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How Our Expertise in Emerging Markets Can Benefit Your Business

June 17, 2014| By Capitolina Tourbina | Auto/Motor | English

Doing business in emerging markets comes with a multitude of challenges. However, for those companies capable of identifying a need for something different, or better, rewards can be significant. Motor Own Damage (MOD) insurance in Russia is a great example of how responding to our clients’ need for an efficient and competitively-priced product made all the difference.

Back in 2007, motor credits were a rising star in the world of Russian banking products. Eight out of ten cars were bought using them. Naturally, the banks required collateral to protect their investment - usually the vehicle being purchased - and MOD insurance became a logical prerequisite for obtaining credit.

However, with lengthy questionnaires and case by case premium calculations to complete, the administration involved was crippling for all - banks, insurers and consumers. Furthermore, despite numerous accredited insurers providing MOD, product variation was minimal.

The need for a competitively-priced product that could be sold on-the-spot without the need for additional underwriting support was clear. So we began working with a client with whom we had strong relationship to analyze their motor book, before matching it to the motor credit portfolio of a key banking partner.

By analyzing the data, we were able to see robust patterns that, based on the size of loan, type of car and geographical distribution, suggested that a single-price premium could be set, up to a specific maximum sum insured.

But what of the need to offer something more competitive? Competition can be especially tough in emerging markets and success often lies in being able to think differently about risk. We suggested introducing a deductible - a first for the Russian MOD market - that experience told us would significantly reduce loss frequency. This way, though our clients’ interests remained fully protected, they were able to offer a solution 20%-30% cheaper than the market rate.

We then brought in a trusted IT firm to automate the insurance purchase at the vehicle's point-of-sale and provide the necessary reporting required.

In the end it was a win-win situation for all parties.

  • For consumers - access to a better-value product, on-the-spot and at a set price for the duration of their credit period
  • For the bank - reduced administration and automatic receipt of commission
  • And for our client - extremely low loss ratios for many consecutive years and the ability to manage, control and retain more of the risk over time

We continue to help our clients to identify and develop opportunities in emerging markets in other retail lines (such as private mortgage property insurance and similar). Talk to us today to find out how we can support your business.


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