Way forward for growth
SMALL and medium enterprises (SMEs) provide insurers with a means to diversify geographically as well as by business activity.
Pacific Financial Inclusion Programme’s former Regional Insurance Specialist Michael Carr said: “This diversification enables them to increase their customer base, but in a controlled way, without the insurers becoming over-exposed to one type of business or a small group of clients”.
A statement from PFIP said insurance companies operating in the Pacific saw SME as the market segment with the biggest potential for growth of the industry for the years to come.
However, a lack of insurance awareness amongst business owners, and the condition of some businesses (insurability) are hampering the speed at which insurance take up is happening among this market segment.
The PFIP’s annual insurance industry survey is conducted through both face to face interviews and emailed questionnaires with 12 insurance providers operating in the general and life insurance sector in Fiji, Papua New Guinea, Samoa, Solomon Islands, Tonga and Vanuatu surveyed.
According to PFIP the survey allows the industry to get some more insights into expected changes in technology adoption, product development, distribution and the impact of the nature of the competition in the industry.
The majority of the respondents from 12 of the leading insurance providers in the region recently surveyed by the Pacific Financial Inclusion Programme (PFIP) say that while SMEs make up a very important part of Pacific economies, insurance providers are still working out how to best capitalise on the opportunity that SMEs present.
A growing middle-class and possibilities to set up more group schemes are also areas with opportunities for the industry according to the respondents.
Mr Carr said the growing middle-class segment will have increasing numbers of people with more assets to insure, for instance houses, motor vehicles or personal belongings.
Assets financed by credit and bank loans will typically also need to be insured.
He added that insurance products tailored to groups of individuals, such as company workforces, students, religious congregations, government officials, or trade associations and cooperatives allow for more efficient sales and administration, which result in lower unit costs and avoidance of “selection”, a scenario where only individuals who have a higher propensity to suffer a loss or make a claim, seek out insurance. So insurers generally look at group business more favourably. When asked about global emerging technology trends in the insurance industry, a third of insurers interviewed said they were already implementing or using new technologies to improve customer experience and to drive insurance uptake.
Insurers are investing in new business models that will bring further automation in processes for risk assessment, quotations, customer service delivery and claims management.
“Insurance technology (InsurTech) will make accessing insurance easier, faster and cheaper for customers and allow insurers to provide tailored products more quickly, boost the number of people that are insured and drive down operational costs,” said Mr Carr.
However, a minority of Pacific insurance providers report that they do not foresee to make any significant changes in the short to medium term to the way they operate as they find it hard to justify the significant investments that have to be made when adopting new technologies.