July 18, 2019
Suva, Fiji – Insurance companies operating in the Pacific perceive small and medium enterprises (SME) as the market segment with the biggest potential for growth of the industry for the years to come.
However, a lack of insurance awareness amongst business owners, and the condition of some businesses (insurability) are hampering the speed at which insurance take up is happening amongst this market segment.
This was revealed in a recent survey conducted by the Pacific Financial Inclusion Programme (PFIP) where majority of the respondents from 12 of the leading insurance providers in the region said that while SME’s make up a very important part of Pacific economies, insurance providers are still working out how best to capitalise on the opportunity that SMEs present.
According to Michael Carr, PFIP’s former Regional Insurance Specialist, this situation is not new. “SMEs provide insurers with a means to diversify geographically as well as by business activity. This diversification enables them to increase their customer base, but in a controlled way, without the insurers becoming over-exposed to one type of business or a small group of clients.”
A growing middle class and possibilities to set up more group schemes are also areas of opportunities for the industry according to the respondents. Carr said that the growing middle-class segment will have increasing numbers of people with more assets to insure, for instance, houses, motor vehicles or personal belongings. Assets financed by credit and bank loans will typically also need to be insured.
He added that insurance products tailored to groups of individuals, such as company workforces, students, religious congregations, government officials, or trade associations and co-operatives allow for more efficient sales and administration, which result in lower unit costs and avoidance of “selection”, a scenario where only individuals who have a higher propensity to suffer a loss or make a claim, seek out insurance. Hence insurers generally look at group business more favourably.
When asked about global emerging technology trends in the insurance industry, a third of insurers interviewed said they are already implementing or using new technologies to improve customer experience and to drive insurance uptake. Insurers are investing in new business models that will bring further automation in processes for risk assessment, quotations, customer service delivery and claims management.
“Insurance technology (InsurTech) will make accessing insurance easier, faster and cheaper for customers and allow insurers to provide tailored products more quickly, boost the number of people that are insured and drive down operational costs,” said Carr.
However, a minority of Pacific insurance providers report that they do not foresee making any significant changes in the short to medium term to the way they currently operate, as they find it hard to justify the significant investments that have to be made when adopting new technologies.
PFIP’s annual insurance industry survey is conducted through both face to face interviews and emailed questionnaires. 12 insurance providers operating in the general and life insurance sector in Fiji, Papua New Guinea, Samoa, Solomon Islands, Tonga and Vanuatu were surveyed. The survey allows the industry to get some more insights into expected changes in technology adoption, product development, distribution and the impact of the nature of the competition in the industry.
Using this survey, PFIP has developed a regional insurance awareness campaign that will be launched in August. The campaign will specifically focus on individuals and business owners in partnership with five insurance companies in the Pacific.
PFIP is a Pacific-wide programme that has helped over two million Pacific islanders gain access to financial services and financial education. It achieves these results by funding innovation with financial services and delivery channels, supports policy and regulatory initiatives, and the empowerment of consumers.
It is jointly administered by the UN Capital Development Fund (UNCDF) and the United Nations Development Programme (UNDP) and receives funding from the Australian Government, the European Union and the New Zealand Government. PFIP operates from the UNDP Pacific Office in Suva, Fiji and has offices in Papua New Guinea, Samoa and Solomon Islands.
For more information or media inquiries please contact:
Erica Lee – Communications Associate