Speaking at International Adviser’s Fund Links Forum on Thursday, the partner at NMG Consulting said life companies need to restructure their models to deliver cost and scope efficiencies to find pockets of profit in a challenging environment.
Field said some of the bigger insurers are using systems that are not supported anymore, and many are facing heavy competition from local insurers and platforms.
Lost our edge
“We have lost our edge and it’s important we get back,” he said. “There is an incompatibility between where we do see pockets of profitable growth and the risk appetite of multi-national insurers, which were the traditional owners of the offshore life business.”
Over the past year, he said market share held by international life companies has fallen sharply, whereas local insurers and platforms have hardly contracted at all. Field cited Asia as the region experiencing the biggest drop in market share.
He said cross-border insurance companies need to fight against what he predicts will be a continuing decline in their volume over the next few years.
“The issue isn’t the volume level but who’s capturing that volume level and where it is,” Field said, suggesting smaller insurers are eating into the market.
“We are moving from insurers which should have reasonable price experience to insurers that don’t.”
Field also said insurers are failing to make the most of the range of funds and benefits they could offer to customers: “Over the past five years it’s become obvious that offering the broadest range of unit trusts is not a sustainable source of competitive advantage.
“We haven’t really gone further, and one thing we have been saying to clients for 10 years is if you’re an insurer offering an insurance wrapper, you should also offer insurance.
“We are gradually seeing a shift and you can see the companies that are winning are making a shift towards offering more protection and more guarantees.”
Field cited distribution as another growing problem for international insurance providers, and said many do not have a sustainable basis for competitive advantage.
But it is not all doom and gloom for international life companies as he concluded: “The offshore industry can win if we focus on the right things and have the right structures in place to deliver on those things.
“We have got to make the best of a tough environment.”