AIG Competition
Now Viewing AIG's competition in: Insurance Carriers (primary)
Call Preparation Questions
Customers, Marketing, Pricing, Competition
How does the company market its products? - Only a few large insurers advertise significantly. Most marketing is by salespeople or agents. Commercial companies may advertise in specialty magazines.
Does the company have an in-house sales force? Exclusive agents? Independent agents? - Consumer-oriented companies may use all three.
Does the company use insurance brokers? - Commercial insurers often use brokers, the equivalent of agents.
Does the company market financial services for affiliates? - Many insurers are now affiliated with bankers and securities brokers.
Does the company use the Internet to attract new business? Can customers apply online? - The Internet has become a source of comparison shopping for many consumers.
Competitive Landscape
Demand is driven by demographics and commercial transactions. Demand is also driven by legal or financial requirements. Consumers are usually required by states to buy auto insurance and by lenders to buy homeowners insurance, for example. The profitability of individual companies depends on effective marketing and on the ability to accurately estimate future payments. Large companies have big economies of scale in administration and in access to capital, as well as advertising and marketing. Small companies can compete successfully by specializing in particular products or industries. Average annual revenue per worker is around $400,000, so the industry is not labor-intensive.
Business Challenges
CRITICAL ISSUES
Insurance Industry Investments Suffer in Recessions - The revenue of insurance companies is highly dependent on investment income, which can suffer in economic downturns. Insurers, who invest premiums paid by customers until the money is needed for claims, have seen those investments wither along with the market in the late 2000s recession. Insurers that moved into the investment and banking sectors when the industries were deregulated have also lost money there. Additionally, the economic downturn triggered by the collapse of the real estate market has slashed demand for insurance for new homes and businesses.
Insurers Face More Catastrophic Losses - Large-scale claims have become more common, creating problematic concentrations of risk for individual insurers. Although insurers often spread risks through reinsurance, some risks can be large enough to drive insurers out of business, curtail services offered, or leave states where risk is highest. Florida has agreed to let State Farm drop homeowner coverage in that state because of hurricane risk rather than risk insolvency.
Industries Where AIG Competes
- Insurance
- Property & Casualty Insurance(primary)
- Life Insurance
- Mortgage Guaranty Insurance
- Financial Services
- Asset Management
