Insurance Markets and Companies
ISSN / EISSN : 2616-3551 / 2522-9591
Current Publisher: LLC CPC Business Perspectives (10.21511)
Total articles ≅ 32
Latest articles in this journal
Insurance Markets and Companies, Volume 12, pp 1-13; doi:10.21511/ins.12(1).2021.01
The COVID-19 pandemic has affected different sectors of the economy, including insurance, and has become a problem and a clear catalyst for innovation. The pandemic has highlighted some inefficiencies of the traditional model of interaction between insurers and their customers and focused on insurance companies’ efforts on innovations and investments in the digital future. That is why the article aims to generalize the transformations of the institutional environment in the InsurTech ecosystem in the context of the COVID-19 pandemic and identify prospects for its development in the post-pandemic period.The analysis of the functioning of InsurTech as an ecosystem necessitated the identification of challenges for the insurance market in the context of COVID-19. The peculiarities of the insurance market development have been identified: the blurring of boundaries between insurers, BigTech firms, and technological partners; expanding interaction with policyholders based on the principle of support and the use of social networks; changes in the structure of the implemented insurance services; an increase in insurance fraud cases; the growing demand for parametric insurance products; introduction of a digital approach to the interaction with customers and employees, modernization of technological infrastructure and expansion of data processing capabilities; remote risk identification; acceleration in the use of financial technologies by insurance market participants. There is a transformation of the insurance market under the influence of business processes digitalization because insurers are aware of the importance of InsurTech in the formation of competitive advantages. For many companies, the crisis has strengthened their innovative development strategies and accelerated the implementation of financial technology tools in their business processes against the background of modernization of technological infrastructure. Chatbots, telematics, the Internet of Things, machine learning, artificial intelligence, predictive analytics, etc., are widely used. In the future, InsurTech will also play an important role in introducing digital innovations in the insurance market.
Insurance Markets and Companies, Volume 12, pp 32-42; doi:10.21511/ins.12(1).2021.03
The pace of digitalization of the insurance industry lags behind similar processes in the banking sector. The main tasks that a Russian insurer solves when using IT technologies are the automation of business operations and the formation of an online system of interaction with customers with the main focus on sales.The purpose of this study is to systematize the effects achieved by insurance market participants when introducing IT technologies and identify incentives to accelerate the insurance sector digitalization. The goal of digitalization of Russian insurers should be the formation of a client interface with a full cycle of services; the transfer to a qualitatively new level of business processes while ensuring the required level of protection; formation of fundamentally new and timely renewal of the existing insurance products. The priority areas of IT technologies used by Russian insurers are identified: cloud computing, chat bots, and information resources that provide online interaction with customers. Factors that have a stimulating effect on the digitalization of the insurance sector are identified: cost reduction, acceleration of business processes, improvement of the quality of customer service and increased competitiveness. The problems and risks of insurers that restrain the use of IT technologies are formulated: high costs of digitalization, lack of qualified personnel, cyber risks, moral and ethical problems.
Insurance Markets and Companies, Volume 12, pp 16-31; doi:10.21511/ins.12(1).2021.02
The insurance sector plays a critical role in the economy, providing protection and security of the state and influencing its social and economic development. However, having a significant potential for development, the sector cannot fully realize it due to many problems, including its shadowing. Using the method of unprofitable enterprises analysis, which is applied by the Ministry for Development of Economy, Trade and Agriculture of Ukraine to determine the level of the shadow economy, considering the type of economic activity, the level of shadowing of the insurance services sector in Ukraine and its regions in 2013 and 2018 was calculated. The calculation results showed an increase in the shadow level of the insurance services sector both in Ukraine as a whole and in the separate regions. To evaluate the effectiveness of the insurance sector potential, given the calculated level of shadowing, a comprehensive assessment was carried out by standardizing the values of selected indicators characterizing the potential of the insurance sector in the context of Ukraine’s socio-economic development. The indicators of the efficient use of the insurance services sector potential in Ukrainian regions, calculated using an integrated assessment, showed an increase in the efficiency of using the potential of the insurance sector in three out of five analyzed regions. Zaporizhzhia region demonstrated the most significant growth. It has been proven that an increase in the volume of services provided is a key factor in increasing the social and economic efficiency of the insurance sector.
