Loan insurance: highlighting new trends

With the rise of the digital world and the opening of the Chinese market, loan insurance is facing a profound transformation of practices and players.

In recent years, loan insurance seems to tend towards automation of analytical tools to cope with the explosion of digital and data production.

Adapting to this digital transition is the best way for corporate insurers to take on new competition. On the other hand, the opening of the Chinese market marks the beginning of a new economic era for this sector.

Big Data and Expert Systems

The rise in strength of digital, computer hardware and mobile devices is also accompanied by a multiplication of objects connected to everyday life. This land promotes the development and collection of a phenomenal amount of data every week, every second. Every day, 2.5 trillion bytes of data come from videos, GPS, smartphones and other stock transactions. This considerable volume is called Big Data.

The intelligent treatment of Big Data allows insurers to know in a very precise way the needs, the aspirations and the financial capacities of their members and the customers of these last ones. The more transparency and data sharing between a loan insurance broker and its client company, the more reliable the analysis models.

Expert systems, which are software packages designed to emulate human reasoning, are created from large databases. In the world of finance, they produce statistics, charts and executive summaries to support decision-making by brokers and businesses (click here for more information).

Towards global digitization and new competition

In the future, more and more insurers are considering investing in process automation solutions including artificial intelligence. Preventing the risk of non-payment will therefore be related to mass information merging and advanced computer analysis. This will probably result in a net decrease in claims.

These automation processes will also reduce insurers’ costs. On the other hand, the overall trend is rising loan insurance premiums. In other words, the combined ratio of insurance companies tends to favor the latter.

The market is also seeing new players emerge, driven by the uberisation of the sector. Insurance comparison sites, for example, use the internet to provide different tariff offers directly to the customer. To remain competitive in the face of these digitization processes, the insurers for companies must align themselves with the same model and innovate in terms of digital.

This flight must not be at the expense of human contact, always central in the relationship with customers and businesses in default.

The opening of the Chinese loan insurance market

In September 2016, a joint venture between Euler Hermes and the China Pacific Property Insurance Company was created (visit this link for more information). This event marks the opening of the Chinese loan insurance market. With China’s economic slowdown, many businesses risk losing their balance sheets. This phenomenon will therefore increase late payments and the risk of unpaid bills. A favorable ground for the signing of numerous contracts.

The Sinique market is therefore the gateway to new opportunities for corporate insurers. However, the interest of the major players in the sector in this young financial area is not new. The French giant Coface has opened a branch in Hong Kong in 1999.

The fact is that the number of players in the Chinese market is not very high. Two large state-owned companies share export risk contracts: China People’s Insurance and Sinosure. The arrival of foreign players is made possible by the liberalization of the market in 2013.