When we look at the financial results of the non-life insurance sector, we see that although there are growth rates that make the counterparts at the developed economies jealous, the technical losses are becoming unbearable for the companies, especially in motor LoB’s.
Even companies which used to profit in these LoB’s in the past and are generally seen as role models by other companies have announced losses in motor third party liability.
When we read the interviews of the executives, we understand that the losses are distribution channel specific and most companies are in a continuous search for a bank channel.
On the other hand, when we look at the market, we see that the larger bank channels are occupied and the remaining ones are either small or medium sized. Independent than their size we always hear that multiple companies compete to use these channels.
Then, how are those companies that don’t have a bank channel (or has one that is insufficient for their needs) supposed to find a cure for their un-profitability problem?
My idea is that most of the companies in the market have already started their preparations. They are working to start selling “direct” through the internet. Direct channels will enter our lives very soon. This is because, in the current situation, the insurance companies do not seem to have any other solution.
What should the agencies, which amount to 16.000, do about these developments?
They should keep pace with the change, and switch to use of high technology with higher capitals. They should stop losing time in their fight for commission with the insurance companies, start consolidating, join their forces (in terms of capital and know-how), and focus on the retail customer segment which is not yet sufficiently saturated. They should target a “tech-intensive” structure instead of a “labor-intensive” structure to achieve this.
While the situation of the insurance companies becomes inextricable, the fact that the agencies continue to look into the future with the old strategies will only lead to a loss of time.
The insurance company executives don’t have room to maneuver anymore. Tomorrow, if not today, we will find ourselves in a new insurance market with radical solutions.