Issue No. 18
Display to 31 October 2022
THE STATE OF INSURANCE Insurance Asia
THE TOP 3 THINGS KILLING THE INSURANCE INDUSTRY
CLIMATE RISK IS COSTING THE INSURANCE INDUSTRY BILLIONS HOW A CAR ACCIDENT PROPELLED THIS CEO’S CAREER IN INSURANCE
YAS MICROINSURANCE PUTS A PRICE ON NFTS HOW INSURTECH IS SOLVING THE UNDERINSURANCE MESS
FROM THE EDITOR
PUBLISHER & EDITOR-IN-CHIEF
Tim Charlton
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his year sees a greater urgency to address the issues threatening the insurance industry. The sector is experiencing a snail’s pace climb in profits, pricing pressures, and slow organic demand. Climate risk is burning billions in Asia’s insurance industry, with the costliest recorded natural disaster in the region topping $2b. The increase in profits is still too slow for Taiwan’s insurance industry, with its insurance penetration at 1%. Meanwhile, the looming threat of climate change can blindside Australia’s growing general insurance industry. We chatted with Fumihiko Harada, CEO of PGA Sompo, on the fateful car accident that propelled him to a career in the insurance industry. Read the exclusive interview on page 14. We also talked with Melita Teo, AIA Singapore’s Chief Customer and Digital Officer, about the company’s new app Xplore with Ally, a smart calculator that helps customers with their financial wellness journey. See the full story on page 16. Insurance Asia also features its annual Top 50 insurance firms from Singapore and Hong Kong. Digital dominance and healthtech helped Singapore mitigate losses, while health and wellness products remain a priority for Hong Kong. See the complete rankings on pages 28 and 32. Read on and enjoy!
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CONTENTS
18
MARKET REPORT TOP THREE THINGS KILLING THE INSURANCE INDUSTRY
FIRST 04 What’s in store for Asia’s insurance industry in 2022
06 Cyber threats to grow HK’s insurance industry
07 APAC PA&H insurance premiums to more than double in 2026
08 2 in 3 Singaporeans worried about losing job due to illness or disability
09 Why are insurers barely earning the cost of capital
10 Nat Cat makes home insurance unaffordable
Published bi-annually by Charlton Media Group 101 Cecil St. #17-09 Tong Eng Building Singapore 069533
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INSURANCE GREAT EASTERN CRAFTS INSURANCE PACKAGE FOR SPECIAL NEEDS CHILDREN
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ANALYSIS CLIMATE RISK IS BURNING BILLIONS AND ASIA REMAINS VULNERABLE
RANKINGS
INSURTECH 24 How YAS MicroInsurance puts a price on non-fungible tokens
28 Singapore’s top 50 insurance firms reveal increase in assets
39 How embedded insurance is cutting out the middleman
32 Time for a comeback? Hong Kong’s top 50 insurers show a 9.75% surge in assets
INTERVIEW 14 The life-changing ‘crash’ of PGA Sompo’s CEO that sparked an interest in insurance
COUNTRY REPORT 40 Increase in profits still too slow for Taiwan’s insurance industry
16 Smart calculator figures out financial weaknesses
42 What can blindside Australia’s growing general insurance industry
26 No man left behind: How insurtech is solving the underinsurance mess
For the online versions of the insurance stories, visit the website
insuranceasia.com
FIRST
Aon’s latest Asia Market Review reveals key areas of opportunities in 2022
What’s in store for Asia’s insurance industry in 2022
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merging markets are poised to become global growth drivers, skyrocketing availability of data, advances in digital and mobile technology and rampant progress in analytics and artificial intelligence all mark the end of 2021 for the insurance industry, according to Aon’s 2022 Asia Market Review: Managing Risk In Connected Asia. The report also gives insight on what to expect from different segments of the insurance industry from property and casualty, cyber, health, cargo as well as managing total costs of insurable risks in different industry spaces. A slow year is predicted for casualty insurance. However, rates are expected to flatten should no large losses occur in 2022. Aon advised that existing relationships in ‘difficult’ industries need to be maintained and built upon as no new insurer capacity seems to be on the horizon. Rates are expected to stay flat at +5%. Asia logged no major property losses for both catastrophic and non-catastrophic events. However, regulatory judgements in Australia and the UK (which ruled in favour of assureds on COVID-19 business interruption claims) could have a significant impact on 2021 renewal rates, especially in these territories. 4 INSURANCE ASIA
Aon predict market differentiation in rate increases in the property segment will start to widen between heavy and light industries. Meanwhile, catastrophe rates will continue to weigh on international reinsurers, with focus on specific territories. Aon expects rate movements in nat-cat exposed property to be between +5% to +15%. Rates for credit will remain flat. Inflation will lead to tightening monetary policies which will result in leveraged, weaker companies to struggle with increased finance costs. A huge year is expected for cyber insurance, however market conditions is expected to remain challenging with no immediate or significant softening due to persisting global threats, although adjustments look set to be less severe than those in 2021. Despite these challenges, Aon predicts that demand will increase as various industries recognise key risks and view their policies as essential. Rate movements are expected to be between +15% to +75%.
