SUGGESTIONS TO INSURANCE AGENCIES FOR DIGITAL TRANSFORMATION – 1

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Recent years rising trend digitalization, changes the structures of businesses in all sectors and ensures a great contribution to reduce the costs and set up more efficient systems. The pandemic also has fostered this process even more.

Most of the insurance companies perpetually improve and develop their software and hardware structures. They allocate big budgets for these purposes and if necessary re-organise their business models

In insurance intermediaries digitalization process is slower than companies because of the investment costs, adequate existing workflows, hesitance for the new problems that could be brought by innovations, etc.

Today, there are various IT programs used by all agencies regardless of their volume and concept. But, most of the programs have the old technologies and insufficient for today’s necessities

Web-based programs, digitalization, automation, AI applications, etc. are attracting the attention of the agencies, but the vast majority of them think their current  business model is sufficient  so innovations are unnecessary.

However, it is inevitable for the agency owners who have future plans. They must innovate their business processes. Digitalization is one of the important components, to ensure improvement and progress of businesses. It would be useful  thoroughly peruse the following items for the agencies who are considering to make innovation and transformation.

  1. Before to start, it is necessary to set expectations and goals clearly. Digitalization does not make a significant difference if there is no improvement and development in the structure and operations. (If you purchased a new program and keep the current structure, the benefit of change could be insufficient )
  2. Agency should plan the innovations according to defined targets. Consequently digital transformation programs should be suitable for the new operational and structural improvements. (if renewal communications planned automatically, you should buy a pursuant  software, etc.)
  3. An agency must complete and analyse the transformation plans then allocate necessary budget. After purchasing a new program with very good features, it is difficult to use on old computers/ hardware in the office. When you figure out the total cost, operating and hardware costs also should be considered.
  4. It is necessary to  prepare the employees for the innovations and transformation. The unwillingness of employees is usual if they hesitate to lose their jobs as a consequence of innovations and improvement. This concern is one of the major obstacles to progress.  To carry out a successful transformation it is very important to explain the benefits of  innovations to all employees.
  5. The agent owner must stand strictly against the problems that could appear during the transformation.  It is very critical to manage the reactions from employees and customers due to the possible hitches in the beginning of transformation. Therefore agency owners will need to allocate additional time to manage this process

The significant point of transformation is, agency owner has to believe the necessity of innovation and changes. You have to take this decision without hesitance. Thus, you can easily focus and solve possible problems and troubles.

Although all these efforts and costs, why do the agencies have to do these transformations and improvements ?

Rıza OYGUR

December 2020

 

APRIL 2020 CHANGES OF INSURANCE PREMIUMS PER DISTRIBUTION CHANNELS IN TR.

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SOURCE: TSB.

In April 2020, when the Covid 19 pandemic was felt intense, brokers and direct+other channel productions increased while the sales of agencies and banks decreased in comparison to April 2019. Total production rises 10.6% in this month

 

Total production branch based changes in April 2020

BRANCH APRIL 2020* APRIL 2019* CHANGE
CMTPL 1.269.899 1.491.181 -14,8%
M.O.D. 668.338 822.699 -18,8%
FIRE AND ALLIED PERILS 685.384 549.490 24,7%
MARINE GOODS ON TRANSIT 114.051 95.400 19,6%
HEALTH AND SICKNESS 789.839 690.664 14,4%
Agriculture Ins. Subsidised by Gov. 209.245 228.827 -8,6%
C.A.R.(**) 754.901 22.386 3272,2%
OTHER 746.691 836.067 -10,7%
NON-LIFE TOTAL 5.238.349 4.736.715 10,6%

 

*x1000 TRY Source TSB

While TR insurance industry grew in fire, marine goods on transit and health, shrinked in traffic, motor own damage and other branches in the table. Approximately 100 million dollars premium of a project policy (**) issued in the C.A.R. branch ,created a great growth effect in the total production of April 2020.

 

Per distribution channels branch based changes in April 2020;

BRANCH AGENCY* CHANGE BANK* CHANGE BROKER* CHANGE DIRECT+OTHER* CHANGE
CMTPL 998.353 -13,5% 21.199 -27,1% 64.224 -4,0% 186.123 -22,8%
M.O.D. 534.828 -16,5% 62.649 -21,3% 61.998 -36,1% 8.864 59,1%
FIRE AND ALLIED PERILS 253.388 11,1% 173.615 5,1% 182.882 66,1% 75.499 63,8%
MARINE GOODS ON TRANSIT 57.501 14,6% 6.167 60,1% 39.931 30,5% 10.452 -3,0%
HEALTH AND SICKNESS 378.235 7,2% 48.756 -18,5% 218.954 40,5% 143.895 17,7%
Agriculture Ins. Subsidised by Gov. -273.013 -494,5% 55.630 -26,1% 236 -58,1% 426.392 408,8%
C.A.R. 14.829 53,6% 1.853 -44,3% 6.166 -18,2% 732.053 39164,9%
OTHER 254.152 -21,1% 196.218 -24,0% 176.411 23,9% 119.911 5,6%
NON-LIFE TOTAL 2.218.272 -21,5% 566.088 -16,0% 750.801 22,9% 1.703.187 172,6%

*x1000 TRY, TSB

Agencies performed 42.3% of the total production in April. Fire, marine goods on transit and health production growth did not recover the losses in traffic, motor own damage and other branches.

