Such resources lead the organization on the path to success by maximizing its competitive advantage. A survey conducted recently by the Office for National Statistics (ONS) found that one in 10 UK businesses reported being at a moderate-to-severe risk of insolvency, with rising energy costs cited as a major factor. Tax has been lagging behind in the digital revolution that many other industries have experienced in recent years. If your customers see your product being different and more beneficial from others, they will be willing to pay more to gain it. Relevant also are population, culture, and events in history, as are the role of the government in lshammari, Alhabshi, and Saiti (2019) examined the impact of competition on the cost efficiency of conventional insurance in the Gulf Cooperation Council (GCC) countries for the period 2009 to 2016. The average Boone Indicator for the period 20102012 was 0.1798 and 0.2659 using the marginal cost and average cost, respectively. cameras, tablets or other digital devices) with a coverage that can be activated and terminated as and when needed and can be switched on and off through the app. It must be rare in its nature so that every competitor has no access to it. What has kept its style unique and made its business prominent is its use of innovative strategies and put great ideas for keeping the customers happy with its services. The insurance sector in Zimbabwe is one of the key pillars of the financial system offering a wide range of products. The results also compare favourably well with those obtained by Abel, Khobai and Le Roux (2017) for the Zimbabwean banking sector where they obtained the average Boone indicators of 0.4950 and 0.2781 for the loan and deposit markets, respectively, for the period 20092016. Insurance industry is in a phase of digital revolution replacing the legacy systems and infrastructure to meet the demands of todays digital consumers. Equation 3 shows the relationship between output and marginal costs. The role of competition in the insurance sector cannot be understated as it helps in reducing risk and uncertainty (Antwi & Antwi, 2013; Claessens, 2009). Fortunately, however, Apperians unique mobile application management (MAM) approach makes it easy for insurance carriers to secure, manage, and distribute apps for both employees and third party producers, across any device or MDM profile, with the appropriate level of access and security. Kramari and Mileti (2019) evaluated the effect of competition on soundness of Croatian insurers and established that the Boones indicator for the sector ranged from 0.2536 to 0.4142 between 2006 and 2010. Competitive advantage can be acquired by the confluence of factors that come to play their role for instance cost structure, quality of their good offerings, branding, customer service, the distribution network, intellectual property, etc. Cost leadership strategy refers to the same idea where companies can be able to produce a product that has a lesser price than what the other competitor is offering. Their study involved calculating the Boone indicator using three different approximations of the marginal costs: average variable costs; marginal costs derived from a trans-log costs function; and scale-adjusted marginal costs. A central banks It also enables rapid standardisation which is essential for driving cost efficiency and offering the necessary room and platform for adapting, changing, and scaling. We have seen the beginnings of this in 2022 but I hope that 2023 will be the year it truly takes off.. The marginal cost is equal to the product of the derivative of the logarithm of total cost (TC) over output (y). How do you leverage legacy assets to embrace the transition more quickly and cost effectively. The millennials have never known a world without computers, the internet, mobile phones and other mobile devices. As a result, all variables were taken into consideration in the estimation of the regression model. From equation 4, profit can be defined as i=+lnMi5, Marginal cost cannot be observed directly or extracted from the financial statement of insurance companies; hence, this study proxy it from the trans log cost function (Pruteanu-Podpiera and Weill and Shobert 2008) and is specified below. Paper presented at the Encore Meeting, https://doi.org/10.1016/S0167-7187(01)00092-3, Competition in the insurance industry in Ecuador, https://doi.org/10.1016/j.qref.2018.10.001, Economic development cointegration and Malaysian life and general insurance consumption, Competition in the financial sector: Overview of competition policies, Banking competition and stability: Evidence from West Africa, Competitive advantage and competition policy in developing countries, Measuring competition: How are cost differentials mapped into profit differentials? Building competitive advantage For insurers that no longer have captive distribution or that can no longer afford to maintain it, the focus will shift to more effectively managing third Thats a huge increase from only $90.69 billion in 2020. His passion other than providing excellent advice is playing golf. The benefits of competitive markets can be inferred from the negative social welfare effects of monopoly (Guzman, 2000). There are other strategies too that help the company maintain its business alive and up-to-date such as: Competitive advantage is the capacity of the company to strategize its business in a way that stands out its position in the market and pays it off for the loner and sustained way than to its competitors. The resources of an organization include capabilities, processes, assets, information, attributes, knowledge, etc that are controlled by the organization and rightly implemented to promote efficiency and enhance competitive advantage. The breakdown of the number of entities per class of business is shown in Table 1. In the case of health insurance, digital consumers want to see and navigate through their explanation of benefits (EOB) dynamically and to further communicate within the context of their claim requiring insurers to be able to engage immediately via online chat or text. In addition, competition enables efficient resources allocation, brings balanced development in a country, enhances product innovation, enhances prospects of economic growth, improves efficient production of financial services and reduces credit risk (Caminal & Carmen, 2002). The insurance sector has experienced phenomenal growth since 2009. The very blurring of the boundaries