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How Mobile Technologies Are Leap-Frogging Infrastructure in Emerging Insurance Markets

How Mobile Technologies Are Leap-Frogging Infrastructure in Emerging Insurance Markets. Panel Discussion – IIS 48 th Annual Seminar, Rio De Janeiro 20 June 2012. Stephen Packard Deloitte Consulting LLP. Emerging markets are the new drivers of organic growth.

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How Mobile Technologies Are Leap-Frogging Infrastructure in Emerging Insurance Markets

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  1. How Mobile Technologies Are Leap-Frogging Infrastructure in Emerging Insurance Markets Panel Discussion – IIS 48th Annual Seminar, Rio De Janeiro 20 June 2012 Stephen Packard Deloitte Consulting LLP

  2. Emerging markets are the new drivers of organic growth Premium growth in emerging markets is more than 5X that of developed markets, with the trend likely to continue • Low penetration in emerging markets: • Insurance premium as % of GDP is low – up to 3% of GDP (versus 5% to 10% for industrial countries) • The market density for life insurance (premium per capita) is on average less than $50 compared to about $2,000 in industrial countries Sources: Swiss Re, World Bank/IFC

  3. However, they face systemic challenges . . . Emerging markets often lack critical business infrastructure • The economic downturn has exacerbated shortfalls in vital infrastructure investments • Firms may have to wait many years before local infrastructure is ready to support a complete rollout of services The number of developing countries with new infrastructure PPP2 projects in the first half of 2011 was the lowest since the early 1990s –World Bank 1: World Economic Forum Infrastructure ranking, Global Competitiveness Report 2011-2012, covers transport, telephony & energy 2: Public-private Partnership

  4. . . . including a lack of consumer understanding and proper distribution channels . . . Knowledge Perceptions of Insurance It is ignorance of, and not opposition to, insurance that creates the biggest risks for the industry’s future development - The Geneva Association Understanding of Insurance Experience with Insurance A lack of established distribution networks impede new players in emerging markets, with most channels (agents, through banks or post offices) controlled by public sector entities Distribution Tiers by Wealth HNW/Affluent Wealth Managers Lawyers and CAs Banks Agents/Brokers Worksite Call Center Online Mail Middle Market Mass Market Source: Finmark Trust, CIFP, Deloitte Analysis

  5. . . . with each market having its own unique set of barriers. • CHINA • Inflation • Aging Population • BRAZIL • Foreign Re-insurer Limits • INDIA • FDI Limits • Opaque Regulations • MENA • Political Instability • Islamic compliant offerings Source: Deloitte Analysis

  6. New models are required to succeed in these markets AXA, New York Life and Sun Life have cut or disposed off their stakes in Chinese joint ventures – China People’s Daily, Dec 2011 • Existing models cannot be successfully transplanted: • Regulations limit foreign insurers by restricting organic growth and local acquisitions • Government-owned domestic players have wide networks and enjoy well-established brand reputations • Local competitors successfully mimic and leverage expertise and capabilities After New York Life, HSBC may exit the Life Insurance business in India - Insurance Times, India, May 2012 Source: Insurance & Pensions, Knowledge @ Wharton

  7. Mobile technologies can go a long way in serving emerging markets . . . Mobile Subscriptions per 100 inhabitants Percent increase in mobile wallet usage from 2010 to 2011 Source: ITU (* 2011 numbers are estimates), TNS

  8. . . . with innovative firms using mobility solutions to leap over traditional infrastructure bottlenecks. Payment Mechanism Accept payments through mobile payment systems, either at the agent or customer level (UAP Insurance/Kenya –farmers can insure crops via mobile payment Data Mining Analyze users’ mobile and mobile payment habits to identify eligible insurance customers Advertising/Sales Sell insurance policies via SMS and push advertisements (Metropolitan/S Africa – using mobile insurance vouchers to advance sales) Monitoring Use mobile technologies to monitor usage and claims (HDFC/India – RFID sensors tagged to cattle to counter cattle insurance fraud) Source: Zurich Financial, Financial Times, Mobile Commerce Daily

  9. Notes Emerging markets (using IMF classification): Asia excluding Japan and the newly industrialized Asian economies (referred to as Emerging Asia). Latin America and the Caribbean (referred to as Latin America). Central and Eastern Europe (referred to as Eastern Europe). the Middle East. Central Asia and Turkey (referred to as Middle East) and Africa. The developed/developing country classifications are based on the UN M49, see: http://www.itu.int/ITU-D/ict/definitions/regions/index.html Source: ITU World Telecommunication /ICT Indicators database

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