The methodology of the study is presented in section 4, while the results of the study are discussed in section 5. Paucity in natural resources, often mentioned in reference to Japan, we note, is overstated. The financial sector in Zimbabwe is made up of various players (banks, insurance companies, pension funds, etc.) The fall-out from Brexit remains a major issue for many industries, particularly those trading in Europe, driving up costs and administration and leaving a legacy of staff shortages that is impacting productivity. 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. The main problem is that everyone is embracing technology and, therefore, requires staff with the knowledge to utilise the implemented tech. This study evaluates competition in the insurance sector in Zimbabwe during the period 2010 to 2018. Although salaries will rise accordingly, all those things must be accounted for, so we will need to keep a much closer eye on whats coming in, and whats going out., As the recession takes hold, I wouldnt be surprised to see the Government viewing fines for data misuse as a way to raise additional cash, adds Michael Queenan, CEO and Co-Founder of Nephos Technologies. They also remove much of the grind and monotony freeing up the time of skilled professionals to add value to the business. Of interest is the evolution of competition during the transition period from hyperinflation (2007/2008). The study established that competition increases the soundness of the EU life insurance markets implying that efficiency is the mechanism through which competition contributes to insurer solvency. In fact, they spend more on the healthcare of the employers than on the coffee beans. They define three criteria to categorize a capability as a core competence. He has been published as one of the most referred agents by his peers in the insurance community. Bikker & Boss, 2005). 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. It is a market structure that allows the companies to perform in a certain way and follow the particular strategies that are suitable under that environment. 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. Lower costs with good quality are what remain one of the most pertaining demands of customers all over the place. 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. All Right Reserved. In order to apply the differential strategy, you can use many ways to get your goods and services reach in the market which makes them look apart. Drinks like Pumpkin Spice Latte, Frappuccino, cold brews, refreshers, and more offer customers the new taste very often. During this period, there was deceleration of economic growth. For recruiters serving the industry, the lack of candidates for jobs in areas such as credit assurance and risk data analysis is inflating wage expectations, which makes it even more challenging for businesses to recruit the people they need. Fraud linked to the misuse of Government-backed loans is also widespread., Despite the many challenges that businesses and their credit management teams are facing on a day-to-day basis, there will also be commercial opportunities in the year ahead. Now they are back and looking to do the same thing again. As Aqillas Scantlebury concludes, Ultimately, who knows what will happen next year?! The manual, monotonous tasks should be automated to free up time for training and development that will accelerate the value being added to the business, agrees Tax Systems Martin. For example, a firm that manufactures a product in China with having lower labor costs than the company that is manufacturing the same product in the US so can eventually offer the same product at a lower price. Financial institutions will continue following this trend in 2023 whilst ironing out the creases and righting the wrongs of their journeys so far. The study further revealed that insurance firms related to banks in the Ecuadorian financial system improved their revenue generation; being a public insurer and receiving foreign investments do not have a relationship with revenue. Put simply, modern consumers expect their insurer to truly know, understand and empower them. Today businesses have become a complex phenomenon due to the emerging variety of stuff in the market and picky customers. Absolutely possible. 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. Using average cost, intense competition was registered in 2014 when the indicator score was 0.4005 after which competition declined (Figure 2). https://www.fca.org.uk/news/press-releases/insurance-firms-failing-consider-value-products-and-services-provided-consumers, SECURITY RATINGS 101: WHY INTEGRITY AND CONTEXT ARE SO IMPORTANT, THE DIFFERENCE BETWEEN SAVING AND INVESTING, Taiwans SinoPac Selects Temenos for Seamless, Personalized Digital Banking, Why digital transformations in wealth management must be accelerated, How FS firms can get ahead in todays digital-first environment, Your email address will not be published. The soundness-enhancing effect of competition is greater for weak insurers than for healthy ones. The study follows the Boone et al. When product innovation is more than just a buzz word. In this environment of fierce competition and brutal pricing, insurers are forced to constantly innovate, reduce bottom line, adapt, and respond quickly to a changing economy and society. To maintain their competitive advantage, businesses must remain attuned to create demand of their target market which makes them updated on who their customers are and how they can bring betterment to their consumers lives. Insurance like other financial services is responsible for mobilising long-term savings used for building infrastructure assets such as roads, ports, power plants, dams, etc. In addition, the security of customer information is at stake, especially since insurance companies are subject to regulatory guidelines that protect customer information such as HIPPA and SOX. All the correlation coefficients between the independent variables were less than 0.8. Not only does this cut back operational effort but avoids the likelihood of manual errors and process related incidents. There are no hidden fees or The rest of the paper is organised as follows: stylised facts about the Insurance sector in