely referred to as drivers of innovation. Sigma Swiss-Re (2016) notes that insurance spending is 6.23% of Worlds GDP. 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. The insurance sector is mostly dominated by the non-life insurance and insurance broking. Central Bank Digital Currency: What is the future of our Banking System? The study shows that marketing innovation and creativity are crucial in organisational success. Paucity in natural resources, often mentioned in reference to Japan, we note, is overstated. 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. However, advances in technology and the advent of process mining tools address many of the legacy challenges of process improvement, benefit realisation, and sustainable improvements. Lower costs will eventually generate more revenue that can as businesses are still able to make a profit over every goods or service sold. The firm profit function is given by (2) i=pimciqi2, The firm is therefore supposed to choose the optimal level of output qi. The competitive advantage that every insurance professional needs, February 13, 2015 at 06:11 AM Post the hyperinflation environment starting 2009 to 2012, there was consummation of a government of national unity which has been credited with stabilising and phenomenally growing the economy. 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. Of interest is the evolution of competition during the period when the economy had transitioned from hyperinflation. Bethan Evans, business recovery partner at Menzies LLP, said: Corporate insolvencies in England and Wales rose to a record level in Q2 and some businesses are seeking advice about entering an insolvency process now, because they know that cost and staffing pressures, as well as market uncertainty, are not going away. Were not the only ones who think so, in fact according to the research firm Celent, total worldwide IT spending in the insurance industry is expected to reach $140.2 B this year. Distributed Ledger Technology (DLT) and Blockchain has been the epicentre of insurers focus, mainly in understanding how this can be used to collaborate with competitors better and drive down costs. The study recommends that the government should ensure that the macroeconomic environment is conducive for businesses to compete. The COVID19 pandemic has not spared the sector which is experiencing higher than usual lapse rates as a result of potential liquidity issues anticipated as customers incomes become constrained. Relevant also are population, culture, and events in history, as are the role of the government in The impulse response function revealed that the impact of one standard deviation shock in the rise of Boone indicator as a proxy for competition on stability was zero for the first year and dropped to negative through to the tenth year. The increase is positively correlated with the increase in GDP from US$12.5 billion in 2012 to US$15.3 billion in 2016. The correlation coefficient matrix (Table 3) shows that there is no strong correlation among the variables. While the concept appears straightforward and simple, catering to digital natives isnt where the insurance industry has traditionally excelled. (2019) studied competition in the life and non-life segments of the Ecuador. 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. The elections in 2013 led to the disbanding the government of national unity which saw a single part taking charge of the government. 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 study established that competition enhances stability. If your customers see your product being different and more beneficial from others, they will be willing to pay more to gain it. In line with prior expectation, the Boone indicator had negative values for all the years reflecting the fact that the more efficient insurer (with lower average costs) makes higher profits. It has been shown that since the economy started experiencing moderate growth rates, there has been increased activity among insurance companies. Customers can initiate a claim at the time and place of occurrence with near-real-time visibility of status along with the EOB. Craig Evans added: In the 2008/09 recession, we worked with a construction business that took on more risk and increased its market share as a result. Steps to attracting millennials while retaining their predecessors. 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. Post 20102012 period, most insurance companies had fulfilled their capital requirements and hence were on good footing to compete in the sector. Gartner estimates that more than two-thirds of global life and P&C insurers still rely on legacy systems (some dating to the 1970s or 80s). How competition evolved during this period is of interest due to the changes in macroeconomic management styles that were experienced after the hyperinflation period. In order to The user base is mostly millennials and zoomers, Roughly 25% of the time spend on the platform is shopping, 98% have tried something they have seen on the platform, 89% of them get inspired for new purchases, 85% buy something based on Pins they have seen from brands. The Hague: CPB Netherlands Bureau of Economic Research, The relationship between insurance and economic growth in Romania compared to the main results in EuropeA theoretical and empirical analysis, https://doi.org/10.1016/S2212-5671(14)00085-9, Competition, efficiency and soundness in European life insurance markets, https://doi.org/10.1016/j.jfs.2016.11.007, Insurance effect on economic growth-among economies in various phases of development, https://doi.org/10.1108/RIBS-02-2017-0010, Bank structure, capital accumulation and growth: A simple macroeconomic model, Interest rates and financial performance of microfinance institutions: Recent global evidence, https://doi.org/10.1080/13571516.2019.1664835, The Boone indicator as determinant of Croatian insurance market soundness, An evaluation of competition in Zimbabwes short-term insurance sector: An application of the Panzar-Rosse approach, The relationship between relative risk aversion and the level of education: A survey and implications for the demand for life insurance, World insurance in 2015: Steady growth amid regional disparities. The insurance industry is going through tremendous change driven primarily by a new breed of consumer: the millennials. Understanding this and staying flexible to individual worker preferences when it comes to hybrid working is helping us to attract the right people. Kramari and Mileti (2019) evaluated the effect of competition on soundness of Croatian insurers. Many are in fact, Chubb, the nations 12th largest property and casualty insurer, was ahead of the game several years ago when the company provided a small subset of its agents with tablets containing a library of marketing material that they could access remotely, and CapGemini recently found that mobile and social media are a priority for more than 50% of insurers included in their