Expert counsels insurers on business development

on   /   in Sweet Crude 12:00 am   /   Comments

By Rosemary ONUOHA

Mr. Yemi Soladoye, Managing Director of RiskGuard Africa, has urged underwriters to go back to the drawing board and map out strategies for business development in 2013.

Soladoye said that the move is necessary if the issue of unhealthy competition is to be eliminated.

He said “Insurers must go back to the drawing board to examine their operations, hence each company needs to sit and draw a strategy on how to develop its business and adopt retail marketing strategy, because when this is done, issues of unhealthy competition, premium reduction and others will stop.”

Soladoye warned that the insurance market may not record significant expansion in 2013 unless operators embrace diverse distribution channel.

He also warned that the reliance on brokers alone to market insurance products on behalf of insurers could lead to market stagnation and unhealthy competition in the sector.

Soladoye said, “The issue of unhealthy competition will be getting worse, until insurance operators look for better, cost effective and non-volatile distribution channel. Bancassurance, which is having collaboration with banks is a retail channel. It also means engaging in strategic alliances with organisations, like Shoprite, Megaplaza and others. Collaborating with co-operative societies and more. It is so wide and until they adopt it, the market cannot expand.”

Soladoye said that adoption of other distribution channels is not a matter of if they like, but, a matter of must, saying that it is compulsory because, they are already feeling the bite of the narrow distribution outlet that they are using at the moment.

“Most of the problems they face – high cost of doing business, premium reduction, unhealthy competition, are all a manifestation of the fact that they are using narrow distribution method. If you have an alternative, you would be able to do business on your own terms, but when you do not have alternative, you have to achieve whatever anybody tells you. That is the problem with the operators, for they are not creating alternative distribution outlets for themselves,” Soladoye stated.

According to Soladoye, most problems in the insurance industry is a manifestation of the refusal by the operators to adopt retail as a business policy. He called on the boards of insurance companies, to as a matter of urgency, compel their management team to adopt retail marketing.

He said the operators are into the problem of unhealthy competition because they boxed themselves into a very narrow distribution outlet, which is brokering market, adding that price becomes the only competitive strategy, when people are not adding value.

He noted that clients are asking for reduced price every year, because they are yet to see any competitive strategy from the operators, stressing that insurance companies, concentrate on premium growth, as against market expansion.

“The future and the solidity of the operators can only come from market expansion. All the operators want is to ensure that their premium for this year is higher than what it was last year, and they are ready to spend anything to achieve that.

If their market position last year was number six and they move to number five this year, their board would laud their effort, not minding the cost. The companies cost of doing business is indeed very high; the claims ratio is quite low. These are pointers to the fact that insurance companies need something new and better,” Soladoye said.

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