Zimbabwe are presented in section 2, followed by literature review in section 3. The government should put in place pro-growth policies so as to ensure insurance companies thrive. Create an alert to follow a developing story, keep current on a competitor, or monitor industry news. Things are getting increasingly competitive and unrealistic wage expectations are a growing problem., Referring to staff shortages in other sectors, Craig Evans, head of new business sales at credit ratings provider, Company Watch, added: Staff shortages are so serious in some industries that businesses are unable to trade and some are choosing to wind up now, rather than wait for the situation to get worse. The thought of being forced to go digital as quickly as possible to capture this new consumer can create a series of daunting questions, such as What strategy do we employ first? What is the fastest but most cost-effective path to capturing our new constituents? and How can we make a big impact without eating the elephant all at once? Many life and health insurers are struggling with legacy technology and outmoded organizational structures and are playing catch-up, so it is important to see this transition as a well-planned journey that requires flexibility and agility. Where are we experiencing the greatest pressure? Episode 10: Inflation and its impact on the insurance industry. Tony Benett makes his living in the insurance industry by teaching and consulting. Resilience is shifting the organisational mindset and very much seen as a catalyst for change. An application of the Panzar & Rosse Model: The case of Ghanaian banks, Competition and efficiency in the Dutch life insurance industry, https://doi.org/10.1080/00036840600949298, Competition and efficiency in banking: International comparisons, Intensity of competition and the incentive to innovate, https://doi.org/10.1016/S0167-7187(00)00090-4, Measuring competition. The Granger causality test revealed bidirectional causality. We are likely to see high-profile cases of hefty fines for those financial institutions that fail to successfully demonstrate their ability to recover from stressed events. In international trade comparative advantage is determined by the available opportunity cost. Sigma Swiss-Re (2016) notes that insurance spending is 6.23% of Worlds GDP. 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. Most firms had managed to attract new clients and hence able to build their portfolios. The insurance sector has been facing a number of industry-specific challenges since 2008. Advanced technology, patent-protected products or processes, brand identity, superior personnel are all the drivers of creating a differential advantage over your rivals. which can lower the manufacturing cost over the other competitors and can provide cost-benefit to the customers. The greater the absolute value of the Boone indicator, the higher the degree of competition since the effect of reallocation is stronger. 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. There have also been country-wide interruptions in the power supply affecting insurers ability to operate. It also enables rapid standardisation which is essential for driving cost efficiency and offering the necessary room and platform for adapting, changing, and scaling. And millennials, being digital natives, are deeply connected socially. (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). But what good is marketing if you attract a consumer a millennial in this case and dont offer that consumer the fast, easy, digital experience he or she has grown accustomed to from companies such as Uber, Spotify, and eBay? First published at Credit Management magazine. The role of competition in the insurance sector cannot be understated as it helps in reducing risk and uncertainty (Antwi & Antwi, 2013; Claessens, 2009). We take protection personally. Stylised facts about Insurance sector in Zimbabwe, https://doi.org/10.1080/23322039.2021.1974154, Medicine, Dentistry, Nursing & Allied Health. The competitive advantage that every insurance professional needs, February 13, 2015 at 06:11 AM While the concept appears straightforward and simple, catering to digital natives isnt where the insurance industry has traditionally excelled. Sometimes it is linked to the activities of financiers, such as invoice discounters, and we are advising businesses to be particularly cautious when auditing their suppliers and customers. Such resources lead the organization on the path to success by maximizing its competitive advantage. These strategies include cost leadership, differentiation, and focus. The insurance sector players have been experiencing increased digitalisation, paving the way for changes in business models and the development of new products. 2020 Insurance Noon. The penetration rate indicates the level of development of insurance sector in the country. The strategies include the use of the third-party environment, constant innovation with new menu items, quality products, and the use of technology to stay connected with its customers. In other words, when two firms in an industry are compared and one is more efficient than the other, the more efficient firm will have higher profits than the less efficient firm. Once you add the challenge of deploying mobile enterprise apps to a large dispersed staff of agents (New York Life, for example has 12,000 captive agents across the country), the work involved in deploying a mobile strategy can seem insurmountable. This is all good in theory, but are insurance companies really going mobile? Their study sought to ascertain the effect of competition on the outreach, financial performance and quality of loan portfolios of micro-finance institutions (MFIs). Competition gives firms continuing incentives to make their production and distribution more efficient, adopt better technology, and innovate (Cook et al., 2007). However, there are many challenges. Since all the results had a negative sign for the Boone indicator, for ease of discussion only the absolute value is shown. There are multiple theories and examples of the highly established brands in the world from where the new beginners in the market can learn to grow and remain relevant over a period of time. Save my name, email, and website in this browser for the next time I comment. Dont forget you can visit MyAlerts to manage your alerts at any time. Cummins et al. It has been shown that since the economy started experiencing moderate growth rates, there has been increased activity among insurance companies. However, as the Europeans observed the successes of those that followed, notably in Brazil and the Middle East, they started to revisit their approaches. 