December 28, 2009 14:22 ET

EMB Outlines 2010 International Outlook

Competition Likely to Remain Intense in Coming Year; Pricing, Usage-Based Insurance and Solvency II Are Top Priorities for Global Insurers

SAN DIEGO, CA--(Marketwire - December 28, 2009) - EMB (, the international actuarial and business consulting firm, has identified some of the market conditions and trends that it believes will shape insurance companies' performance in many parts of the world in 2010.

Doubts about the speed of recovery, or indeed the threat of double dip recession in some countries, will continue to suppress demand for insurance products. Should economies recover too quickly, however, prices will also be affected by the adverse impact of likely rises in interest rates on many people's disposable income, the company is advising.

Pricing is king

"Pricing is likely to remain competitive throughout 2010," says Stéphane Chappellier, Partner at EMB France. "The ability to refine the appropriate mix of product features and to segment target markets very accurately is becoming increasingly important."

This is particularly true in markets where aggregators are already popular such as the UK, or are starting to operate, such as Spain. Aggregator-instigated sales of motor policies are likely to have exceeded 50% of the total in the UK in 2009.

"Brand strength still plays an important part in converting quotes to sales on aggregators. The challenge for UK personal lines insurers is to balance competitiveness, brand spend, the importance of ancillary income and product features," says Peter Lee, Partner at EMB UK.

Usage-based insurance to drive bottom line

With higher margins generally remaining harder to come by, innovation will be required. "Few innovations have as much potential to positively affect the health of an auto insurer's bottom line as usage-based insurance," observes Geoff Werner, a Managing Director at EMB USA. With Progressive well on its way to a national roll-out in the US, other early adopters are moving aggressively to market, not just in the US. "As occurred with the use of credit score rating in the US, early adopters will have a significant advantage. Unlike insurance credit scores, late comers will not be able to easily recover," he warns.

Unemployment levels impact fraud

Unemployment levels that continue to hover around cyclical highs in many part of the world will present both pricing and fraud issues for insurers. EMB Spain Managing Director, Oscar Huerta, noted: "We expect official figures for unemployment to stabilize around 20% in 2010 but sustained low prices and a cost reduction attitude are inevitable in such an environment."

The Spanish market also faces a particularly thorny issue with the Government intending to update the Baremo table of standard indemnities for bodily injury. At present, compensation rates lag behind many European neighbors.

High unemployment also means there is no immediate end in sight to current levels of fraud. "Desperate times bring out desperate actions in some people," says EMB UK Partner, Karl Murphy. "We would advocate investment in good technological prevention measures to complement the work of claims investigation teams."

Regulation remains on the agenda

Solvency II looms large over companies with European operations, but regulatory changes affecting other markets such as IFRS and proposed federal regulation and healthcare reform in the US will also require detailed preparations.

"We have Solvency II QIS5 in 2010 which will be an important step in enabling companies to assess their preparations and the likely impact on capital and operational costs looking forward," notes EMB Germany Partner, Frank Sommerfeld. "From a wider capital and solvency perspective, however, the rebound in securitization markets is good news for reinsurance strategies," he adds.

Developing markets offer greatest opportunities

In the developing markets, China and India remain the big opportunities for 2010, with pockets of growth elsewhere. "The danger is that in the stampede for business in India, prices are being undercut to an unsustainable level. There is almost a process of communicating the value of insurance to be gone through," explains Vikas Newatia, EMB India Managing Director.

The African insurance market will receive a boost with South Africa hosting the soccer World Cup in 2010. "This is already creating business opportunities for insurers in areas such as property, contingency risks and travel," notes Lisa Pines, EMB South Africa Partner. "The downside will be the increased traffic volumes that could lead to more claims on motor insurers."

In a similar vein, Brazil can begin looking forward to hosting both the 2014 World Cup and the 2016 Olympics. "These events, combined with stable economic performance, strong infrastructure growth and the opening of the reinsurance market create an unprecedented level of opportunity notably for commercial insurers," says EMB Latin America Managing Partner, Dave Sommer.


About EMB

EMB ( is a leading international consulting firm specializing in property and casualty (P&C) insurance. Its services cover personal insurance, commercial insurance, and reinsurance. EMB offers C-Counsel Business Consulting, Actuarial Consulting, Professional Development, and Marketing Sciences.

Additionally, EMB pioneered the development and use of high-performance actuarial software, which allows businesses to perform tasks that would otherwise be impossible, impractical or hugely time-consuming.

EMB employs more than 300 people around the globe covering North and South America, Asia-Pacific, Europe, the Middle East, and Africa. Our clients include 28 of the top 30 P&C companies in the world.

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