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IAI Actuarial Core Principles · Business Management · Decision-making process, attitude to risk and competition

A mid-sized Indian life insurer notices that several fintech platforms now let customers compare term-plan premiums in seconds and switch insurers with little effort. Using Porter's five forces, which force has most clearly strengthened as a result of this development?

Buyer bargaining power has strengthened, because comparison platforms make premiums transparent and switching cheap. Customers can easily move to a cheaper insurer, which pressures prices and margins. The change does not primarily affect suppliers, scale-based entry barriers or capacity-driven rivalry.

  1. ABargaining power of buyersCorrect
  2. BBargaining power of suppliers
  3. CBarriers to entry through economies of scale
  4. DThreat of vertical integration by the regulator
  5. Rivalry arising from capacity constraints

Explanation

Easy price comparison and low switching costs shift power to customers, so buyer power rises. Supplier power is not directly affected by comparison platforms. The other options do not describe the effect of reduced switching costs and greater price transparency.

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