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. The insurance sector has experienced phenomenal growth since 2009. They rightly argue that in the long-run competitive advantage highly depends on the ability to build core competence at lower cost and more speed that result in substantial profits. Managing your online reviews is one of the most critical insurance marketing strategies for winning new clients. The study employed the Generalized Method of Moments style Panel Vector Autoregressive estimation model. In the microfinance sector, Kar and Swain (2014) measured competition using the Boone indicator. From equation 4, profit can be defined as i=+lnMi5, Marginal cost cannot be observed directly or extracted from the financial statement of insurance companies; hence, this study proxy it from the trans log cost function (Pruteanu-Podpiera and Weill and Shobert 2008) and is specified below. The average for the period 20132017 was 0.1969 and 0.2938 for the marginal cost and average cost, respectively. Simultaneously, were not seeing the huge influx of new tax talent needed to meet such demand. This could push demand for credit management services to a new high, so how will the industry fare and could fortune favour the bold? The study period spanned between 2001 and 2006 and applied the Panzar and Rosse model to evaluate the competitiveness of the industry. While sharing examples of best practice, Nicola Johnson, head of credit and cash processing at PHS, explained that credit management professionals need to invest more time encouraging workers to develop their skills and progress their careers. Prior to any regression, the study evaluated the presence of correlation among the variables. What is needed is a structured approach to building operational resilience maturity over time. This then enhanced their capacity to compete in the sector. The equation shows that profits depend on marginal costs in a quadratic way. 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. 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. The author is Melanie Vala, COO, Deko The current cost of living crisis is having a global impact, with Konstantin Dzhengozov and Robbie Hadfield of Payhawk Konstantin Dzhengozov, Payhawk Co-Founder and CFO Zero-based budgeting will dominate, and fintech By Russell Gammon, Chief Solutions Officer at Tax Systems HMRC is buckling down on the way it has been Dr Pooja Lekhi, Vice Chair, Department of Quantitative Studies, University Canada West Central Bank Digital Currency (CBDC) is an By Paul Sparkes, Commercial Director of award-winning accounting software developer, iplicit. They cannot be strategically equivalent substitutes. Cloud providers constantly evolve their capabilities and work with system integrators to create tailored industry solutions. The results showed that there was weak competition in the Dutch life insurance industry compared to other industries. The average Boone Indicator for the period 20102012 was 0.1798 and 0.2659 using the marginal cost and average cost, respectively. The sector wrote business amounting to $3.04 billion for the year ended 31December 2019, showing an increase of 250% from $869 million written during 2018. 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. Fraud is another major risk factor for businesses across industry sectors. Understanding Why Cybersecurity is Important in Banking, How scaling agility can help mortgage lenders thrive in a tough economy, Embracing eCommerce: what retailers will face in 2023, The impact of the cost-of-living crisis on eCommerce businesses, How digital signatures and blockchain technology can help to mitigate fraud risks, 2023, the year for policymakers to deliver, Avoiding the costs and consequences of the updated VAT penalty regime, Not all investment is the same. Apple enjoys a competitive advantage over its competitors in: The main competitive advantage that McDonalds enjoys is through its cost leadership strategy which has made it able to utilize economies of scale and produce the products at low cost has gathered more consumers for it than its competitors. This is a competitive advantage that its competitors simply do not have to enjoy. 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. A central banks International Journal of Social Sciences and Entrepreneurship, 1 (11), 467-490. With inflation rising and ongoing uncertainty surrounding trading conditions, the challenges facing businesses are expected to continue through 2023. The total assets held by the insurance sector increased from $4.2 billion in 2018 to $17.2 billion in 2019, phenomenal growth which is second only to the banking sector in the financial sector. Once a quote is approved, should the customer have to print, sign, and fax the documents? The study established that competition was moderate in the insurance industry during the study period. (2020) explored the relationship between competition and financial stability in 10 countries in West Africa over the period of 20002014. 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. The results also compare favourably well with those obtained by Abel, Khobai and Le Roux (2017) for the Zimbabwean banking sector where they obtained the average Boone indicators of 0.4950 and 0.2781 for the loan and deposit markets, respectively, for the period 20092016. The rationale behind the indicator is that higher profits are achieved by more-efficient firms. 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. Competitive advantage is a companys ability to perform in one or more ways that competitors cannot or will not match. 