Growing market opportunities Insurers in the health segment mostly responded to emerging needs in 2021 by developing digital services like virtual consultations, prescriptions, and support for employee well-being. Aon predicts that this year the easing of movement restrictions will increase utilisation levels for both inpatient and outpatient claims. Further increase will be driven by rising inflationary pressures. Meanwhile, COVID-19 healthcare costs will now transition to the private sector. “The normalisation in utilisation patterns, emerging mental/musculoskeletal health risks, and the potential for a greater COVID-19 cost burden will fall on the private sector. This will require employers to carefully analyse their medical plans and employee needs, as cost pressures increase,” Aon said. Aon also sees a growing market opportunity for insurers in the mergers and acquisitions (M&A) market. It expects the market to grow as more investors seek new opportunities in pharmaceuticals, renewable energy, technology and biotechnology. Aon notes that claims notifications have become frequent in Asia, due to increase in claims associated with higher-value deals. Common claims were in relation to financial statements, tax issues, compliance with law, stock and inventory, as well as material contracts and agreements. “There will likely be increased claims activity, fuelled by more insurance policies being placed and businesses looking to alleviate financial losses,” Aon added. Aon’s chief executive officer for Asia Pacific Anne Corona said that traditional industry borders will fall away in 2022, with ecosystems and digital platforms that enable them will continue to influence the future of business. She adds that they believe the impact of the new normal will no longer be about offering the right product, but about advice and holistic solutions that will give companies greater clarity and confidence. “The volatility of the last two years has brought the interconnectivity of risk into sharper focus, making risk management even more critical. Businesses are now more open than ever before to map current and underrated risks against their risk appetite early on, embracing better strategies to protect their organisations from volatility. We are also seeing the focus shift from event-based to impact-based risk assessments,” Corona said.
The volatility of the last two years has brought the interconnectivity of risk into sharper focus, making risk management even more critical
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FIRST working and increased risk of cyber attacks. Additionally, increased cases of financial frauds in the last few years gave a rise in the demand for directors and officers insurance. Property insurance is also expected to contribute to the growing industry as it currently is the third-largest general insurance line with a share of 18.7%, growing by 13.2% in 2020. This was driven mostly by increased construction and real estate activities in Hong Kong.
