Digital vision leaves insurers in a spin

The insurance sector is facing a digital revolution, and many emerging markets can quickly adapt, but insurance companies with extensive legacy system face difficult choices

Jan Weiser
Jan Weiser

Across Asia, the insurance industry is embracing digital solutions to disrupt and overhaul traditional business models, but according to Jan Weiser, Asia-based partner with global strategy consultants Simon-Kucher & Partners, some players may not be staying ahead of the curve.

Amid the current digital onslaught, the conventional distribution and sales models of insurers have proven to be robust. Despite this situation, the rapid rise of mobile penetration in emerging markets, especially in Asia, demands that insurance businesses incorporate change or risk becoming obsolete.

The effect of digitization in the insurance business is immense, moving rapidly through all layers of insurance groups. To complete its journey, the disruption must also travel into the operational heart of firms where legacy systems are still in play.

In Asia, advances made in adopting cutting-edge insurtech by utilizing artificial intelligence, blockchain, data analytics and connected devices have allowed insurance firms to quickly infiltrate new coverage hinterlands.    

Learning from China

This technology jump is an example of where the newer markets, such as China, can leap ahead of the mature countries, according to Weiser.

“China is way ahead of other countries and there is a lot to learn from them. It's a different kind of market but they’re making steady progress in effectively adopting digital technology for insurance,” says Weiser.

Tencent, the Chinese multinational technology conglomerate owner of social media and mobile payments app WeChat, which boasts in excess of 900 million users, launched an online insurance business in 2017 offering tailored insurance offerings to customers.

Another online offering, from billionaire Jack Ma’s Ant Financial, developed digital tools for insurers using artificial intelligence and data. They were able to focus on developing new insurance products for the motor sector without having legacy issues weighing them down.

But despite the myriad of digital initiatives, few industry insiders are really sure where the insurers are headed.

Muddled message

While the digital evangelists at major insurance firms have defined goals, the second tier of management often lack a digital vision, according to Weiser.

“In many cases, digital vision and digital initiatives are often thought of as a pure IT topic. So, either the vision has been poorly defined or it was poorly executed,” adds Weiser.

With insurance firms continuing to invest significant resources into digital transformation, another question is where and when its positive impact will be realized.

Weiser is of the opinion that the faster movers are the emerging markets because they represent an almost greenfield opportunity.

He cites the example of Yangon, Myanmar where the penetration of smartphones is substantial.

“Myanmar is seeing a tech boom and the country is leapfrogging quickly into the digital era. There are less legacy IT systems to overhaul and 85% of people in Yangon already have smartphones,” says Weiser.

“That's an enabler to say we can do something substantial there with digital insurance. If you are in Singapore, however, and you have your legacy system baggage, it's a little bit harder,” he adds.

Customizing the service

But he also sees the deeper impact of digitization being felt in the developed mature markets, such as Singapore and Hong Kong, where GDP per capita and insurance penetration are higher.

While digital seems to be the solution to every insurance question, Asian culture also throws up some challenges for insurers.

According to Weiser despite the digital push, the agent or the relationship manager is still the trusted key person in many Asian sales interactions.

“If you have digital support, such as data analytics and a mobile device to guide customers through the step-by-step buying process, then the agent or banker becomes empowered. With this, you could have a higher possibility of influencing the customer and pulling them across the line,” he says.

Waiting in the wings

Armed with customer data, the insurance sales lead or relationship manager can immediately offer accurate and relevant choices. All of a sudden, your sales force in developed markets is much more powerful because they are digitally enabled.

But the insurers might not have it all their own way, for those who drag their feet and fail to respond to rapid change, new threats could quickly dilute their market share.

The unprecedented mass of data now available to insurance groups, while a bonanza for marketing and calibrating products and services, has also been the backbone of growth for the major e-commerce giants.

Recent reports have indicated Amazon’s interest in offering business insurance to small and medium-sized enterprises as part of their service.        

More adept at using the information to configure and quickly deliver what their customers want, behemoths such as Amazon looking for additional revenue pipelines could be tempted, despite the regulatory hurdles, to enter the insurance market, a move that would be truly disruptive.

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