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الثلاثاء، 8 ديسمبر 2015

SME Insurance Penetration - Here's how you do it!!!

Oil prices decrease is expected to continue for the 2016 period as latest economic reports show. The effects of this decrease are having dramatic effects on all governmental & private sectors. Large groups have high economies of scale to swallow the SME players drastically, which in their return will not be able to honour their financial commitments. This is already starting to be felt in the UAE, as the federal government is pushing towards a new bankruptcy law and a credit guarantee scheme to support the SME sector, in which Bad Debts have reached a record limit of 1.4 Billion Dollars this year.


Here comes the role of the insurance industry… Again in this article, I want to grant it to the local insurance companies which are clearing the field to foreign investors, to increase their market share and reinvest it outside the country (Not to say region) --- Local economies will be losing a significant potential income. On the other hand, other international players such as Zurich are exiting the Middle East’s General Insurance market due to lack of market potential (to be discussed in another article), which is an opportunity for other players to grasp their existing book.
Based on my humble experience, the underwriting department is the backbone of any insurance marketing strategy, and can be very flexible in crafting a holistic technical approach to increase the portfolio in a specific segment. It all depends on the senior management appetite to penetrate it or not!! Having clarified the above issues on the corporate segment, there should be a great emphasis on the SME segment in diversifying revenue sources, maximize profitability, and support local governments in their plans to stabilize it.
To take this matter little bit on the social side, most of the individuals comprised in the SME, make the middle social layer which is the main drive of any economy. From this point, local insurance players should think innovatively on contributing in its sustainability.
Below are some ideas on how the underwriting department can grant the competitive edge to the marketing team for developing the SME segment:
·         Multi-Risk Insurance policies:
These products don’t require any change on the treaties and their Sum Insured are within the limits, so instead of denying standalone quotations due to insufficient premiums reserving vs. risk in caption, a product can be developed to cover many risks and diversify the premium revenue (i.e. A restaurant desiring a Workmen Compensation policy can benefit from a “restaurant-package” offer composed of: “Workmen, Public Liability, Property & Loss of Profits” covers.
Cost-wise, it will be also more affordable because the operating costs are being calculated a single basis and not as 4 individual policies. In addition, it can be directed throughout the various distribution channels for operational scrutinizing. 
·         Online Insurance services:
Welcome to the world of “Internet of Things (IoT)”. A recent study conducted by “Accenture Strategy” states that the next winning insurer will be the “Insurer of Things”. IoT is connecting homes, cars, people, and organizations to a single platform somewhere on the planet, and as per the report, this will be affect our industry by creating “Different consumer expectation, new offering and new risks, and new competitors & contestable markets”.
One of the main drives of these strategic changes should be “Technology”, by putting the latest user-friendly mobile apps or any technology tool within the reach of the client’s palm, which will allow him to have any retail/SME policy online without the hassle to do it at the insurer premises. TIME is a precious gem nowadays, so the insurers should be a facilitating factor in the equation and not the opposite. Every single product can be tailored to the customer needs, thus creating a new competitive bar in the market that is irrelevant to the other players (Blue Ocean Strategy).
·         Reviewing pricing strategies:
One of the advantages to tailored products is “Pricing Flexibility”. Each factor has its own pricing element from the overall rate, so the insurer can put different criteria in the online app that will modify the final offering. This will make the product unique and irrelevant to competition both from Technical & Marketing perspectives.
By applying the above recommendation, the local players will waive the main advantage of the international ones: “Economies of Scale”.
·         Re-assess policy covers on each renewal date:
Trust me guys, a standard “Fire & Allied perils” doesn’t do the job nowadays. Even the “LM7 wording” is being exhausted with extensions to have a fair coverage.
You can’t imagine how many clients I’ve encountered with standard policies for the past decade without any enhancement whatsoever on the wording and covers provided.
Insurance is an “Utmost Good Faith” business relationship --- From my point of view, it is an ethical duty of the insurance provider (insurer, broker, and agent) to re-assess on each renewal date, the risk environment of the insured and propose coverage enhancements accordingly. Being Risk Managers in nature, we are aware of certain risks that the client isn’t, and it is our mission to assist. I know it will consume the human resources, but its ROI is significant on all levels (Sales, Underwriting premium, credibility, and brand recognition).
·         Scrutinize underwriting guidelines to the minimum:
Some guidelines are understandable, while others are not. Insurers should understand that insurance awareness in the market is still low, so we can’t expect them to be fully equipped to satisfy all underwriting requirements. On the other hand, the insurer can judge the importance of each guideline. If it’s not a MUSTto release the quotation, they can just skip it, or put it as a Warranty. Enterprise Risk Management (ERM) is still in its early stages in the MENA region, so we can’t expect fully equipped clients Via Risk Profiling before 2 years’ time.
We are living in a highly fragmented economy where the digital & economies of scale are becoming the main drives for any marketing strategy, so the Underwriting team should meet half way, first to hold the horses little bit, and second to have a sound marketing strategy with a technical support.
By : Anthony Bechara