AUSTRALIA’S GENERAL INSURANCE INDUSTRY TO BALLOON IN 2026 AUSTRALIA
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he general insurance industry in Australia is predicted to grow at a compound annual growth rate (CAGR) of 6.4% from AU$73.29bn ($54.6bn) in 2021 to AU$99.87bn ($73.6bn) in 2026, in terms of direct written premiums (DWP), according to a report by data and analytics company GlobalData. GlobalData said it expects a strong economic recovery for Australia, with increasing vehicle sales and growing demand for natural catastrophe policies supporting the growth of Australia’s general insurance sector during the review period. Personal accident and health (PA&H) insurance, which is the largest segment in the Australian general insurance industry, accounts for 36.7% of the DWP in 2021. The PA&H segment, which are mostly sold as riders or additional insurance not covered by the public health insurance system, grew by 0.7% in 2021 against a decline of 0.2% in 2020. PA&H insurance was supported by increase premium rates by the Australian government amidst rising medical costs. The insurance segment is expected to grow at a CAGR 4.5% between 2021 to 2026. Meanwhile, motor insurance is the second largest segment, which accounted for 24.2% of general insurance DWP in 2021. After a slow down in 2020, the segment shook off its lull by growing by 6% in 2021 on the back of growing motor vehicle sales. This segment is expected to increase by 6.4% between the review period of 2021 to 2026. Natural calamities insurance Property insurance is the third-largest segment with 22.3% share in 2021. The segment grew by 9.5% in 2021, driven by the demand for natural catastrophes policies. Increased number of natural calamities in the last two years, such as hailstorms, bushfire and floods, have prompted insurers to increase the price for these policies. 6 INSURANCE ASIA
Strong performance from liability, property, and financial lines insurance to boost the industry
Cyber threats to grow HK’s insurance industry HONG KONG
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ising cases of cyber threats is actually helping the growth of the general insurance industry in Hong Kong which is estimated to reach more than $10bn by 2026 report by data and analytics firm GlobalData said. The general insurance industry is projected to grow at a compound annual growth rate of 6.6% in terms of gross written premiums (GWP). According to Jeneshree Sahoo, GlobalData insurance analyst, the growth was going to be driven by strong performance in liability insurance as well as property and financial lines insurance. Currently, personal accident and health insurance is the largest general insurance line in Hong Kong with a GWP share of 30.8% or $2.2bn in 2020. It declined by 4.8% during the pandemic; however, with the expected easing of restrictions in Hong Kong, it is projected to grow at CAGR 5.1% in 2021 to 2026 reaching $2.7bn. Meanwhile, liability insurance is the second-largest line with a GWP share of 23.9% in 2020. It grew by 8.8% in the year, driven by the growing demand for cyber insurance policies due to remote
Hong Kong’s low insurance penetration provides ample opportunities for general insurance growth
Fastest growing insurance lines The fastest growing segment is financial lines insurance, accounting for 8.3% share in 2020, growing by 60.7% in the year due to increase in premium prices following the upward adjustment of property values defined under the Mortgage Insurance Program. Financial lines insurance, which accounted for 8.3% share in 2020, is the fastest growing segment. It grew by 60.7% in 2020 due to an increase in premium prices following the upward adjustment of property values defined under the Mortgage Insurance Program. The remaining 18.3% share consists of Motor, and marine, aviation, and transit (MAT) insurance. Sahoo said after recovering in 2021, Hong Kong’s GDP growth is expected to slow down by 1.5% this year due to resurgence of COVID-19 cases. However, the general insurance industry will be able to overcome this hurdle, with an increase of 5.7% driven by strong performances of some of its general insurance lines. “Hong Kong’s low insurance penetration, as a percentage to GDP, at 1.6% provides ample opportunities for general insurance growth. A gradual economic recovery, increasing cyber risks and growing commercial real estate activities are expected to support growth of general insurance over the next five years,” Sahoo concludes.