Insurance Markets and Companies, Volume 11, pp 61-80; doi:10.21511/ins.11(1).2020.07
In the conditions of insufficient budgetary financing of the health care system and low quality of medical care in the state medical establishments of Ukraine, the importance of extra-budgetary sources of financing becomes increasingly relevant. One such source is voluntary health insurance. The aim of the paper is to compare the state and structure of medical financing in developed countries and in Ukraine, to study the global experience in the functioning of the voluntary health insurance market, and to calculate the potential capacity of the voluntary health insurance sector in Ukraine. For mathematical calculations, 20 absolute indicators of the state of the voluntary health insurance sector, as well as macroeconomic indicators, were used. The annual values of absolute indicators for the period 2010–2019 were used in forming the array of input data. Based on the experience of foreign countries, the paper substantiates the development of the voluntary health insurance in Ukraine as an extra-budgetary source of health care funding. The capacity of the voluntary health insurance sector was defined by the authors as the maximum possible amount of insurance premiums that insurers can receive in the process of selling voluntary health insurance products. The calculations made it possible to conclude that the voluntary health insurance market in Ukraine has the potential for development, as evidenced by the predominance of the potential capacity of the voluntary health insurance segment over its real indicator.
Insurance Markets and Companies, Volume 11, pp 53-60; doi:10.21511/ins.11(1).2020.06
The purpose of the study is to develop methodological approach for identifying changes in the level of insurance companies’ competitiveness on the travel services market. Based on development of multifactor regression equation, integrated indicators of insurance companies’ competitiveness in 2016–2019 were calculated. The application of three-sigma rule allowed to divide insurance companies by competitiveness levels and to identify that during 2016–2019 most of insurers had sufficient and critical levels of competitiveness and the group of insurance companies with a high level of competitive position is small. The Markov chain theory was used as a research method to determine the probability of insurance companies moving to higher or lower competitiveness levels. The results of Markov’s method showed that the majority of insurance companies are most likely to remain in their initial groups and only insurers with low and sufficient competitiveness have high probability to change their positions. Companies with high competitiveness have very strong positions on the market and there is very low probability that other insurers will capture leaders’ market share in the coming years. So, the use of the developed approach allows predicting a decrease of insurance ability to compete on the travel services market and deciding on the necessity to change the competitive strategy.
Insurance Markets and Companies, Volume 11, pp 42-52; doi:10.21511/ins.11(1).2020.05
Environmental, social and governance criteria (ESG) are considered to be the main factors in measuring the sustainability and ethical impact of companies. This article focuses on comparing the ability of insurance companies to use an ESG-driven approach to managing their sustainable development. The study is conducted using comparative analysis, statistical analysis, and a case study method. The study compares six ESG Ratings on four main criteria (dependent variables, independent variables, scale type, sample), that allows choosing the most appropriate rating for the analysis of insurance companies. As a result, 156 insurance companies are compared by the level of ESG risk (low ESG risk – 24 companies, medium ESG risk – 111 companies, high ESG risk – 21 companies) and by geographical affiliation (26 countries) using descriptive statistics. The assessment of effectiveness of the ESG-driven approach to managing sustainable development of insurance companies is carried out on the example of 16 companies by comparing their non-financial reporting (the sample is selected based on of the annual report for 2019-2020). The study identifies the most common guidelines for report development, as well as components of the ESG-driven approach: environmental (waste and pollution, climate change, energy efficiency), social (workforce and diversity, customer engagement, communities), governance (code and values, reporting, risk management). The study systematizes the best practices of insurance companies for applying the ESG-driven approach to manage their sustainable development and highlights the need for insurance companies to improve their reporting and disclosure practices related to the development of the ESG-driven approach. AcknowledgmentComments from the Editor and anonymous referees have been gratefully acknowledged.