Because of the cancellations in Agriculture Insurance Subsidised by Government production, agencies were the most shrinked channel in April. If we exclude the production of Agriculture Insurance Subsidised by Government, agencies total declined 9.7% in April 2020.

The banks increased the fire and marine goods on transit production, but they shrunk due to results of other branches.

Brokers achieved to rise their total production, even the reduction of CMTPL, motor own damage,

Agriculture Insurance Subsidised by Government and C.A.R. premiums.

Direct + Other channels succeeded good increases in all branches and in total, except CMTPL and marine goods on transit. Particularly, the growth rates are quite high in c.a.r and Agriculture Insurance Subsidised by Government

In april 2020 there were great contractions in many sectors like textile, construction, automotive, tourism, etc.. Even we evaluate the TR insurance industry except enormous c.a.r project policy, insurers performed better than many sectors in April 2020.

 

Rıza OYGUR

June 2020

TURKISH INSURANCE INTERMEDIARIES NUMBER OF EMPLOYEES ARE DECREASING BUT TOTAL COSTS ARE RISING – 2

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The cost of 10,000 TRY premium production to intermediaries seems to decreased 17.3% between 2014 and 2018, but the cost rising have been prominently felt since 2016. Let’s continue to examine the changes of the costs, premiums and number of employees in agencies and brokers.

TÜİK
Agencies + brokers

There was a big decline in the number of employees between 2014 and 2016. Even though the number of employees in the period of 2016 – 2018 was rising again but it was still below 2014 and 2015. During this period number of intermediaries remained almost the same while the number of other related people  (owners, share holders, salespeople, etc.) increased by 10%.

The total number of employees + others between 2014 and 2018:

Agencies + brokers

These intermediaries employee more than 50 thousand people and realized 67% of the premium production (total 54.6 billion TRY, agencies + brokers 36,4 billion TRY) in Turkish insurance market in 2018.

The premiums and costs of intermediaries (agencies + brokers) between 2014 and 2018;

YEARS PREMIUM* TOTAL COST* COST/PREMIUM
2014 18.130.486 2.105.782 11,6%
2015 21.772.401 2.236.006 10,3%
2016 29.042.196 2.211.615 7,6%
2017 30.883.971 2.544.903 8,2%
2018 36.408.601 3.494.919 9,6%

TÜİK, TSB

* x1000

Agencies + brokers

Consequently increased employee and sales costs, sharing commissions and increasing in general expenses are the main reasons of total cost rising.

In this period the rising rates of premiums and costs:

* Agencies + brokers

The Cost / Premium ratio has decreased compared to 2014 and 2015, but since 2017 the cost ratio increase of agencies and brokers has been more than twice the premium rising rates. As we shared at the beginning, cost change of 10.000 TRY production proportionally seems not bad over the years but the cost rising trend is conspicuous. Regardless of the position, directions of the both lines are giving ideas about the future of present situation.

(In our previous article we shared detailed information about the costs of intermediaries.)

Intermediaries who take correct and effective interventions would be able to continue their performance in the future. So the right decisions and implementations are important than ever under these circumstances.

The main goal is to reduce the costs and increase the revenues. So what needs to be done?

Rıza OYGUR

March 2020

TURKISH INSURANCE INTERMEDIARIES NUMBER OF EMPLOYEES ARE DECREASING BUT TOTAL COSTS ARE RISING

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*Agencies + brokers

Source: TUIK

TURKISH INSURANCE INTERMEDIARIES NUMBER OF EMPLOYEES ARE DECREASING BUT TOTAL COSTS ARE RISING – 1

All commercial enterprises have to closely monitor their costs in order to maintain their profitability and  compete effectively. Recent years insurance intermediaries are struggling with tougher competition and harder market conditions and also trying to cope with the rising costs. Between 2014-2018 number of intermediaries, number and cost of their employees, annual general expenses are as follows:

 

  2014 2015 2016 2017 2018
Number of intermediaries* 14.748 14.007 14.723 14.211 14.683
Annual average number of employees 44.758 39.968 35.424 37.930 38.689
Personnel
cost** x 1000 ₺		 1.055.920 1.019.058 1.070.140 1.337.846 1.441.097
Purchase of
goods and services x 1000 ₺		 1.049.862 1.216.948 1.141.475 1.207.057 2.053.822
Total cost x 1000 ₺ 2.105.782 2.236.006 2.211.615 2.544.903 3.494.919

Source, TUIK

*Agencies + brokers

**Gross

 

Comparison between 2014 and 2018;

2014 2018 RATIO
Number of intermediaries* 14.748 14.683 -0,4%
Annual average number of employees 44.758 38.689 -13,6%
Personnel
cost x 1000 ₺		 1.055.920 1.441.097 36,5%
Purchase of
goods and services x 1000 ₺		 1.049.862 2.053.822 95,6%
Total cost x 1000 ₺ 2.105.782 3.494.919 66,0%
Annual total cost per intermediary x 1000 ₺ 143 238 66,7%

*Agencies + brokers

The number of intermediaries from 2014 to 2018 were almost the same. Total costs rised 36,5% despite the number of employees decreased by 13.6%. In this period expenses  also increased  66%.

So, quick and effective precautions have become  necessity to cope with rising costs. First of all, intermediaries have to review their methods and processes  thoroughly. For this purpose they should utilize  knowledge and experiences of their stakeholders and everyone who can assist. Consequently, created innovations should be implemented fast and effectively

Thus, the new structure will  reduce costs, rise the competitiveness and help them to grow.

Rıza Oygur

January 2020