Insurers looking to spread their businesses across Asia may need to rethink their strategy as depth of offering is becoming more important than breadth, according to a new report from EY.
Asia: Time to refocus
, complied by EY alongside Harvard Business Review
, notes that businesses across the region should try to refocus their energy and ensure the depth of the service before branching out to new territories.
Vikram Chakravarty, EY ASEAN managing partner, Transaction Advisory Services, said that pressure is growing on multi-national insurers as companies need to rethink their strategy.
“For the insurance industry in Asia, there are very few synergies between individual country operations, given that elements such as capital, products and technology are typically developed and deployed locally,” Chakravarty told Insurance Business.
“Further, local regulators are increasing capital requirements (as in the case of Thailand) and pushing the consolidation agenda (in the case of Malaysia), which is putting pressure on the return on equity of sub-scale operators.
“This has put pressure on the multinational companies model of going wide across many markets and pushed players to double down into a few key markets where they can get to scale.
“This rethink is important.”
While the insurance industry across Asia is growing, Chakravarty noted that a “deeply fragmented market” has left some multi-national businesses out of the region which could see other transactions take place.
The report notes that several insurers have been successful in amplifying their business with four companies ranked in the top three by market share in three or more countries. Chakravarty said that successful insurers have heightened their focus.
“What successful insurers have done right is to focus on a small number of large distribution partnerships – rather than a large number of small outlets – and then relentlessly focus on sales effectiveness in the top three or four channels,” Chakravarty continued.
“This solid business model has allowed firms to drive profitable growth.”
For insurers to compete both today and in the future, Chakravarty said that creativity will be needed as insurers look for further partnerships outside of usual avenues.
“In order to compete in today’s environment, the key things that insurers should consider is to identify top channel partners in a small number of priority markets; be creative about partnership ideas, including going beyond banks to consider telcos, digital retailers and post offices; and be prepared to value and pay for partnerships accordingly,” Chakravarty said.
“Insurers should also have a clear execution plan with a good understanding of the market, customer base, sales force and incentives, and then relentlessly execute on the plan.”
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