New business models challenge the established players

The Strategic Partnership

At the Business Model Summit 2012 we heard many stories about how new business models are underestimated by the leading and established players. When it comes to changing their business models and value offering things often run late. To adapt their business models and value offering it is necessary to start on time. “Just-in-time” is usually not about changing quickly – but starting on time. This avoids taking short-cuts which later turn out to be costly. 

Here are a few examples of events since the Business Model Summit in late November which change the conditions for the players in the market for long-term savings:

  • Folksam is creating a clear focus on the occupational pensions market – has teamed up with UIG 4 and is now investing in the individual occupational pensions segment through brokers and partners
  • Söderberg & Partners is acquiring the asset manager Valbay with 4 million SEK in AUM – increased their value offering as a distinct ”Special Clients” segment
  • ICA Banken is distributing funds from AMF Fonder – enhanced its value offering and a new source of revenues from advertising in the customer magazine Buffé* besides kick-backs
  • AMF Fonder has found another distributor, ICA Banken – creating relationships with a growing number of distributors who own the customer relationship

 How do these challenges affect your core business? Because even if you are not making any money in the first few years, you will probably accept premiums, capital and savings from your business that affect the ability to bring in fees/revenues. The opportunities also require efficient processes that enable cost-effective administration and this is where Itello comes into the picture.

Starting on time is something we often write about at Itello Insights. The management of long-term savings is inherently a long-term process. Saving for 20-30 years and making payments after that for just as long or for a lifetime requires administrative efficiency and not administrative burdens.

What will conditions in the market change in 2013?

  • A unit-linked insurance policy that guarantees 80 per cent of the capital and which can take advantage of the opportunities in the market? It’s time to replace expensive structured products with the next generation Constant Proportion Portfolio Insurance CPPI, which is both cheaper and more flexible than equity-linked bonds. 
  • Who will challenge the brokers with their own ”insurance marketplace” for their business customers, Where will they offer administration of occupational pension plans and the opportunity to choose among different insurance companies like an election centre?
  • Who will be the first with an automated and rule-based risk assessment? This makes it easier for the customer to fill in the health declaration, minimising the need for tele underwriting and significantly lowering acquisition costs.

Follow the market for long-term savings at Itello Insights where we provide news, comments and analysis of our customers’ market.

* Another example of a challenge. The giant in the food magazine market “Allt om mat” faces competition with Buffé with its 4 million printed copies – for free of course.