Innovation and flexibility are essential for providers of insurance schemes wanting to make the most of opportunities in a fast changing market. Jane Bernstein examines the challenges ahead and finds out how Allianz Cornhill Schemes is meeting them
Insurers looking to be successful in the schemes sector need to be able to move fast to make the most of exciting opportunities in the marketplace. Innovation is key, as is the flexibility to act quickly on a good idea and follow it through with real products. How should providers evolve to make the most of these opportunities and what challenges will they meet along the way?
In an insurance market which can be strongly cyclical, schemes business often provides insurers with a stable profit stream. This has been the case for Allianz Cornhill Schemes, where partnerships grew up around extended warranty and payment protection and whose portfolio now also includes a variety of all risks schemes, such as mobile phone insurance.
Nigel Wilkinson, Business and Marketing Manager, reflects on the development of the extended warranty market, an area that often receives attention from the consumer media. "The reality is that it's a sector that comes in for some bad press but it is also one which gives a valuable service to the customer, reflected by the fact that sales remain relatively constant." Mr Wilkinson believes extended warranty still holds a strong appeal for customers but is very much a product which needs to evolve. "The challenge lies in the offering and how it is sold. We are constantly working with our clients to find new ways of adding value to what is a pretty standard engineering or breakdown based product. It's about coming up with novel ideas."
Mr Wilkinson goes on to consider the case of the kitchen appliances marketplace: "The intelligent home is becoming a reality - fridges which inform you that you are down to your last pint of milk, for example. Insurers need to keep pace with these kinds of changes. While insurance will of course be the core proposition, it is important to realise that it is not just about providing insurance if the fridge breaks down, but also finding out what other opportunities are presented by the technological developments."
Creativity is also key in the mobile phone market. Mr Wilkinson observes that there has been exponential growth in the number of people owning mobile phones. But whilst the market has now reached a level of saturation, mobile phone providers are continuing to come up with new product innovations which move the market forwards. As phones and other mobile technology becomes increasingly valuable - a result of improvements in technology, increased functionality and a greater variety and volume of content being stored on devices (see inset) - then the concept of insuring becomes more appealing. "People do like to protect their phones," says Mr Wilkinson, "mobile phone insurance is an attractive product that sells well."
As far as the future for Allianz Cornhill Schemes is concerned product development will continue to be essential and insurance solutions will need to cover a more comprehensive range of perils. Mr Wilkinson highlights this: "These days it is not enough just to be an insurance provider. We need to bring additional elements to more traditional products or innovate and bring new products into whichever route to market we are working with. For example, in relation to mobile phone insurance, this could mean a move towards protecting the content of a handset, rather than just the hardware itself, but also working with partners on issues such as penetration of sales over the web."
Lynda Cooper, Director at Allianz Cornhill Schemes and figurehead of the business, says they will certainly focus on core areas but that they are also open to considering new product areas. "We can benefit from being part of a big European company but equally as a small division, we can be flexible enough to be entrepreneurs" she asserts.
Alongside developing products which reflect the advancement of technology and increasing sophistication of the marketplace, insurance providers must also ensure that their own systems keep pace with the solutions they offer, pulling together all the different elements of a scheme. Ms. Cooper states that "The end customer wants - and is entitled to - a seamless solution. Providers must continue to invest in new technology to deliver high customer service standards." She goes on further to say that at Schemes they are in the process of implementing a new system which will put this into practise.
Despite the challenges which must be met along the way, these developments and opportunities make for an exciting market, where according to Ms. Cooper, innovation and creativity are taken seriously. The sector remains profitable both for providers and their partners, as well as offering valuable protection to the consumer.
NEW TECHNOLOGY: MARKET TRENDS
Where is the growth in the market?
The electrical sectors that have grown the fastest over the last five years are:
- Mobile telecoms and mobile technology
- Gaming consoles and software
- Audio/visual equipment
What is driving these changes?
There are some exciting technologies stimulating growth such as:
- Development of mobile operating platforms - 3G and 4G
- Wi-fi and Bluetooth
- Voice over Internet Protocol (VoIP) enabling phone calls over the internet
- Digital replacing analogue television and radios
What trends are developing?
- Convergence: for example the mobile phone being combined with landlines as well as being used as an MP3 player, digital camera, internet browser, PDA and games console and in the future an electronic wallet. But also convergence in terms of the same solutions now being used to meet both business and personal use - for example GPS tracking.
- Shift in value to customer: the content can now be more valuable than the hardware, for example, an iPod costing £250 could hold £4,000 of downloaded music.
- Greater reliance on mobile technology meaning there is a greater need for protection.
Source: Allianz Cornhill Schemes.
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