Sector covered in the first phase 2002/03: Insurance and
Pension Funding Services
Definition
The insurance sector covers long and short-term risk dispersion
activities with or without a savings component. The according NACE Rev. 1
chapter 66 is named "insurance and pension funding, except compulsory social
security" and comprises three basic activities:
- life insurance (NACE 66.01),
- pension funding (66.02),
- and further insurance activities (66.03).
"Further insurance activities" include accident, fire, health,
real estate, transport, assets, claim and third party insurance. "Pension
funding" does not include systems with mainly public sources. Reinsurance is not
listed as a separate category because many general insurance firms also offer
reinsurance services.
Basic economic data
European overview: There is not yet a uniform structure of
European insurance industry. The single insurance market, formally existing
since 1994, did not harmonise all preconditions for market entry and activity,
but only a few legal issues. In the EU there are as many insurance economies as
countries. The most important insurance nations in terms of primary insurance
premiums are the UK (163 billion Euro), Germany (123) and France (105).
Number of businesses: In 1997, 4212 insurance companies were
active in the EU, a decrease from 5422 in 1990. However, in Luxembourg and
Ireland, the number increased from 196 to 330 respectively 81 to 101 in this
period of time. This increase illustrates the attractiveness of the two
countries for finance firms due to tax benefits and other benefits. The largest
share of insurance firms in the EU is dealing with non-life insurance (62.3
%).
Market structure: After the opening of the common market, a wave
of mergers and acquisitions took place in the European insurance sector, mainly
between companies of the same country. Many companies do not only serve the
market in their home country. There is a trend towards large insurance or
financial groups operating on a European level, still leaving space for
specialist insurers on a national or even regional level. Consequently, the
insurance market is dominated by large firms: In 1996, 85.9 % of the employees
in the EU-15 insurance firms worked with companies larger than 250 employees,
and 72.2 % of the turnover was generated by large firms.
In 1997, the largest shares of net premiums were covered by motor
insurance (33.4 %), accident and health (25.2 %) and fire/other claims (20.6
%).
Employment: In 1996, employment in EU insurance firms was
estimated to a bit less than a million (967 000). According to the 1998 labour
force survey, the share of female employees was 47.4 %.
Growth trends: Considering the crisis of social insurance systems
in all European countries, the insurance sector is likely to grow in the coming
years. For example, the German government introduced a public support scheme for
private pensions in 2001.
Reasons for selecting the insurance sector
The insurance sector is of particular interest for the ICT and
e-business market watch project due to two main reasons: Firstly, the insurance
sector is one of the most important service sectors regarding its basic function
for the whole economy. Modern, highly industrialised and technology-driven
economies are challenged by higher risks than ever, which was plainly shown by
the events of September 11. Secondly, since the insurance business is organised
in a very decentralised manner, optimising business processes between
headquarters, agencies and salespersons is a constant challenge. Against this
background, ICTs can play a particularly vital role in the insurance sector, by
allowing immediate access to data from any location.
Role of ICT and e-business
To some extent, the insurance sector has been quite conservative
in applying new ICTs, although established firms are increasingly contested by
newcomers offering insurance polices exclusively through the Internet. A sector
specific impediment, however, for applying B2C e-commerce via the internet is
that many customers prefer personal consulting, mainly because of the inherent
product complexity, particularly as far as life insurance and pensions are
concerned. Currently, because of the introduction of the Euro on the one hand
and because of ongoing mergers and acquisitions on the other hand, marketing
strategies and market shares as well as developing new products are generally
given higher priority by insurance firms than implementing and applying new
technologies.
On the other hand, the highly competitive environment forces the
insurance firms to invest in ICTs. Call centres have a growing importance as a
distribution channel. E-business may well be identified as a means to cut costs
in insurance firms, particularly for bought-in services like rating, asset
management and administration.
European associations
- CEA - European Insurance Committee, 3 bis, rue de la Chaussee d'Antin,
F-75009 Paris, Phone: ++33 1 44 83 11 83, Fax: ++33 1 47 70 03 75, www.cea.assur.org
- ICMIF - International Co-operative and Mutual Insurance Federation, Denzell
House, Dunham Road, GB-Altrincham WA14 4PD, Phone: ++44-161-929-5090, Fax:
++44-161-929-5163,
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