Mature life insurance markets remain the top priority for those considering expansion, according to a new study, with the United Kingdom and United States ranking at the top of the scale.

The survey was conducted by market analyst firm Datamonitor on behalf of EDS.

In the survey entitled “Fit to Travel: A study of competencies for global expansion,” EDS explored the market opportunities as well as the expansion drivers, barriers and enablers, such as technology,

Among the key findings of the survey:

  • 45% of North American life insurers are targeting a European country as their top priority;
  • 48% of European insurers view North America as their top priority; and
  • Emerging markets such as Latin America (11%), China (6.5%) and India (5%) are second priority in expansion plans.

“Despite the hype surrounding emerging market expansion for financial services firms, many life insurers will focus short-term expansion efforts on mature, well-established markets to show immediate return on investment,” said Tom Warsop, EDS vp of financial services. “For many, uncertainty coupled with regulatory and cultural differences are barriers to expansion in emerging markets – but those who explore these markets sooner than later will have the competitive advantage and benefit greatly from brand recognition in the long-term.”

The reasons life insurers are looking to expand in mature markets versus for emerging markets differs greatly. The survey found 83% of respondents focusing on mature markets see higher margins and return on investment as the primary reason of expansion in mature markets. Conversely, only 53% of respondents cite this as a reason for expansion in emerging markets, where capturing market share is the main impetus for entering the market. Risk diversification is also important for international expansion in mature markets, due to the presence of stable capital markets, regulatory control and greater transparency.

With an increasing number of insurers currently surveying the global landscape for opportunities, nearly half of our survey respondents stated an understanding of local and cultural factors critical to their expansion success in established and emerging markets combined.

“Life insurance companies remain focused on establishing share in the largest life insurance markets, so not surprisingly creating the best products and distribution channels remain the dominant concerns,” said Edward Blomquist, lead Datamonitor analyst. “However, as the global life insurance industry becomes more integrated and more competitive, operational efficiency, including IT processes will become more important.”

Datamonitor and EDS obtained input for the survey from more than 100 life insurers from 17 countries – 45% Americas, 39% Europe and 17% from the remainder of the world. The information was obtained via telephone surveys and from in-depth interviews with directors from some of the world’s largest life insurance companies.

EDS provides a wide range of outsourced services from payments and securities processing to applications development and network, customer relationship management and helpdesk services to all sectors of the industry.