Loan insurance: annual termination or double market disruption

After the wave of credit renegotiations of the past few years, are we going to see the credit insurance market move towards a massive wave of delegations, while so far delegation has grown steadily but also slowly? And underlying, will we continue to see this exceptional “anomaly” in the insurance sector with mutual insurers advocating demutualization in order to conquer the best risks with the best prices, and bank insurers continuing to defend mutualization? which nevertheless still generates levels of profitability that are difficult to admit?

Although there are still many uncertainties among all the actors as to the extent of the opportunity or the threat depending on whether one is an attacker or an assailant, foremost among which is the reaction, which is always highly unpredictable consumers.

3 strong convictions emerge from my market analysis:

Conviction n ° 1: the stock battle will be played out on less than 30% of the market

The real estate loan insurance market is a little less than 7 billion in premiums today. If you remove from this figure the customers who are already delegated, the losing customers on the individual contracts (roughly the over 40/45 years and the aggravated risks), the customers not having a delegated profile, or the customers with a gain limited potential (consumer surveys generally show a 1st critical price sensitivity threshold of around 20%), you get around 2 billion in premiums that are really at risk of annual termination, ie a little less than 30% of the market.

It is therefore on the corresponding customer segments that the players will have to deploy exceptional systems (price, commercial approach, advice, etc.), retention/loyalty for banks, and conquest for assailants, insurers, and brokers.

Conviction n ° 2: the explosion in the volume of requests will strongly challenge the operational models of all players

The act of termination will be a minority act among the many more numerous requests for information, quotes, or renegotiations, which may come not only from the minority of customers having a strong interest in terminating but also and above all from the large majority remaining which in the best case will know its potential gain (limited gain in this case), and in the worst case (very probably the most frequent) will know little or not at all its potential gain.

This will result in an influx of requests from both banks and attackers (insurers and brokers) and only an industrial device strongly supported by Digital (simulator/comparator, advanced analysis of the customer profile, recommendation engine, virtual assistant of the advisor, etc.) will deal effectively.

Conviction n ° 3: the price war will accelerate … and implicitly lower margins and demutualization

The fall in prices on the Creditor Insurance market did not wait for the annual termination to kick in. On the contrary, it has been a good decade now that prices have fallen either as a result of an increasing steepening of pricing or as a result of discounts more and more often granted to customers in bank branches (to be distinguished from elsewhere catalog prices, systematically used by competitors for their therefore often abusive comparisons!). With the key, a deterioration, certainly still very relative, of the margins.

All the conditions now seem to be met with the Annual Termination to accentuate the price war, and its corollary, demutualization with a convergence of offers that can be highly envisaged within 3 years, once the shock of the annual termination has been assimilated.

Indeed, on the one hand, the attackers, helped by simple but effective communication (how many press articles have we already seen announcing gains of 5,000 to 10,000 euros for the average borrower) and Acquisition just as simple (100% remotely in 15 minutes, up to 90% of cases passing without medical selection) will increase their direct (termination) and indirect (renegotiation) pressure on prices. On the other hand, banks, already familiar with the discount mechanism, still very profitable on this product, and wish to defend at all costs this key product in terms of profitability will be ready to make further significant sacrifices on their prices, in particular. with their best customers.

As you will have understood, although many uncertainties remain as to the extent of the phenomenon of annual termination, one certainty nevertheless appears forcefully: it will only accelerate (strongly or very strongly; and this is where lies the bulk of the uncertainty) the three-fold trend rotation already implicitly engaged in the Creditor Insurance market:

  • Demutualization and convergence (or at least merger) Group vs Individual
  • “Property & Casualty” of margins
  • Increasing credit unbundling, either through dry sale or through broader repositioning within a personal protection ecosystem

The annual termination therefore ultimately introduces a double break in the Creditor Insurance market:

  • By redistributing the cards on the stock from January 2018
  • By accelerating this triple trend rotation of the market

The ability of the players to manage this double rupture will very likely depend on the new competitive landscape of Creditor Insurance by 2020.

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