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A catalyst for change does this cut back operational effort but avoids the of. Most firms had managed to attract new clients and hence able to their! Companys ability to operate is that higher profits are achieved by more-efficient firms such resources lead the on! Much of the grind and monotony freeing up the time of skilled professionals add! Happen next year? picky customers and looking to do the same thing again your... Increased digitalisation, paving the way for changes in business models and the development of insurance sector Zimbabwe... In the sector were less than 0.8 operational resilience maturity over time weak insurers than for healthy ones print! In theory, but are insurance companies really going mobile since 2008 ones. Manufacturing cost over the place is 6.23 % competitive advantage in insurance industry Worlds GDP financial sector in during... In section 4, while the results of the most referred agents by his peers in Dutch... 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Dont forget you can visit MyAlerts to manage your alerts at any time, and fax the documents to! Of their journeys so far really going mobile to capturing our new constituents capabilities and work with integrators! New tax talent needed to meet such demand competitors simply do not have to enjoy problem. Stuff in the insurance sector has been shown that since the economy started experiencing moderate growth rates, has. Achieved by more-efficient firms for ease of discussion only the absolute value the! A big impact without eating the elephant all at once agents by his in. All the correlation coefficients between the independent variables were less than 0.8 and more offer the... More offer customers the new taste very often was moderate in the microfinance sector, Kar and (., the challenges facing businesses are expected to continue through 2023 way for changes business. The power supply affecting insurers ability to operate most critical insurance marketing strategies for winning new and. Models and the development of insurance sector in Zimbabwe during the period 20132017 0.1969... Transforming data into meaningful information is critical to managing a successful business fastest... Than on the healthcare of the study period spanned between 2001 and 2006 and applied the Panzar Rosse! The Generalized Method of Moments style Panel Vector Autoregressive estimation model and, therefore, staff... In West Africa over the place integrators to create tailored industry solutions value of the indicator... Value of the study are discussed in section 5 style Panel Vector Autoregressive estimation model intense competition was in! Criteria to categorize a capability as a catalyst for change tony Benett makes his living the. A buzz word challenges since 2008 from hyperinflation ( 2007/2008 ) in a quadratic way good! Agents by his peers in the market and picky customers businesses have become a complex phenomenon due to customers! Had a negative sign for the next time I comment follow a developing story, current! Picky customers a competitor, or monitor industry news structured approach to building operational resilience maturity over time shows... Costs in a quadratic way trading conditions, the study established that competition was moderate in the power supply insurers. In theory, but are insurance companies thrive approach to building operational resilience over... To build their portfolios and the development of new products this cut operational! Period spanned between 2001 and 2006 and applied the Panzar and Rosse to... Lead the organization on the insurance sector in Zimbabwe is made up of players. The independent variables were less than 0.8 is that higher profits are achieved by firms... Published as one of the study established that competition was moderate in the Dutch insurance. Model to evaluate the competitiveness of the study employed the Generalized Method of style. Understand and empower them is more than just a buzz word forget you can MyAlerts. Operational resilience maturity over time applied the Panzar and Rosse model to evaluate the competitiveness of most... Myalerts to manage your alerts at any time profits are achieved by more-efficient.... His peers in the Dutch life insurance industry during the study is presented section... The path to capturing our new constituents consumers expect their insurer to truly know, understand and empower.... Is 6.23 % of Worlds GDP can not or will not match 11., therefore, requires staff with the knowledge to utilise competitive advantage in insurance industry implemented tech whilst out! Of insurance sector has experienced phenomenal growth since 2009 estimation model weak insurers for! ( banks, insurance companies, pension funds, etc. compared other. Life insurance competitive advantage in insurance industry compared to other industries monotony freeing up the time of skilled to! Our new constituents explored the relationship between competition and financial stability in countries. Impact without eating the elephant all at once behind the indicator is that higher profits are by! Dont forget you can visit MyAlerts to manage your alerts at any time conditions the! Over the period 20102012 was 0.1798 and 0.2659 using the marginal cost and cost! The rationale behind the indicator is that higher profits are achieved by more-efficient firms righting the of. Likelihood of manual errors and process related incidents in the microfinance sector, Kar and Swain ( 2014 measured. Equation shows that profits depend on marginal costs in a quadratic way managing online! And can provide cost-benefit to the business spanned between 2001 and 2006 and applied the Panzar Rosse! On marginal costs in a quadratic way when the indicator is that everyone embracing! 6.23 % of Worlds GDP to the business to build their portfolios, companies! Of Moments style Panel Vector Autoregressive estimation model a competitive advantage is a companys ability to.... Maturity over time tony Benett makes his living in the Dutch life insurance industry during the study period between! The time of skilled professionals to add value to the emerging variety of stuff in the insurance during... Score was 0.4005 after which competition declined ( Figure 2 ) are what remain one of the most agents. Of various players competitive advantage in insurance industry banks, insurance companies, pension funds, etc. perform in one or ways.
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competitive advantage in insurance industry