Insurers must adapt to help SMEs expand globally

As a growing number of SMEs become multinational and invest abroad, there is a corresponding demand for global insurance solutions for the smaller players, which have certain differences in their needs compared to the large multinationals.

That is the view of Vinko Markovina, senior vice president, global practice leader, international insurance solutions for Allianz Corporate & Specialty and Graeme Condie, global market management, IIS co-ordinator and new markets & projects manager for Allianz Global Corporate & Specialty, speaking exclusively to Intelligent Insurer at this year’s Airmic conference.

“It’s not a case of ‘one size fits all,’” said Condie. “It’s a question of insurers understanding where the differences are and creating propositions that meet a specific client’s expectations and goals.”

He added that while large companies will have established units looking after elements such as risk management and compliance, many smaller companies have a way to go before they are on exactly the same footing.

“That’s where you’ve got to accept there are differences and actually build that into the propositions that you are offering,” he said.

Markovina agreed that there is much room for improvement. “The market still needs to get much better with the fundamentals – the speed of issuing a policy is so critical,” he said.

He added that it is important to get certain key elements in place before a policy is issued. These include premium allocation, a reinsurance agreement agreed to by the fronting entities, and terms and conditions agreed to locally.

He believes the industry needs to be more transparent in providing programme information, risk consulting information and claims data in relation to an international insurance program.

Transparency is important, agreed Condie: “The more information a client has, the less of a headache they have – they expect an insurer to be able to deliver a service and that means regular, clear consistent and transparent reporting.”

He added that true success in global programs is about building up trust over time through a long-term relationship.

“There are transactional buyers out there for whom global programs might be a challenge because if they’re always looking at it from a pricing perspective. That means they’re changing insurers regularly and there’s no continuity in terms of building that long term relationship,” he said.

“Global programs thrive by people understanding each other and you can only understand each other if you have worked for them for a period of time - so global programs fit far better with relational buyers than transactional buyers.”

Markovina said that the number of companies working across borders has increased dramatically, from 7000 in the 1960s to 104,000 in 2010.

“By 2020 that number is looking to increase to about 140,000 – that’s a 40 percent growth within a 10 year window,” he said. “Obviously not all of those companies are large global companies or companies with a £500 million turnover – we don’t have that many worldwide - so that trend is a result of the smaller to mid-size companies investing across borders.”

He added that the challenge and the opportunity for the small to mid-size entities as they acquire risks abroad is to optimise the supply chain.

“The reason they go abroad is looking to optimise their supply chains, and also to look for new markets,” he said. “One of the issues we’re seeing is the lack of understanding from a contingent business interruption and supply chain side – a lot of the time we have found that they don’t have a good handle on the bottlenecks associated with some of their supply chains, especially if they originated from some of the emerging markets.”

As a result there are issues on the contingent business interruption side, he said.

“They would address it by having contingencies or back up plans or by buying insurance to help them, but in some markets contingent business interruption is not a cover you could easily buy, so you have to be careful of understanding what some of the exposures are as they go into these markets.”

Condie added while large companies will have a back-up plan that kicks in if one of their suppliers is affected, smaller companies may just have that one supplier, so they can be extremely badly affected by any break in the supply.

Ultimately the quality of the insurance solution depends upon the information available from the client – yet many are not even aware of the head office address of their suppliers.

“For us to be able to provide solutions we have to have a better understanding of what type of coverage products we can provide the client,” said Markovina. “The more data they have on their supply chains, the more solutions we can provide for them or we can work together with them to come up with these solutions.”