Executive Summary

Internationale Nederlanden Groep (ING) insurance segment has decided to enter the Australian market.  The market is characterised by a large demand  for life policies and a low demand for non-life policies.  Furthermore, there is a general negative perception of the general insurance segment (Bowler, 1988).  The government policies favour the growth of life insurance segment especially the insurance firms that have a good financial base.  The ICT sector is growing at a very fast rate which has been attributed to the government policies that are aimed at improvement of ICT (Alsem, 2007).  The populations perception to technology is quite positive.  The population’s buying power is quite large and the supply power to the insurance firms is on the increase.  The Australian politics play a great role in business as the business community contributes to over half of the Australian GDP.  The role of e-commerce in the insurance sector is yet to be appreciated fully.  Furthermore, the population which is generally ageing and composed of largely of young people (16- 45 years) presents a good market  for insurance firms (Bell ; Wanna, 1992) . The insurance market is characterised by increased consolidation as local players seek to join multinationals in a bid to gather resources in order to exploit the insurance market.  The mass media is well developed and free of unnecessary political pressure. The true capitalistic democracy that defines the Australian politics is designed such that power is decentralized to people by the use of able groups in the society (Business Monitor, 2008).

In conclusion Australia provides  a viable and suitable opportunity as far as the insurance sub-sector is concerned.  The use of ICT and e-commerce aid the initial market entry and ensure the relevance of the approach to the industry in future.


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ING (Internationale Nederlanden Groep) group is a financial service provider of dutch origin (ING, 2008).  The group deals in banking, asset management and insurance.  By the end of 2007, ING had up to 75 million clients.  The clients are composed of individual, corporate and institutional entities (ING, 2008).  The group has offices in Australia, Belgium, Peru, Spain, India, New Zealand and in other destination spread all over the globe (ING, 2008).


To meet the insurance needs of the population by in an efficient manner (ING, 2008).


To provide a wide range of insurance policies that are affordable and relevant to the needs of the general population (ING, 2008).


To provide a wide range of policies
To ensure affordability of our policies.
To ensure relevance of our policies.
Market Dynamics

Industry Definition

            The deregulation of the financial sector in the mid 80’s, caused two implications.  First authorities have encouraged the participation of foreign businesses.  This is because of the common belief that customers will benefit from increased competition.  Secondly, there has been a growing pool of assets that has attracted businesses who are keen on taking advantage of the said resources.  One asset is the superannuation that all employers in the Australian business sector are forced to pay to meet their employees private pension plans (Dufty & Fells, 1989).  This funds have been growing at a rate of up to 25% if compared to the rates at June 2007, have had an effect on the insurance sector in that they have led to increased competition between service providers. Most multinationals often try to offset the competition by developing new plans as they approach new markets (Dahl, 1957).

 There is little cross border selling of policies mainly due to location, culture and taxation laws.  The effects of operating as a composite insurer in the Australian market are quite unnoticeable, and therefore there are no composite insurers in Australia, except ING.  The insurance industry is characterised by firms that either have life or general insurance but rarely both.  45% of the non-life segment is in the premise of local players who focus on niches that they believe would give them a competitive advantage in the industry.  The pressure is so much that most non-life insurers have to pass to their customers the benefits of lower claims in order to stay afloat.  The gross premium have been growing at the rate of 2% which is considerably lower compared to the GDP growth (Hooley et al, 2008).

Industry Segment

Life Insurance

            The growth of superannuation has had a positive impact on the life insurance segment of the Australian insurance sector.  Life insurance have been growing at rates that are quite high, despite sophistication that is characteristic of the Australian people. This is partly because of the SG levy contributions.  In Australia there is no competition between pension and insurance as they are completely separated (Walker et al, 2005).  Local insurance service providers can combine brand names and distribution to exploit the available market exhaustively.   This is has not been the case as ING is the only entity that has employed this mechanisms.  The number of industry players that deal in the life insurance segment are few.

General Insurance

The area of general insurance is quite competitive.  There is a large number of industry and offshore players.  This has been due to the ease in implementing startup in this segment.  The population especially the young are quite uninterested in this segment and therefore, the demand is quite low which has led to low policy rates.  The segment is rather unprofitable, though with innovation and improvements this trend can be reversed.
Market Overview

The Australian market is quite diverse as there are several sectors that contribute to the economy.  Furthermore, the government has put down policies that make it mandatory for all employers to submit some amount of money in superannuation.  The Australian economy is quite, sophisticated as the people are quite well informed on the need for insurance and assurance.  The insurance sub-sector is very competitive and includes both local players and multinationals.  The insurance sector is rapidly growing and the current growth rate is estimated at over 10% per annum.