between industries owed to the sharing economy and the generation of vast real-time data, is set to create gigantic shifts presenting new market opportunities and threats. Captive agents, who only work for one carrier, may need to access company-wide CRM data or account history for existing customers, requiring tie-in to the carriers back office. The results further revealed that there was no significant difference in competition in the periods 20132017 and 20102012. They employed the Boone indicator method for the period 19992011. Given that 86% of mid-sized to large insurance companies, life and annuity providers already have a BYOD (bring your own device) strategy, it is not a huge stretch to conclude that a large percentage of this spending will be directed towards enterprise apps and other mobile solutions. The rest of the paper is organised as follows: stylised facts about the Insurance sector in Zimbabwe are presented in section 2, followed by literature review in section 3. The equation shows that profits depend on marginal costs in a quadratic way. With the introduction of new API platforms, migrating to the cloud is no longer onerous. For that reason, a phased cloud migration plan would act as the most effective way to manage change of this scale and to also allow the required room for the deployment of new applications. The methodology of the study is presented in section 4, while the results of the study are discussed in section 5. As we enter 2023, many business leaders may be experiencing feelings of uncertainty and apprehension. The Boone indicator reveals the impact of competition on the performance of efficient insurers in post-EU accession period only accounting for the reallocation effects proving that efficient insurers make higher profits. The study employed one of the new empirical industrial organisation methods, namely the Boone indicator. Monopoly power may allow the persistence of inefficient managers, leading to increased cost inefficiency (Abel & Le Roux, 2017). Table 4 shows that the values of the Boone indicator, which were estimated using linear regression equations 5 and 8. One of the biggest advantages of Central Bank Digital Currency is an increase in the safety and efficiency of both wholesale and retail payment systems. For example, a firm that manufactures a product in China with having lower labor costs than the company that is manufacturing the same product in the US so can eventually offer the same product at a lower price. Table 2 shows that total gross premiums written by insurance companies. We didnt know there was going to be a war in Ukraine and we didnt see the energy crisis coming. All rights reserved, Competitive advantage vs. Post 20102012 period, most insurance companies had fulfilled their capital requirements and hence were on good footing to compete in the sector. Customer expectations and demands are growing. Its a win-win for the Government so I think it is inevitable that the ICO will be hot on the tails of companies that fall foul of permitted data use., 2023 is going to be all about doing more with much less, notes Bruce Martin, CEO of Tax Systems. Overall, the range of the Boone indicator for the study was 0.232 to 0.4005 with average cost and 0.096 to 0.344 with marginal cost which compares favourably with the results obtained in a Croatian study. In addition, by migrating legacy systems on Cloud not only gives flexibility but allows the organisation to maintain these at a fraction of the cost. Its clear that integrating the digital and physical worlds is not a straightforward process, and doing it all at once would be enormously expensive and complex. This strategy is called need-based positioning where Pinterest only targets the specific population of the market. Unfortunately, businesses in some sectors have been experiencing defaults or delays, which can be highly disruptive and financially damaging. To effectively support an omnichannel approach that meets the needs of millennials, insurers need to modernize their technical spine. This means updating legacy systems to ensure the organization can access data as necessary to present a single view of the customer across all channels and lines of business. According to delegates at the roundtable, the biggest and most immediate challenge that businesses are facing is the staffing crisis. Prior to any regression, the study evaluated the presence of correlation among the variables. Stylised facts about Insurance sector in Zimbabwe, https://doi.org/10.1080/23322039.2021.1974154, Medicine, Dentistry, Nursing & Allied Health. How Can You Get A Loan With Fair Credit? Your Data, Your Leverage . Insurance like other financial services is responsible for mobilising long-term savings used for building infrastructure assets such as roads, ports, power plants, dams, etc. The average variable costs are measured as variable costs to variable revenues ratio. It found that increased competition in the micro-finance sector led to an increase in the amount of loans and a decline in financial self-sustainability. Product development can also be accelerated by backing InsurTechs that do not face the usual policy and legacy burdens. The results revealed that the values of Boone indicator were statistically significant throughout the study period for average cost and marginal cost models. The Granger causality test revealed bidirectional causality. Steps to attracting millennials while retaining their predecessors. This strategy is usually applied by small businesses that dont find enough resources to spend on a large span of population. Staying dry during the recessionary storm of 2023, How new financial directors can champion change in the first 100 days, From budget cruncher to transformational leader, the role of the CFO in 2023, 2023 predictions: authentication, digital identity and in-car payments, Mizuho Bank Luxemburg upgrades anti-financial crime compliance risk management with Napier, Bahrain based fintech IPS extends its collaboration with BPC. By presenting this information on graphically rich enterprise apps, brokers and agents make it easier for clients to understand their options and ultimately make a purchase. Convenience when switching, which used to be a hurdle, is not considered an issue anymore with the advent and now dominance of marketplaces and price comparison platforms. Phahalad and Hamel took the RBV framework a step further by enforcing the value of core competence as the leading factor in the advancement of the competitive