Post Europe: Affinity insurance in Central and Eastern Europe ripe for picking

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There are undeniable signs that affinity markets in Central and Eastern European markets, including Poland, the Czech Republic, Slovakia, and Hungary, are ripe for expansion. However, as Jane Bernstein discovers moving in to tap this market might not be as easy as some insurers think.

Those looking for the ‘next big thing' in affinity insurance business would do well to investigate the potential of Central and Eastern European regions. There is consensus among industry experts that certain types of affinity business are ripe for development there and that the right affinity model could prove rewarding.

Fernando Martínez de Velasco Juste, managing director and chief operating office for affinity for Europe, the Middle East and Africa at Aon, observes that while the Visegrad region, Poland, the Czech Republic, Slovakia, and Hungary, remains relatively untapped for affinity business, this presents both a challenge and an opportunity. He adds that those in the Visegrad Group are in a good position to know develop their affinity market, particularly after the financial crisis of the past few years.

Likely partners
There is a view that banks and automotive companies are among the most likely partners for the development of affinity products in CEE. In fact, Alan Leach, director at market research and consultancy firm Finaccord, observes that motor insurance sold through the automotive trade is already proving a success in Central Europe, as are life and non-life products sold through bancassurance.

Mr Martínez de Velasco Juste adds car and home insurance, as well as accident insurance, would be particularly suitable for the affinity model in Central and Eastern European regions such as Poland and Hungary.

Sizable affinity
Ralf Blesching, accident and health manager for Central & Eastern Europe at for Ace, observes that CEE and Turkey have significant potential. He believes there are industries and brands in these regions - supermarket chains, retailers and financial services - that are likely to develop sizeable affinity businesses.

Asked for his predictions on the ‘next big region' for affinity business in Europe, Walter Schenk, executive director risk and insurance, Greco International Holding AG part of the JLT International Network, points to markets such as Slovenia, the Czech Republic, Slovakia and Poland.

Positive approaches
In fact, some industry commentators are already reporting increased interest in CEE regions such as Poland and Hungary from insurers. "We have been approached by many insurers which would be interested in these markets," says Mr Schenk.

Andreas Wania, Ace's regional manager for CEE, Russia and Turkey, also points to the CEE as one to watch, observing that: "The affinity business in CEE is underdeveloped but at the same time on the target list of most major carriers and intermediaries."

Distribution opportunities
For Mr Leach, it is about product and distribution opportunities rather than strict regional differences. As far as products are concerned, Mr Leach identifies certain areas that have grown to a very significant size in the UK, such as extended warranties, home emergency insurance, mobile phone insurance and travel insurance, for which there is apparent scope for considerable growth in Europe. "In fact, these are obvious ‘affinity products' as the logical distribution channels are often entities such as retailers, telecoms firms and utilities," he observes.

So what issues will influence the development of affinity business - or indeed impede its development - in this region? One of the main cultural issues to consider, says Mr Leach, is customer behavior. He explains: "In many countries, customers are far less likely to switch to a new distribution channel than they are in the UK. This is caused by a variety of factors including the dominance of distribution through insurance agents in many countries, less price-based competition among insurance providers, a preference for buying insurance in a face-to-face environment and, in some cases, a less developed ‘insurance culture'."

Bigger concerns
Mr Schenk emphasises the inevitable significance of the economic situation, observing: "Right now many countries in the CEE region have been hit very hard by the economic crisis. The people there have much bigger concerns now than affinity insurance." He believes the presence of international insurers is important for the development of affinity insurance in these countries, adding: "We do not think that the local insurers will offer such products."

A competitive insurance environment is certainly part of the equation, according to Mr Leach, who emphasises that there needs to be underwriters or brokers that are keen to cultivate new channels. The other main requisite, says Mr Leach, is the existence of partner organisations with sufficient brand strength or a large enough base of customers, or members to diversify credibly into insurance distribution.

Lessons to learn
For those looking to develop affinity business, there are, of course, lessons to be drawn from the experiences of the more mature markets. Asked to identify some of the major issues, Mr Leach responds: "The key considerations are the commitment and quality of the affinity partners chosen, the fit between those partners and the insurance products being marketed, the scope for selling via online and telephone channels as well as via a face-to-face environment, and the degree to which customers can be persuaded to migrate from traditional distribution channels."

Mr Martínez de Velasco Juste emphasises that providing genuine added value to members of the affinity groups remains a key factor. He concludes that insurance should also be viewed as a tool to further increase the end customer's brand loyalty and that the product should be simple, comprehensive and easy to sell: "Simple and efficient sales, administration and IT processes are also crucial issues."

Clears signs
There are undeniable signs that affinity markets in CEE regions are ripe for expansion, with success stories already emerging. Bancassurance is establishing itself as a successful model and motor insurance sold through automotive business is already thriving in some parts. Mr Leach predicts that there will also be opportunities in niche products, and points to card protection insurance, forms of accident and health insurance and even pet insurance. The CEE region is certainly one to watch.

 

 

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