Hong Kong’s low insurance penetration provides ample opportunities for general insurance growth
FIRST HOW CHINA’S INSURANCE INDUSTRY FARED IN LOCKDOWN
CHINA
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The segment is growing at an annual growth rate of 13%
APAC PA&H insurance premiums to more than double in 2026 ASIA PACIFIC
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ersonal accident and health (PA&H) insurance in Asia Pacific is predicted to grow from $203bn in 2020 to $421.9bn in 2026 in terms of written premiums according to a report by GlobalData. The PA&H segment in Asia Pacific is growing at a compound annual growth rate (CAGR) of 13%, backed by increased awareness and growing disposable income. According to GlobalData Senior Insurance Analyst, Deblina Mitra, the APAC PA&H insurance segment peaked at 17.8% in 2021, driven mostly by economic recovery and increased insurance awareness in the region. “The region’s emerging markets with underdeveloped public healthcare systems struggled during the pandemic to deliver healthcare due to a surge in demand beyond their capacity, compelling individuals to seek private healthcare, driving insurance sales,” GlobalData’s Deblina said. The report said that China is seen to be leading the PA&H insurance market in APAC, with a 69.5% share of written premiums in 2021. GlobalData identified the growing middle-income population, tax exemption, traction in remote healthcare services, and rising medical expenses as the major factors behind the growth. “The formation of a new national pension company in 2021 to develop health insurance is expected to create substantial business for PA&H insurers
With 1 in 5 Australians experiencing mental health issues, the demand for health insurance covering mental health grew
from China’s $1.2 trillion pension sector. The PA&H insurance industry in China is expected to grow at a CAGR of 15.8% from 2020-2026,” Deblina said. Meanwhile, Australia has a share of 8.5% of written premiums in 2021 and is the second-largest market in APAC. The PA&H insurance industry in Australia is expected to grow at a CAGR of 5.1% over 2020-2026 with the lifting of restrictions on international travel, and awareness of mental health and well-being. “With every one in five Australians experiencing mental health issues, the demand for health insurance covering mental health witnessed growth. Psychology services and in-patient treatments/ rehabilitation are some of the mental healthcare services that are available under private health insurance,” Deblina added. Rounding the top five markets in the region is Taiwan, India, and Japan, with a combined share of 15.4% in 2021. PA&H insurance in the three countries is expected to grow at a CAGR of 4.5%, 9.8%, and 3.3%, respectively, until 2026. “Economic growth and pandemicled awareness coupled with the revival of the tourism sector will favor PA&H insurance’s growth over the coming years. Product innovation centering around personalisation and inclusion of mental healthcare will be focus areas for insurers,” Mitra concluded.
hinese life insurers continue to have muted growth in April of this year, a trend that continued in the month before according to a Jefferies report. China’s major insurers saw drops in life premium growth with just a few showing a slight increase. The report said that the weakness in April was widely anticipated given the developments in COVID-19 infections and the strict lockdown protocols in Shanghai. However, the fact that growth in April did not deteriorate further from its results in March showed efforts by life insurers in channel diversification started to pay off. “The Shanghai lockdown will ease starting from this week, although zeroCovid remains the authorities’ primary pandemic control strategy. Lifers are pushing savings/annuity products as well as whole life insurance. We expect premium/Value of New Business growth to improve year-on-year in H2 thanks to a lower base and government stimulus on the macro economy,” Jefferies said. Meanwhile, property and casualty (P&C) insurers have maintained solid growth, with Jefferies anticipating strong underwriting profit in 2022 because of reduced vehicle traffic amidst lockdowns. Inflexion point Jefferies pointed out that the major reason for Chinese insurers’ sluggish Q1 results was mainly because of weakness in investment performance as the Chinese insurance industry remains massively underweighted by investors. “China insurance remains massively underweighted by investors. Most investors we spoke to agree valuations are attractive but would like to wait for better clarity on Covid/market directions,” Jefferies said. The report predicts that P&C will likely see lower auto losses in Q2, whilst life insurance players will have to deal with the impact of COVID-19 and a volatile investment market. INSURANCE ASIA
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FIRST ICCSC RELEASES LATEST INDUSTRY BEST PRACTICES SINGAPORE
