Strategies in the World's Insurance Business

In the last 10 years there are very wide competition at the level of knowledge, product innovation and strategy in insurance business. Creation of new values ​​in the insurance business began to unfold with the rise of consumer insurance and the development of the insurance market itself,such as:

1. Knowledge in risk management's insurance is rapidly increased. They began to make calculations of the premiums they pay to the frequency and intensity ( severity ) of the risks that they face. This realization encourage contracts with insurance deductibles and low premium sand also the spread of captive insurance.

2. The more saturated the world's insurance market, especially in America and Europe, along with the stagnation of market developments with implications for the low level of price premium. The level of insurance premiums in the United States since 1988 actually increased when calculated with inflation in the same period. While Europe experienced market saturation due to higher life insurance policy ownership per head and the number of insurance companies in the market (about 5000 companies for 18 western European countries).

3. Financial institutions such as pension funds, Insurance, Reinsurance, Investment Bank and Asset Management began to realize that in fact they compete in similar fields. Business characteristics of these institutions has been thinned, so that they appear as new competitors in the insurance business. This fact was used by the insured to undertakehedging and transfer the risk it has with other forms of more innovative.
All three of the above forced companies engaged in the business of insurance "gasped" to find new strategies to remain "survive".

These strategies includes:

1. Mergers and acquisitions. Surely this is an old story in any business.But for the insurance world, it became a phenomenon most evident at the end of the second millennium. Mergers and acquisitions's phenomenon to the fore because of the saturated market and increasing competition. Other than that this is done to stabilize the loss portfolio companies and beneficial in increasing the market share instantly.

2. Improve the core competence of the divested business. Swiss Re sold to Allianz insurance company losses and acquired life reinsurance company in the UK.
Increase marketing efficiency. The purpose of this strategy is to get closer to the service and market relations.

3. Expansion into the Capital Market. Mid '90an characterized by the emergence of derivative products from insurance business was sold to the capital markets as catastrophic bonds in 1994 and followed with a variety of bonds and other derivations to gain additional capital from investors. With products this derivation, insurers / reinsurers to its medium accountabil-dependents because the risk is actually the investor. This investment strategy arising from intense competition and high combined ratio ( loss ratio plus expense ratio management) anywhere in the world as well as the market began to weaken. As a result, profit from underwriting income is no longer expected to be the spearhead of the insurance business as it did 10 years ago. Actually, insurance companies have changed the focus of the business due to trends like that. From a business that only underwrite the risk and benefit for their underwriting to move business to accumulate funds from the public and make a profit through the investment of premiums collected.That causes world class reinsurers are now starting to acquire investment in the bank.

Weather Insurance for Small Companies

Japan has introduced a new type of insurance in the form of weather insurance. This type of insurance is to anticipate a decline in profits due to the cool summer climates (cool summer). Target sales of this type of insurance is a small company engaged in the service such as rental homes (huts) that are used by tourists on holiday edge beach, restaurant manager, swimming pool, ice cream industry and other small businesses whose sales concentrated in the summer.

How it works as follows: The number of days in the summer in August determined only for 10 days. Summer day is defined as a day where the temperature is more than 30 0 C. When the days of summer numbered less than 10, then asuradur indemnify in accordance with the deficit because of the small number of summer days. For example, such compensation is determined $ 5,000 per day, if the number of summer days in August was 6, then the amount of damages amounted to $ 20,000 as compensation for deficiency 4 days of summer.

Application closing risks should be completed before entering the period of insurance in August. Determination of the sum insured are free, but the overall limit of indemnity specified maximum profit margin incurred in August of the year with gains in August of the previous year. While it has been designed also some kind of insurance to cover the risk of a fall in profits due to abnormal weather conditions, such as warm winter, heavy rain or sunshine insufficiency.