Once insurance companies / reinsurance companies put the competition in size and the size of the capital. But in the last 10 years the competition was beginning to spread at the level of knowledge, product innovation and strategy.
Creation of new values in the insurance business began to unfold with the major challenges of insurance consumers and insurance market development itself, among others:
- Knowledge of the insured in risk management which increased rapidly. They began to make its calculation of the premiums they pay to the frequency and intensity (severity), the risks they face. This awareness encourages the creation of contracts, insurance policies with large deductibles and low premiums and the outbreak of captive insurance.
- The more saturated the world insurance market, especially in America and Europe, along with the stagnation of the market developments that have implications on the low level of price premium. Life insurance premium rate in the United States since 1988 was not increased when calculated for inflation in the same period. While Europe experienced market saturation due to high ownership per head of life insurance policies and too many insurance companies in the market (about 5000 companies for 18 western European countries).
- Financial institutions such as Pension Funds, Insurance, Reinsurance, Investment Bank and Asset Management began to realize that in fact they're competing in a field which is almost the same. Business characteristics of these institutions have been thinned, so that they appear as new competitors in the insurance business. This fact was exploited by the insured to perform hedging and transfer of risk has with the forms that are more innovative.
- All three of the above forcing companies engaged in insurance business "rack one's brains" to find new strategies to keep "survive".
These strategies include:
- Mergers and acquisitions. Surely this is an old story in any business. But for the insurance world, he became the most visible phenomenon at the end of the second millennium. General Re (a reinsurance company is number three in the world and the largest in America) has acquired Cologne Re (Germany reinsurer) which is one of the largest acquisitions of this century. Then merjernya insurance broker Marsh McLennan and Sedgwick recently showed that insurance brokers are also getting ready to face the business challenges ahead. While Swiss Re is more careful with reinsurance companies acquired in Europe and America who had the capital is not too big but in high frequency (the reinsurance company Swiss Re acquired the world twice a year). Merger and acquisition phenomenon is advanced because of saturated markets and increasing competition. Moreover this is done to stabilize the company and the loss portolio useful in increasing market share in an instant.
- Increasing core competence with business divestments. Swiss Re to sell its loss to the Allianz insurance company and to acquire life reinsurance companies in the UK.
Improving marketing efficiency. The purpose of this strategy is to get closer to services and relationships in the market. For example with the use of Internet and call centers (the latter is beginning to realize by some insurance companies in Indonesia). Research Booz Allen & Hamilton in England to prove that the Internet is a marketing vehicle cheapest insurance. Some of the world's major reinsurers have also used this medium as a way of offering elective for asuradur by filling out the form facultatif offering on their homepage. In Indonesia it is still experiencing difficulties in its implementation given the absence of legal provisions regarding the usage of the Internet as a means of distribution.
- Expansion into the Capital Market. '90an Marked by the emergence of mid-products derived from the insurance business was sold to the capital markets such as catastrophic bonds in 1994 and followed with a variety of bonds and other derivatives to achieve the additional capital from investors. With this derivation products, insurance companies / reinsurance intermediaries to be media-gungan pertang just because the risks are actually investors. This investment strategy arising from intense competition and higher combined ratio (loss ratio plus expense ratio management) and also anywhere in the world market began to weaken. As a result, profits from underwriting income is no longer expected as the spearhead of the insurance business as it did 10 years ago. The truth of insurance business has experienced changes in business focus due to such trends. From a business that only underwrite the risks and benefit from the business side of underwritingnya to move to accumulate funds from the public and seek profit through the investment of premiums collected. That causes asuradur / world-class reinsurers are now starting to acquire investment banks.
Developments outside the insurance world that can so rapidly would spur us to start changing the mindset of business in Indonesia in order to run more quickly catch up with a different emphasis in business knowledge and strategy. Especially when we want to survive in the world arena of free trade era. Think Globally, Act Locally.