The insurance market is characterised by increased consolidation as local players seek to join multinationals in a bid to gather resources in order to exploit the insurance market.   There is also improved underwriting performance characterised by declining expense ratio.  The claims in the insurance sector have been fluctuating due to unstable prices.
Growth Drivers
Market Drivers

The Asian population has been growing at unprecedented rates.  The average growth rate in Asia is above 4%.  The growth rate in Australia is averaged at about 1.4% per annum.  The population is characterised by a large number of old people.  Furthermore, the number of old people in the country is expected to increase due to better provision of medical services and the increase in life expectancy.  The government has also put in place innovative risk management technology, that makes it easier for both the service providers and the insured to seek risk management policies.  The area of retail insurance is quite profitable as there are very many people who are seeking to meet their insurance needs.

The other aspect that have contributed to the good marketing environment in Australia is high investment return, as the Australian economy is basically supported by the business sector.  The economy is characterised by high per capita income which is one of the key factors behind the high buying power in Australia.  The business environment is quite stable as the changes in policy that greatly affect businesses are quite few and are generally aimed at affecting the business environment in a positive manner.
Major Issues and Implications

Though there is a good business environment, there are several factors that can either play out in a positive or negative manner to the insurance industry.  First, the taxation rates in Australia are quite high, furthermore the number of taxes a business outfit has to put up with is considerable.  Secondly, the rates of the premiums in the non -life segments of the insurance sector have been falling due to increased competition as there are quite a number of service provider, in a society that is highly under-insured.  Lastly, the cost of providing insurance services has also gone up.

 PEST Analysis
Political Factors

The political power of business in Australian politics can be viewed as both strong and weak.  There are several areas in which businesses enjoy political power, while in others they lack it.  Australia’s industrial sector is quite diverse, there are conflicting ideas and interests.  The power of business in the Australian political context is fragmented between industry sectors.  Businesses are often forced to compete with other sources of great political backing, this has contributed to the great influence the business sector has a lot on Australia’s politics.  The parliamentary system in Australia is structured in such a way that it favours businesses, tis is because government policy making is done by individual departments and it is believed that insider status is important.

The government in Australia acts as a coordinator between extremist groups.  This is a feature of corporatism.  On the other hand, there are instances in which power is divided among interests groups in a grievance like system, this is referred to as pluralism.  Under pluralism, there are few mechanism put in place to bring together the stakeholders in the business fraternity in decision making.  This system favours those who have insider status.

The true capitalistic democracy that defines the Australian politics is designed such that power is decentralized to people by the use of able groups in the society. Therefore political power is delegated to the business fraternity.  Furthermore, political parties are quite aware of the correlation between reelection and satisfactory performance.  The economic system is basically capitalism and there has been a general movement toward the creation of a free market economy.  Furthermore, the government is quite reliant on  the business sector to meet its GDP requirements and thus be able to support its population.  The business society in Australia is well known for funding various parties which goes in line with the pluralist theory.

There have been reforms in the industrial sectors that are aimed at improving business practises.  The reforms generally favor insurance firms that have a large capital base, and are rather harsh on small businesses as the implementation of the changes require considerable financing.

Lastly the government has put in place measure to ensure the growth of the ICT sector which the government views as a pathways to ensuring economic stability.  The measures include funding small ICT service provider so that they may be able to acquire stability and thus grow in the rather viable ICT sector.  Furthermore, the policies put in place allow for conducting business over the Internet as they promote e-commerce.
Economic Factors

The changes in the regulations are generally aimed at increasing the population’s spending.  Furthermore, the population is empowered in terms of finance and financial knowhow.  The growth rate of the economy is sustainable as the rate is not to the extremes and is considerably stable.
Social Factors

The Australian population consist of an urbane young population, though demographics show that the population is ageing (Cravens ;Piercy, 2006).  The young people ( 16-45 years) form the greater part of the workforce and is empowered financially.  The young generation has a negative attitude towards insurance and are more likely to ignore insurance if presented with the avenue.  The population has in the last four decades experienced considerable increase in the life expectancy this has been the contributing factor to the ageing population.  This increase has had a great bearing on the pension plans as retirement benefits providers have had to cut down on the money they dispense in pension to meet the large clientèle.  As a result, the population is turning towards life insurance as a suitable complement.  The society is quite sophisticated and educated furthermore, the use of ICT (especially the Internet) is on the climb and the current usage is quite high as Australia is ranked fourth in Asia’s ICT usage charts.
Technological Factors