advantage. building competitive advantage in Kenya: A survey of insurance firms. For many years, identifying process improvements has traditionally been a well-proven but heavy, slow, and manual process. Studies suggest that Starbucks competitive advantage is due to its strategy of product differentiation which helps it out to remain distinct among its rivals and keep on attracting more audience at its place. The study follows the Boone et al. Heading into a recession and with costs continuing to rise at unprecedented rates, the next 12 months will undoubtedly be tough. They also need accurate data about where risks might arise in the future, so they are better informed, commented Craig Evans. Compliance as a Competitive Advantage in the Insurance Industry Submitted by: Teresa Settas. Yet, it is impossible to truly predict what the next year has in store for us the last couple of years have certainly been unpredictable! This will play a very important role in achieving competitive advantage especially in the insurance industry where competition is Technology as a competitive advantage in the insurance industry In contrast to software companies, insurance companies are rarely referred to as drivers of innovation. The COVID19 pandemic has not spared the sector which is experiencing higher than usual lapse rates as a result of potential liquidity issues anticipated as customers incomes become constrained. Advantage One Brokers is more than just your standard IMO. The global insurance market grew from $5946.74 billion in 2022 to $6466.23 billion in 2023 at a compound annual growth rate (CAGR) of 8.7%. So, the SCP framework argues that the structure of the industry is the key parameter in determining the right direction for the success of an organization. The study investigated the evolution of competition in the Zimbabwean insurance sector during the period 20102017. Critically, insurers will need to get the basics right; embracing new technology as an enabler and designing services rather than products in a collaborative manner through the use of an ecosystem. 10. International Journal of Social Sciences and Entrepreneurship, 1 (11), 467-490. After a challenging year for dealmaking, whats the 2023 UK M&A outlook? Having heavy investments into custom silicon has helped it to develop lockstep with hardware, software, and silicon engineering. Simon Philpin, head of trade credit at credit assurance provider, Markel, added: We have seen increased demand for credit assurance linked to suppliers. Under monopoly, managers can use resources to sustain market power. The study established that there is a positive relationship between competition and efficiency supporting the quiet life hypothesis where managers in a less competitive market may utilise the market power of their firms and reduce their efforts. (2017) did a cross-country study on the association between soundness and competition in the life insurance industry in 10 European countries. Through effective communication, credit management professionals can help to build a more complete picture.. Linear regressions are estimated for each year starting from 2010 to 2017 following the works of Cummins et al. Of novelty to this study is the use of the Boone Indicator, one of the new empirical industrial organisation methods. To maintain their competitive advantage, businesses must remain attuned to create demand of their target market which makes them updated on who their customers are and how they can bring betterment to their consumers lives. Did you know that with a free Taylor & Francis Online account you can gain access to the following benefits? Insurance also inspires creativity, innovation, entrepreneurial activities and trade that are vital for sustainable economic growth (Billah, 2014; Cristea et al., 2014). The economy should be prevented from sliding into hyperinflationary environment, which negatively impacts policy holders as well as insurance companies. Create an alert to follow a developing story, keep current on a competitor, or monitor industry news. From the carriers perspective, by deploying an effective enterprise mobility strategy, they can increase revenue and decrease risk by enabling their agents and partners to access back-office pricing and product data in real-time, thus expediting sales at the most current risk-adjusted rates. In the huge industry of social media, launching a new social media platform requires extraordinary efforts and developmental ideas if one wants to remain to stand out. The manual, monotonous tasks should be automated to free up time for training and development that will accelerate the value being added to the business, agrees Tax Systems Martin. Its global supply chain is vertically integrated which means that they have full control of every stage from moving the coffee beans from the farm to the store and there is no middleman in between. Transforming data into meaningful information is critical to managing a successful business. Required fields are marked *. In contrast, life and pension insurers are more stable in a highly competitive and more concentrated market. This is a static model as compared to the above which is dynamic. Registered in England & Wales No. The number of reinsurance broking firms increased by 100% during the period from 4 to 8 which might have increased competition in the industry. The Hague: CPB Netherlands Bureau of Economic Research, The relationship between insurance and economic growth in Romania compared to the main results in EuropeA theoretical and empirical analysis, https://doi.org/10.1016/S2212-5671(14)00085-9, Competition, efficiency and soundness in European life insurance markets, https://doi.org/10.1016/j.jfs.2016.11.007, Insurance effect on economic growth-among economies in various phases of development, https://doi.org/10.1108/RIBS-02-2017-0010, Bank structure, capital accumulation and growth: A simple macroeconomic model, Interest rates and financial performance of microfinance institutions: Recent global evidence, https://doi.org/10.1080/13571516.2019.1664835, The Boone indicator as determinant of Croatian insurance market soundness, An evaluation of competition in Zimbabwes short-term insurance sector: An application of the Panzar-Rosse approach, The relationship between relative risk aversion and the level of education: A survey and implications for the demand for life insurance, World insurance in 2015: Steady growth amid regional disparities. 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