Changing conventional thinking will help insurers to differentiate themselves on the world stage
by Jérome Pezé – Tinubu Square CEO

The international credit insurance industry is on the cusp of transformation, but it needs a little nudge to fully take flight. Don’t misunderstand me, this is not a fledgling industry, it is well established, credible, profitable and as economic challenges have demonstrated, resilient too. However, from a global perspective it’s also unbalanced with important geographies offering huge opportunities for market penetration. To 

grasp these, the industry must re-evaluate its offer to customers, gain a better understanding of the ecosystem in which it operates and enhance and energise the services that it provides. This might mean challenging established conventions, but for an industry that has withstood and adapted to change for over 100 years, that should not be difficult. 
Credit insurance emerged in post-WW1 Europe and the early providers established key principles, processes and products that we still recognise today. There have been periods of difficulty, during the 1929 financial crash and in more recent years, and there have also been periods of glorious expansion, particularly between 1950 and 1975, when the industry, characterised by its oligopolistic structure, enjoyed between 5% and 7.5% annual growth. 
The long-held influence of a handful of European insurers has had benefits. Critical mass has kept costs down, the market has diversified within controllable limits and multi-country services have been developed. Risk control has been supported by a large base of European buyers. However, expansion has been limited outside Europe as evidenced by five European countries currently accounting for 70% of the premiums to the main providers. What about the rest of the world? 
There are both challenges and opportunities. Take the US for example, where an open business culture, an export market aimed mainly at Canada, Mexico and Europe, adequate bankruptcy laws and the perceived high cost of credit insurance have restricted expansion. It’s a similar picture in Canada, where trade credit insurance has realised little growth over recent years. But if these markets want to be part of the growth in global trade, dominated by emerging markets in the Far East, Latin America, India, other parts of Asia and Africa, they will need to facilitate the international ambition of their exporters and to guard against a higher level of risk, embrace credit insurance. And what of the emerging markets? They are ripe for development. The Asia-Pacific region saw trade rise from 25% to 33% between 2003 and 2013, offering unparalleled opportunities for the credit insurance sector. 
To maximise on this, insurance companies have to address some key challenges including improving their processes. The digital tidal wave is impacting on product delivery processes, distribution, supply chain integration, the emergence of alternative payment and settlement solutions and data analytics. Meanwhile, while Solvency Capital Requirements are boosting credit insurance, they also demand more efficient attention to detail and improved governance and controls. Insurance companies these days are operating in a much bigger, more exacting ecosystem, and they have to rise to this challenge and also understand their position within it. Whilst they were able to satisfy the requirements of their core markets, and even the needs of extended enterprise, including trade associations, banks, regulators and investors, what they now have to do is face the challenges of disruptive technologies and innovations that will have an impact on their business. This includes new payment and settlement solutions, changes in the supply chain, and technology innovations. There has been much talk about the impact of blockchain technology, for example, and insurance companies must understand that this is part of the ecosystem that they are now operating in. Critical mass is no longer the key competitive advantage as work-around solutions have emerged, but flexibility and the benefits of innovation are becoming paramount. 
Increasingly insurance companies are overhauling and updating the services they offer to customers. Their own databases are restricted, so they are looking for third-party assistance in sourcing invaluable local market intelligence and insight on local buyers, particularly in emerging markets or territories with low credit insurance penetration. This is essential, particularly for small insurance companies so they can compete with the major and mid-size players and successfully re-engineer and transform their organisations. Provision of best practice enhances processes and good governance for mid-sized and smaller companies and is reaping dividends in the form of support from reinsurers. Instead of maintaining their focus on traditional products, insurers are keen to build tailor-made solutions and adopt a multi-niche, customer-centric strategy to boost growth. 
This of course, depends on their ability to work within the ‘golden rules’. This means identifying that they are capable of operating effectively within the market, that they can manage local relationships and partnerships and have a cultural understanding, that they can be competitive, and that they have access to local up-to-date intelligence. This also stands insurers in good stead when they diversify, spreading their offer amongst a range of different markets with different economic cycles. 
More and more markets are now accessible, and insurers need to think competitively, use their expertise and knowledge but supplement this with help from a local partner who can deliver cultural understanding. In reality, any geography is accessible if you have the strength and business intelligence to tackle it confidently. There is a trend for companies to offer expertise in multiple niche areas, and diversification helps to spread risk, as long as the insurer is able to support each of those areas within the golden rules. 
Perhaps most importantly, insurers have now got to confront their conventional thinking. If they look around they will find partners to help them do this, and adopt a more agile, flexible approach. Supported well, they are in a position not only to tackle today’s complex credit insurance ecosystem, but to take full advantage of it.
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