Insurance Markets and Companies, Volume 11, pp 30-41; doi:10.21511/ins.11(1).2020.04
Pandemic affects insurance industry both directly, via health shocks, and indirectly, via financial shocks, as well as via shift in the policyholder behavior and distribution channels. The paper contributes to understanding the impact of COVID-19 on the global and Ukrainian insurance market, provides insights into implementing digital measures and technologies for insurers, in response to changes caused or accelerated by pandemic, building the capabilities to survive and exploit the changing market.A research of the the dynamics of Ukrainian insurance market changes during the quarantine period was conducted, the main tech achievements of leading insurers were investigated. The paper highlights priorities that insurers need to address in the wake of pandemic (distribution destruction, reinvention of the customer experience, cost structure changes, new protection offerings and new revenue pools), deals with different business strategies that insurers can follow to adopt and pivot in the low-touch economy and reveals new opportunities to extend insurers’ protection offerings and establish new sources of revenue emerged with digital transformation. AcknowledgmentThis project was financed by the Ministry of Science and Higher Education of the Republic of Poland as part of the «Regional Initiative of Excellence” Programme for 2019–2022. Project No. 021/RID/2018/19. Total project budget: PLN 11 897 131,40.
Insurance Markets and Companies, Volume 11, pp 21-29; doi:10.21511/ins.11(1).2020.03
Given the growing threats to the financial sustainability of businesses during the COVID-19 period, anti-crisis development strategies are the basis for ensuring successful operation and maintaining competitiveness in the markets. Insurance companies formulate and implement anti-crisis strategies in accordance with the requirements of the circular economy. Thus, the purpose of this study is to identify the main anti-crisis development strategies that insurance companies adhere to during COVID-19. The features of strategies that existed before the pandemic and were formed during the pandemic are identified. Tourism and hotel and catering business is an activity that considers the conditions of the circular economy. It is in this industry that the highest risks arise during the period of COVID-19. An anti-crisis development strategy of insurance companies during a period of pandemics and crises is understood as a tool for resolving contradictions in the development of a company in the event of a crisis or its threat. Moreover, the development process of the insurance company is inevitable, given the manifestations of the circular economy. As a result, insurance companies changed and consolidated anti-crisis development strategies during COVID-19. The newly created concentrating effort strategy combined the strategy of long-term planned changes and the strategy of balancing the interests of the insurance company and stakeholders. Instead, new strategies have emerged to innovate and maintain an adequate level of financial sustainability. It is especially worth highlighting the marketing strategy that ensures the image of insurance companies.
Insurance Markets and Companies, Volume 11, pp 11-20; doi:10.21511/ins.11(1).2020.02
Longevity risk management is an area of the life insurance business where the use of Artificial Intelligence is still underdeveloped. The paper retraces the main results of the recent actuarial literature on the topic to draw attention to the potential of Machine Learning in predicting mortality and consequently improving the longevity risk quantification and management, with practical implication on the pricing of life products with long-term duration and lifelong guaranteed options embedded in pension contracts or health insurance products. The application of AI methodologies to mortality forecasts improves both fitting and forecasting of the models traditionally used. In particular, the paper presents the Classification and the Regression Tree framework and the Neural Network algorithm applied to mortality data. The literature results are discussed, focusing on the forecasting performance of the Machine Learning techniques concerning the classical model. Finally, a reflection on both the great potentials of using Machine Learning in longevity management and its drawbacks is offered.
Insurance Markets and Companies, Volume 11, pp 1-10; doi:10.21511/ins.11(1).2020.01
Loss portfolio transfer (LPT) is a reinsurance treaty in which an insurer cedes the policies that have already incurred losses to a reinsurer. This operation can be carried out by an insurance company in order to reduce reserving risk and consequently reduce its capital requirement calculated, according to Solvency II. From the viewpoint of the reinsurance company, being a very complex operation, importance must be given to the methodology used to determine the price of the treaty.Following the collective risk approach, the paper examines the risk profiles and the reinsurance pricing of LPT treaties, taking into account the insurance capital requirements established by European law. For this purpose, it is essential to calculate the capital need for the risk deriving from the LPT transaction. In the case analyzed, this requirement is calculated under Solvency II legislation, considering the measure of variability determined via simulation. This quantification was also carried out for different levels of the cost of capital rate, providing a range of possible loadings to be applied to the premium. In the case of the Cost of Capital (CoC) approach, the results obtained provide a lower level of premium compared to the percentile-based method with a range between 2.69% and 1.88%. Besides, the CoC approach also provides the advantage of having an explicit parameter, the CoC rate whose specific level can be chosen by the reinsurance company based on the risk appetite.