Technological improvements has been the catch phrase in the Australian business dynamics.  Technology, especially ICT is used in marketing promotion and the actual sale of services and products.  The mass media is well developed and free of unnecessary political pressure.  E-Commerce in the insurance sector is a new phenomenon and is yet to be adopted by many insurance providers.  In the recent past, mechanisms have been developed to ease the prediction of premium which is full of statistical jargon.  The use of technology has also exposed businesses to the effect of technological defects.
Michael Porters Five Forces Analysis
Customers’ Power

The industry is characterised by intense competition among industry players especially in the non-life segment leading to low premium rates.  Furthermore, the companies in the insurance sector are in their expansion phase and are generally characterised by intense promotion to achieve a stable market base.  These two factors have led to large purchasing power on the Australian population which is empowered economically.
Suppliers Power

There is a large concentration of players in the reinsurance sector (Woodbridge, 1993).  There is increase in the role played by actuaries as the firms aim at professionalism.
Rivalry among Competitors

The industry can be described as having a fragmented market for the general insurance policies and a highly concentrated market life insurance.
Threat of New Entrants

The new policies that have been implemented are generally harsh towards new players.  The requirements for starting an insurance firm are generally high and thus the entry of new competitors is restricted.  On the other hand, the government has failed in the regulation of offshore insurers who pose great competition to the mainstream insurance firms.

Threat of Substitutes

Superannuation may offer a small degree of threat as substitute.  The government has made it mandatory for employers to address their employee future needs by contributing to pension schemes.

SWOT Analysis

a)      Strength

 The political environment is quite suitable for the existence of ING as their policies are aimed at increasing the buyers power.  The policy of superannuation has created large market for the life insurance policies.  The government support for ICT education and initiatives is likely to broaden the market scope for most local and multinational providers (Quiggin, 1995).  The state of the ICT sector and other technologies is likely to create a good market place for ING now and in future as ICT is expected to grow.  The use of  ICT in promotion and sale of ING policies is one sure way through which the organisation can expand its horizons.

The society which is generally ageing is a good market as the number of policy seekers are many (Vogel, 1987).  Furthermore, the existence of an economically empowered young population is a sure sign of viability in the insurance market.  The changes in economy which favour the growth of insurance firms with good financial backgrounds will surely favour ING as their financial background is good.

b)     Weaknesses

The young people (16-45 years) who form a major workforce and are therefore the major target have a negative attitude towards insurance.  This may lead to  a small market segment especially in the health and general insurance segments in the insurance sector.   The use of e-commerce in the insurance industry is a rather risky venture as its effectiveness is yet to be demonstrated since it is a new phenomenon (Stretton, 1987).  Furthermore, it might take a long time for the market to come to terms with the use of ICT in the insurance sector as a marketing tool.

The unwelcoming taxation and growth in operating costs in the Australian business environment will lead to accrual of large overheads by ING.  This large overheads are unsuitable in the rather competitive environment and may lead to reduced profitability and even losses.  The over-reliance in technology may expose ING to dangers associated with failure and malfunction.

c)      Opportunities

 The opportunity presented by operating in the Australian insurance market are many.  The government policies which discourage the entry of new competitors gives ING a chance to really establish itself in the sector.  Furthermore, the nature of the insurance sector, which is rarely diverse as players either deal in life or non-life insurance, presents a great opportunity for ING to diversify its market as it deals in both.  Furthermore, the government policies which are aimed at the development of ICT in Australia is a good catalyst for the development of e-commerce.  The nature of the Australian population, which is sophisticated and Internet conscious gives ING as one of the few players that have the ability to meet the e-commerce requirements, a great opportunity to diversify and expand its market scope by using the Internet as a marketing and promotion tool (Ewer et al, 1991).

d)     Threats

The existence of many general insurance providers may hinder the growth of ING in this market segments.  Furthermore, the existence of offshore insurers due to government failure in curbing them is bound to cause more competition.  The attitude of the young population towards insurance will limit the growth of the market (Frenkel & Peetz, 1990).  Furthermore, the existence of as large market for life insurance policies will surely attract other large multinationals who have the ability to meet the governments requirements.  Such companies will bring great competition in the lucrative life insurance segment.

In summary the business opportunity provided by the Australian insurance sector is viable and profitable if the right approach is taken.  The use of ICT and e-commerce will not only aid the initial entry into the market but also ensure that the group remains relevant to the industry needs in the future.


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