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Source: ZE

One of the greatest challenges in any competitive market revolves around the ability of an organization to adapt to a changing environment. The insurance industry is no exception.

Even the established players, considered to be recession-proof on account of their conservative, risk-adverse policies and formidable customer base, are finding themselves challenged on multiple levels.

Mature Industry

The insurance industry is in the mature phase of an economic lifecycle, evident from stable demand growth and industry consolidation. The U.S. insurance industry is expected to grow at an annualized rate of 3.4% up until 2018 against the backdrop of U.S. GDP growth of 2.1% over the same period.

The industry emphasizes life insurance and annuities, which links it strongly to disposable income and median age of consumers. Evident from Figure 1 below, the median age and per-capita income is set to gradually increase.

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Figure 1: US – Per capita income and median age projections

A strong indicator of saturation, industry consolidation is on rise in the insurance sector. Major players, such as Metlife and Prudential, have been aggressive in acquisitions over last few years and this trend is expected to continue in near future.

Consumer Behavior Trends

Traditionally, insurance companies have relied on person-to-person interaction and the ability of their trained personnel to sell products. But over the years, customers have become more self-reliant and like to do their own research before talking to an agent. Gen-X (born between 1960-1982) and Gen-Y (born between 1982-2000) customers don’t particularly like to talk to agents for the purchase. They prefer visiting the websites, where they scan can through available product information and make the decision themselves.

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In light of the changing consumer behavior, it’s imperative that the marketing and sales channels be tailored to consumer preferences. Demographic change in the consumer base is another key area which demands attention. With increasing globalization of businesses, the consumer profile is becoming more multi-cultural.

Data Integrity And Predictive Analysis

Predictive analysis based on historical data has been serving the insurance companies well and it will gain more importance with time. Accurate, reliable data is a prerequisite for dependable predictive analysis. The intelligence of the data gathered determines its relevance to the business. With a plethora of variables determining the direction of the game, identifying and keeping track of truly significant trends is a challenge.

Solution – Make The Numbers Talk Sense!

In a saturated market like insurance, technology-enabled frameworks and data-driven underwriting models could provide insurance companies with the edge to create competitive advantage. Deriving meaningful insights from historical data and recognizing the trends in the variables controlling the profitability in the industry will be a key area going forward.

Most companies have access to a huge amount of information. However, intelligence of the data is critical to success and not just volume. Many consumer behavior databases and tools give a glimpse of the dynamics shaping up customer segments. These, coupled with the intelligent ZEMA Suite of data analytics and management products, both the industry data and consumer behavior trends can be leveraged to their full potential.

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Figure. 2: States in US which showed maximum percentage growth in the proportion of per capita income spent on auto insurance

Figure 2 , created using our data management solution software, ZEMA, captures the correlation between per-capita income and expenditure on auto-insurance products. It analyzes the proportion of per capita income spent on auto insurance per state, depicting the states which have shown maximum average growth over four years from 2006 to 2010. Such insights could prove valuable while launching strategic initiatives for business development, helping insurance companies determine their focus.

The latest of version of our comprehensive product suite, ZEMA 4, has the flexibility and functionality to help organizations around the world achieve such analysis, making data management more intuitive and fruitful, yielding more bang for your buck!