Global Issues

Why does an insurer decide to go global?

· First of all, many countries are moving away from protectionism and state control and taking a more market-driven approach, especially in the insurance sector. They are regulating and deregulating insurance to encourage a stable, properly managed, and thriving industry through privatization and opening up their markets to foreign companies.

· Secondly, many previously volatile economies are settling down and as a result a new middle class is emerging in countries around the world. A significant proportion of the population in these emerging markets is aging. Moreover these countries place a great importance on family values. When you can earn a decent living and when you place a high priority on taking care of family, you save money and buy insurance.

· Thirdly, the new challenges many insurers face in their local markets from non-traditional competitors like banks, non-financial companies, financial retail centers; direct insurers; the Internet. Mature markets like United States are coping with market saturation—both real and perceived—and with stricter sales practices regulation.

What effect does globalization have on local-national insurers in emerging markets?

The impact has to be positive. When foreign insurers like New York Life enter a market, they bring world-class product development and marketing standards with them that significantly raise the awareness of consumers and forces the local players to bring innovative products and raising their standards in every aspect of the sector.

Has globalization helped or hurt the insurance industry?

Globalization has provided many benefits for the insurance industry.

· Over the years there has been a dramatic increase in professionalism throughout the industry as companies apply best practices developed by innovators in one market to other markets around the world.

· Sharing their expertise across borders that ultimately benefits both consumers and the industry as a whole has created a uniform regulatory environment.

· Globalization has resulted in a free flow of managerial talent across borders. Companies like New York Life are moving smart managers from one market to another.

This helps broaden the horizons not only of each company but also of the entire industry itself.

There are not many instances in which globalization has hurted insurance industry.

· The high negativity as a result of globalization occurs when an insurer enters new foreign markets and pay high price to buy all or a portion of an existing insurer in that market, or pays ridiculous sign-on bonuses to attract experienced agents from established companies. When the insurer comes to know his mistake, he is left with option either to take a big write-down or withdraw from the market which ultimately hurts the reputations of all foreign companies operating in that market."

Even if you have no intention of establishing a global presence, you must be prepared to compete successfully with those who do, because you can be certain they are assessing the potential of your corner of the world like New York Life, you may just have what it takes to succeed on both the home front and in the international arena.