Big question for voters

The economic prospects for the main population centres of the Eurozone: France, Germany and Italy, are by no means golden, because of the demands of ageing populations on public funds, and the difficulty that smaller workforces may have in maintaining national economic output. Long-term insurance has a very important role in helping individuals to minimise their demands on public funds during infirmity and old age. Long-term insurance also helps individuals to amass capital which can be passed to the next generation. Yet there can be no certainty that voters will elect governments committed to cutting social welfare spending.

Future social welfare liabilities are a thundercloud hanging over the euro, which is central to the future of financial services in Europe. The strength or weakness of the currency affects the borrowing capacity of euro-using governments, and their relative attractiveness as homes for investments. Unified action by member governments to implement strategies for controlling future social security and welfare spending would help to stabilise the euro and strengthen the demand for long-term insurance. But will the voters agree?

Fastest Growth in Italy…

Many millions of people have become convinced of the benefits of long-term insurance. Premiums are rising over the European Union (EU). By 1998 they were over 4 percent of GDP. Growth was fastest in Italy. Belgium, the Netherlands, Spain, and the UK, the most developed market, all showed strong growth, too. The German market crept forward, and the French market fell back as a consequence of reduced tax concessions, a process reversed in 1999 and 2000.

…and Good Prospects in Germany and Spain

Market Assessment believes that Germany, Italy and Spain have the greatest potential for growth in long-term insurance, because of their combinations of low or negative population growth, demographic ageing, and current low levels of premiums per head. The UK market has scope for growth, but the positive factor of government encouragement for savings is counterbalanced by relatively low growth in disposable incomes, which are likely to rise by less than 2 percent a year in real terms. The French market is still characterised by a substantial public sector involvement, the Belgian market is buoyant but small and with little room for newcomers, and the Dutch market is both mature and well served by existing insurers.

Major Life Companies are From France and the UK

The French company CNP is the largest life insurer in Europe. The largest four life insurers: CNP, Prudential, AXA and Barclays Life, are from two nations: France and the UK.

In 1995, Market Assessment found that the top five companies had a market share exceeding 60 percent in Belgium and the Netherlands, and between 40 percent and 50 percent in France and Italy. In the UK, the five leaders shared less than 30 percent of the market. By 1999, concentration had intensified in Belgium and France, had changed little in the Netherlands, and decreased in Italy.

Essentials for success

Key elements for future success are: the development of parallel distribution channels; the effective use of advanced communications technologies; and improved customer retention. Communications technologies can play a big part but contact with real and knowledgeable staff will also be important. This is too often overlooked. A full range of financial products from several suppliers is also important.