Competition
Consolidation improves MLP’s market position
Competition in the German financial services industry is set to increase further over the next few years, which will lead to consolidation of the sector in the mid term. While competition to date has largely been characterised by international competitors and new competition from other sectors entering the market (for example special banks for vehicle financing as subsidiaries of automobile manufacturers), the situation has now been made more acute by the regulatory environment.
Various new legal requirements from 2007 and 2008 have changed the relationship between sales and the clients. Whether clients will get any actual benefit from this is viewed as questionable by many in the sector, although administration expenses on the part of the vendors of financial products have certainly increased significantly. The EU Insurance Mediation Directive, the Markets in Financial Instruments Directive (MiFID) and the change to the German Insurance Act have increased the requirements for documenting and disclosing information and also altered the requirements for training insurance brokers. The high degree of investment associated with this should lead to consolidation in the market segment of small and medium-sized operators, as only strong enterprises will be able to generate economies of scale in the long term and keep qualified staff.
Independent sales with a promising future
In a comparison between the pros and cons of the various sales channels for financial products, clear cost and efficiency advantages are to be had in independent, less capitalintensive sales. Indeed, the Tillinghast Sales Channel Survey produced by Towers Perrin predicts that the market share of independent financial consultants will increase from 29 % in 2007 to 31 % by 2015. Alongside the banks, independent finance brokers are among the very few sales channels that can still win market shares. This assessment is also confirmed by practical experience from other countries. In Great Britain, for example, where the regulatory environment was made stricter several years earlier than here, the market share of independent financial consultants increased from 39 % in 1992 to 73 % in 2006.
Market shares of the different sales channels for life insurance products in Germany
Foresighted corporate policy
MLP has been carefully following the opportunities and risks that have developed in the German financial services market for many years and has always acted quickly and proactively. Our proximity to our clients and our flexible organisation make it easier for us to detect changes early on and act accordingly. The expansion of our wealth management in the last few years and the fast implementation of the new legal requirements in our consulting process are tangible proof of this. Despite the fact that the competitive environment is becoming increasingly challenging, we still expect to be able to further expand our market position in future and see profitable growth.
Sector-specific factors impacting on anticipated business development in the sector and on MLP in the years 2009 and 2010
| Sector 2009 and 2010 | MLP 2009 and 2010 | |
|---|---|---|
| Regulatory framework for old-age provision | + | + |
| Regulatory framework for health insurance | – | – |
| Trends towards saving old-age provision | + | + |
| Increased requirement for financial investment on the part of private clients in Germany | + | + |
| Increased intensity of competition between sales channel for financial services | 0 | + |
| Changes in the regulatory framework (VVR, MiFID, VVG) | – | + |