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ingapore’s Insurance Culture and Conduct Steering Committee (ICCSC) has released its third set of guidelines on ‘Intermediary Culture and Conduct Best Practices – Promoting Ethical Culture and Conduct in Insurance Intermediaries (Life), focusing on enhancing standards for financial adviser representatives (FA Reps) and Financial Adviser Firms (FAFs). This is part of the Committee’s continued efforts to elevate the culture and conduct standards of the life insurance ecosystem in Singapore by focusing efforts on people, performance, and processes. The first two papers focusing on Human Resources and Corporate Governance were released in March 2022. Third paper The third paper aims to enhance the quality of the financial advisory service sector through the practices of FA Reps and FAFs by providing the following: • Guidance on the role of supervisors in setting the right tone from the top to ensure accountability from leadership that priorities are not only placed on achieving sales and revenue growth. • Best practices on establishing key performance measures that effectively encourage FA Reps to provide customers with highquality financial advisory services. • Collaboration on enhanced disclosures to customers and information sharing between insurers and non-tied FAFs to align and protect customers’ interests through regular engagements and dialogues with recommendations centred on Proper Disclosure to Customers on Products and Incentives, as well as the Sharing of Sales Quality Data to improve Culture and Conduct. “We aim to enhance professionalism within the industry more consistently and elevate the standard of care for customers in the advisory process,” said Dr. Khoo Kah Siang, Chairperson of the ICCSC.v 8 INSURANCE ASIA
More than half do not have disability income protection
2 in 3 Singaporeans worried about losing job due to illness or disability SINGAPORE
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wo in three or 66% of Singaporean workers are worried about losing their jobs due to illness or disability or both, according to the AIA Disability Income Survey 2022. The survey was conducted in April 2022 amongst more than 1,000 respondents consisting of full-time working Singapore residents ages 18 and above. The survey revealed that despite being worried about losing their jobs due to illness or disability, 53% do not have disability income protection. Singapore workers have different ways to survive the implications of a job loss due to illness or injury. Most (66%) said they will cut down on spending. 63% said that they will rely on savings whilst 58% said they will look for another job where other tasks or duties can be done. Only around 50% will rely on insurance to cover the financial risks of losing their jobs. Awareness More than four in five know that disability income protection exists. The survey also revealed that blue collar workers (42%) deemed disability income insurance as an important coverage to have compared to white collar workers (29%). The AIA Disability Income Survey 2022 survey also listed that the top two reasons for getting disability income
Melita Teo
Understanding the pain points of disability income plans allows us to better address Singaporeans’ concerns
protection are to have peace of mind if anything happens (53%) and to ensure that there is financial support for loved ones if unable to work (51%). What’s preventing most to purchase this type of insurance is product complexity, complicated processes, and high premiums. In fact, one in four (25%) of females cite the cost of premiums as a reason for not having disability income protection compared to less than one in five (16%) of males. This was the most selected reason amongst females. However, 22% of men said they did not have disability income protection because they don’t think they need it – the most selected reason amongst males. Only 13% of women chose this reason. “Losing one’s job and becoming dependent on others due to an unexpected accident or illness is painful and places heavy financial and emotional burdens on a person and their loved ones. Understanding the pain points of disability income plans allows us to better address Singaporeans’ concerns which range from affordability, to ease of getting insured and making a claim. These are key priorities which informed how we developed the AIA Pay Protector to make disability income protection accessible to even more members of the community,” Melita Teo, Chief Customer and Digital Officer at AIA Singapore said.
FIRST
Why are insurers barely earning the cost of capital
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ASIA PACIFIC
he pandemic may have taken a huge toll on the insurance industry, however, there are still issues, like persistently low interest rates and digital challenges, that remain unresolved that consistently puts a drag on profits, according to a report by management consulting firm McKinsey & Company. The COVID-19 pandemic may have been the major driver in the industry’s distress today, however McKinsey said past issues have now taken on an even greater urgency resulting in Asia Pacific’s insurance industry barely earning the cost of capital. “After decades of stable returns, insurance is now a value-destroying industry in which half the players do not earn their cost of equity,” McKinsey said. The report identified three ‘structural factors’ challenging the industry’s growth: persistent low interest rates; pricing pressures driven by fee transparency, digital attackers, and lowercost options—pressures that in some markets are aggravated by price comparison websites; and organic demand that is growing only slowly in mature markets. The latter is particularly worrying, because growth in developed economies is coming mostly from price increases rather than from volume or new risks covered, highlighting a risk that the industry might lose its relevance over time. In the global life insurance segment, growth has been subdued.