survey. Not only does this cut back operational effort but avoids the likelihood of manual errors and process related incidents. Gaining Competitive Advantage in the Insurance Industry with Enterprise Apps. Compliance as a Competitive Advantage in the Insurance Industry Submitted by: Teresa Settas. Assuming that >mci and 0< b, the first-order condition for the Cournot-Nash equilibrium becomes 2qiijqjmci=03. This is a growing area of credit risk that our customers are seeking information about particularly regarding the number of winding up petition applications., While there is no silver bullet to the staffing crisis, employers are aware that they need to remain flexible and understand what workers want. (2020) explored the relationship between competition and financial stability in 10 countries in West Africa over the period of 20002014. The insurance 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. In this process, keep looking at the issues in your goods and services or the strategies you apply, and try to fix them in a proper manner. In practice, a modern core system is stable and secure and can support improved processes throughout the entire lifecycle, from first customer contact to claims settlement. Figure 1 shows insurance penetration in Zimbabwe between 2012 and 2018. No longer is it sufficient to have a consumer complete a paper application and wait days or weeks for a quote. In the microfinance sector, Kar and Swain (2014) measured competition using the Boone indicator. In Zimbabwean case, there is some level of competition among insurance companies with some degree of product differentiation (Musiiwa & Dzingai, 2021). In contrast, life and pension insurers are more stable in a highly competitive and more concentrated market. In addition, competition enables efficient resources allocation, brings balanced development in a country, enhances product innovation, enhances prospects of economic growth, improves efficient production of financial services and reduces credit risk (Caminal & Carmen, 2002). Resilience is shifting the organisational mindset and very much seen as a catalyst for change. When planning to go digital, insurers should: Listen to free podcasts to get the info you need to solve business challenges! To learn about our use of cookies and how you can manage your cookie settings, please see our Cookie Policy. If you continue to use this site we will assume that you are happy with it. The insurance sector has experienced phenomenal growth since 2009. 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 results show that the amount of competition in the insurance sector was almost consistent mean reverting around Boone indicator of 0.26 and 0.2 using average cost and marginal cost, respectively, implying moderate competition in the sector. Episode 10: Inflation and its impact on the insurance industry. 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 In fact, they spend more on the healthcare of the employers than on the coffee beans. 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. Kramari and Mileti (2019) evaluated the effect of competition on soundness of Croatian insurers and established that the Boones indicator for the sector ranged from 0.2536 to 0.4142 between 2006 and 2010. The study recommended that players in the insurance sector should constantly evaluate To analyze the influence of focus strategy on competitive advantage of insurance firms in Thika town iii. At the end of the day, it is the sustainability of the business and profit that matters the most. Thats a huge increase from only $90.69 billion in 2020. Jamie Hopkins: Advisors Ignore 401(k) Plans at Their Peril, CFP Board Sanctions Advisor Over Misleading YouTube Video Ad, Creative Planning Taps Charlie Bilello as Chief Market Strategist, Ex-AARP Lobbyist Named New SEC Investor Advocate, BMO pegs U.S. economic growth in 2015 at 3.1 percent, Lockton Acquires Agency That Serves Advisors: Deals. It should be difficult for the competitors to imitate and easily adapt to their own strategy. This is all good in theory, but are insurance companies really going mobile? Insurance is a key instrument of risk transferring, indemnification and intermediation (Outreville, 2015). This is a competitive advantage that its competitors simply do not have to enjoy. Competitive advantage generates more value for a company that can enhance its market position and stabilize its place. Deceleration in economic activity experienced in the economy resulted in the insurance penetration rate declining consecutively in 2017 and 2018. According to delegates at the roundtable, the biggest and most immediate challenge that businesses are facing is the staffing crisis. The number of reinsurance broking firms increased by 100% during the period from 4 to 8 which might have increased competition in the industry. J. Bikker and Van Leuvensteijn (2008) used the Boone indicator to study the Dutch life insurance market. In 1985, Michael Porter wrote a book in which he identified three strategies that can be adopted by any firm to tackle the possible competition in any marketplace. After a challenging year for dealmaking, whats the 2023 UK M&A outlook? Competition increased in the years after the EU accession. It also concluded that through marketing innovation and creativity, the Insurance Competition in the insurance sector An . 2. Develop a 360-degree view of the customer. His passion other than providing excellent advice is playing golf. On the other hand, the amount of non-life insurance firms declined significantly from 28 in 2012 to only 16 in 2018. 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, as the Europeans observed the successes of those that followed, notably in Brazil and the Middle East, they started to revisit their approaches. Bikker & Boss, 2005). Companies understand the importance of underwriting customer credit risk, but a growing number are now seeking advice about how to mitigate supply-side risks too. Finance Derivative. With the introduction of new API platforms, migrating to the cloud is no longer onerous. The Granger causality test revealed bidirectional causality. that contributes to economic growth (Haiss & Smegi, 2006). Elsewhere, blockchain has been used as a lever in the battle of reducing bottom line and responding to downward pricing pressures. A valuable resource cannot be considered as the source of competitive advantage if it is in the reach of everybody and exploited by all of the organizations hence making it a travail source. Shifting to a digital world to capture the hearts and minds of the digital natives calls for taking a holistic approach to customer centricity, technology, and processes. Get the info you need to solve business challenges the Ecuador go,! Going through tremendous change driven primarily by a new breed of consumer: the.. Is shifting the organisational mindset and very much seen as a lever in the years after the EU accession 2006... 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