Amidst a lackluster global outlook, Asia is experiencing unprecedented growth through urbanization, technological advances and burgeoning middle-class wealth. The insurance industry is especially booming, with the region accounting for 76 percent of overall global insurance industry premium growth, to the tune of USD 157 billion in 2017.
Meanwhile, Asian consumers are increasingly tech-savvy, with mobile phone user penetration expected to reach 60 percent in 2019 – herein lies the opportunity for insurance firms to embrace new technology and industry innovation (known as ‘insurtech’).
These are the five key trends we believe companies in Asia should look out for in 2019 and beyond:
1. Open APIs as an accelerator
In these digital times, customers now expect an inter-connected service marketplace that is an extension of their insurance product - like financial planning, home security or car maintenance, for instance. Applied programming interfaces (APIs) can address the current lack of insurer flexibility by enabling extensive information sharing with third parties and vendors.
It’s already happening, too. Alibaba and Tencent are already using their digital reach to create a digital-only insurance experience, whereas Ping An Insurance have built an API platform which offers advanced auto-claim technology to small and medium-sized insurance companies at an affordable cost.
Improving distribution channels is only one aspect, however. Ultimately, open APIs have the potential to transform the whole insurance value chain through the free-flow of customer information.
2. Positive behavioral reinforcement through IoT
Both public and private sectors are always looking at ways to nudge customers towards healthier lifestyles, to promote better outcomes for individuals and society at large.
Motion-tracking is not a new concept in insurance. After all, black box automobile technology has been around for years, but we also expect wearables and smart devices to soon take off in this industry. Through monitoring health data, companies can get richer data on individuals to accurately price risk, customize policies and reward customers (with lower premiums). This should translate into deeply-engaged customers and higher loyalty.
3. Cloud and blockchain to enable personalization
The next evolution of insurance will be primarily driven by data exchange and sharing between different stakeholders in the ecosystem - from new customer acquisition, fraud prevention, predictive analytics on risk and pricing, to instant claim process.
Effective data sharing will pave the way to the adoption of data-driven operating models in the healthcare and insurance industries – and blockchain and cloud hosting will be the most efficient and safe way to handle such sensitive information.
4. AI, machine learning, and IoT leading to automation
Rather than the usual manual process of claim forms, followed by a lengthy reimbursement process, technology-advanced insurers are automating claims management through smart contracts, open data, machine learning, and IoT technology.
The driver of automation on claim management will shift from cost and resource-saving to enhancing the customer experience by enabling instant and seamless claims. With the rising population of Millennials and the tech-savvy, AI-enhanced customer service will become a core feature and an expectation.
5. Blockchain as the fraud police
Around 10 percent of global compensation claims on property damage or personal accidents are fraudulent and that trustworthy customers are spending more due to the fraudulent and exaggerated claims. Unitizing the records from blockchain can improve the management of fraud risk and result in lower premiums.
So, what next?
Insurtech has rapidly transformed markets in the West. Asia is meanwhile fast reaching inflection point and will be the next industry focus. As the competition heightens, a solid understanding of the unique landscapes of fast-growing Asian markets and the agility to adapt to new trends will be critical.
The unique macro-economic dynamics of the Asia region and insurtech ecosystem innovation go hand-in-hand amidst the backdrop of supportive governments and regulation. With the continued rollout of various initiatives by different insurance governing bodies (i.e. Bowtie in Hong Kong), lowering the barriers to entry and igniting innovation, industry change will continue. It’s time for firms to get on the front foot.
Interested in understanding more about insurtech's opportunities in APAC? Contact Isabel Wendleken and stay tuned for our Virtual Insurance report in the next edition of the Capco Journal (#49).