The non life-sector, especially in Asia and Europe has seen the lowest growth rate in recent years. Insurtech’s role McKinsey said that a distinctive digital customer experience—from attackers or incumbents—will be a prerequisite for industry-beating growth. As such, insurtechs are poised to drive digital innovation and disruption in the industry, as insurtech investments worldwide grew from $1b in 2004 to $14.6b in 2021. “More than 40%t of insurtechs are focused on the marketing and distribution segments of the insurance value chain, enabling them to solve customer pain points through a digitally enhanced client experience that could pose a competitive threat to incumbents. And whilst some of these players have seen their share,” McKinsey said. McKinsey adds that the traditional approach of many insurers will find themselves challenged by superior technology and healthy margins in insurance service business to own the whole value chain, forcing traditionally insurers to form partnerships or make outsize investments to keep up. A value-destroying industry? McKinsey blamed the ‘structural factors’ it identified as the reason behind the industry’s
These issues have plagued the industry for a decade
limited value creation in recent years. “Not only has the overall insurance industry destroyed value in the past years, but its positioning has eroded from 2005–2009 to 2015–2019, with insurance brokers as the exception,” McKinsey said. However, McKinsey emphasised that these problems are not caused by a few underperformers rather it is industry wide. 54% of listed insurers ,representing 52% of the global industry’s equity, had a return on equity (ROE) below their cost of equity over the past five years. This have raised questions about the long term economic viability of their business model. “In summary, after decades of stable returns, insurance is now a value-destroying industry in which half the players do not earn their cost of equity,” McKinsey said.
Indian insurers forbidden from advertising services not part of cover INDIA
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nsurers, especially motor insurers were ordered by the Insurance Regulatory and Development Authority of India (IRDAI) to stop advertising services that are not part of the insurance cover. Furthermore, general insurers were forbidden to display discounts with reference or comparison to rates of the erstwhile tariff and they have to ensure that the discounts and savings on the premium, which may be applicable only under extreme or exceptional scenarios, shall not be displayed as examples. According to the IRDAI, some general insurers enter into service agreements with motor workshops and garages for the purpose of providing motor insurance claim services for repair of accident vehicles. The said services, in addition to
claim services, extend to certain assistance services not related to insurance claims such as free pickup and drop of vehicle, body wash, interior cleaning, and more. “Whilst the bundling of the above facilities with insurance is left to the motor service providers, the general insurers issuing advertisements of the said services, projecting them as benefits provided within the insurance cover is unacceptable,” the IRDAI explained in a circular to general insurers. The IRDAI stressed that the main objective of service agreements with motor garages/workshops shall only be providing insurance services for claims of accident vehicles and they cannot arbitrarily expand to include the scope of services which are not relevant for insurance claims.
The regulator said this is ‘unacceptable’
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FIRST ASIA’S INSURANCE INDUSTRY HAS THE WEAKEST GROWTH ASIA
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ith underperforming countries in major markets such as China, Asia has the weakest growth in the insurance industry amongst the major regions of the world, global insurer Allianz revealed in a report. In the Global Insurance Report 2022, the report revealed growth in Asia was significantly weaker than the global average. In the life insurance market for example, it only clocked a +0.9% growth rate well below the global average of +4.4%. Asia’s non-life segment meanwhile grew by +1.7% far from the +6.3% global average. The common factor in the below average performance of Asia was mainly due to underperformance of China. In the life segment, China holds nearly 13% of the global premium volumes written. According to Allianz the market shrank by -1.7% in 2021. “The premium decline is mainly due to stricter regulation, i.e. the data of failed insurance companies no longer being included in the statistics. Underlying growth seemed to be closer to +4%, which – admittedly – is also rather weak for the Chinese market,” Allianz said. Performance issues This is the same case for the non-life segment which saw the market shrinking by -1.7% in the last year. Besides China, negative growth rates in the life insurance industry in Hong Kong, South Korea and Taiwan also put a huge drag on the region’s growth. In the non-life segment, Japan’s premium volume almost stagnated at +0.2% growth rate, pushing down the regional average growth. 10 INSURANCE ASIA
Increase in home insurance premiums will lead to underinsurance or no insurance
Nat Cat makes home insurance unaffordable AUSTRALIA
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requent natural catastrophes are making home insurance unaffordable in Australia and this could lead to a serious underinsurance gap or worse: homeowners opting not to buy insurance at all. This is because extreme weather events are forcing home insurance premiums to surge. In fact, according to data and analytics firm GlobalData, home insurance premiums in Australia grew by 5.9% in 2021, the highest in the last seven years. According to GlobalData’s senior insurance analyst Swarup Kumar Sahoo, the impact of natural catastrophe events is most severe on personal property insurance which accounted for 80% of claims that occurred in 2021. “This will have a significant impact on home insurance premiums as insurers will pass this to the consumers to recover the losses. Rising insurance costs and increased frequency of natural disasters will leave around 4% of Australian homes uninsurable by 2030,” Sahoo said. According to Sahoo, home insurance prices in Australia registered significant growth after every natural disaster.
1 in 25 homes in Australia are in danger of being uninsurable by 2030
Northern Australia, which is prone to natural disasters, registered growth in both claims and premiums during the last five years. Natural disasters that occurred in 2019 increased average premiums on home insurance by 20% in this region compared to 11% in the rest of Australia. Recent floods in February and March 2022 which caused an insured loss of US$3.35bn, is expected to further increase home insurance prices in 2022. “Increase in home insurance premiums will lead to underinsurance or no insurance as lower and middleincome groups will look to reduce policy coverage if they are unable to afford high premiums,” Sahoo said. This analysis was similarly echoed by the Climate Council of Australia. According to the council, about one in 25 homes or 520,944 properties in Australia are in danger of being uninsurable by 2030, due to rising risks of extreme weather and climate change. This number increases to one in seven homes within Australia’s top 10 electorates most at-risk of environmental and climate impacts. According to the report of the Climate Council, across all electorates in Australia, 3.6% of properties (520,944) or one in every 25 properties will be uninsurable by 2030. In addition, one in 10 (9%) of properties will reach the ‘medium risk’ classification by 2030, with annual average damage costs equaling 0.2% or more of the property replacement cost. The report also found out that riverine flooding poses the biggest risk to properties. Of the properties classified as ‘high risk’ by 2030, the majority (80%) of that risk is due to riverine flooding.
Australia Home Insurance - Average Premium Per Policy (AUD), 2017-2026
Source: GlobalData Insurance Intelligence Center
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11
2020
NEW INSURANCE PRODUCT OF THE YEAR - SINGAPORE
Singaporeans are proactive in planning for their retirement
The age-old issue of ageing
HSBC Life Singapore has launched the HSBC Life Variable Annuity.
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he past two years has been a turning point for society. The pandemic has not only made us more aware of the necessity of protecting ourselves and our future, but it has also made us all re-evaluate the manner in which we want to live. The fact is, as technology progresses and more medical advances are made, global life expectancies are also raising. It has now topped 70 years for men1 and 75 years for women2. And more than any other region in the world, Asia is experiencing this. In 2019, there were 260 million people over the age of 65 living in the eastern and south-eastern area of the continent alone3. And according to United Nations projections, that number is set to double by 2050. Closer to home, Singapore is set to experience a 21%4 increase in its share of older people by 2050 – one of the biggest rises worldwide. However, many people are now shifting their emphasis from how long they live, to the way they want to live. Being given the opportunity to age is a good thing, and there are many advantages to it. Longer lives means that many people have the opportunity to spend more
time enjoying their retirement, picking up news skills and playing an active role in their community. However, ageing populations also raise some concerns, both for the individual and society as a whole. Will you be able to continue to fund your lifestyle and standard of living after you have stopped working? Do you have enough set aside for your medical needs? Who can step in should you need help looking after yourself? Can the healthcare system support an influx of patients coming in with age-related issues? These are all difficult questions that many find hard to face. And there are no easy solutions or answers. But very often, individuals will need to take steps to prepare for their future. However, that doesn’t mean that they have to go at it alone. Being part of a society, there are many organisations in place that can play a part, such as governments, employers and financial institutions. The insurance sector has a pivotal role to play as well. Taking into account the increasing longevity of society, insurers are developing new products to help people access support that they may be more likely to need later in life. And we are already seeing signs that
https://data.worldbank.org/indicator/SP.DYN.LE00.MA.IN https://data.worldbank.org/indicator/SP.DYN.LE00.FE.IN https://www.un.org/en/development/desa/population/publications/pdf/ageing/WorldPopulationAgeing2019-Highlights.pdf 4 https://www.un.org/en/development/desa/population/publications/pdf/ageing/WorldPopulationAgeing2019-Highlights.pdf 5 https://www.lia.org.sg/news-room/industry-performance/2020/life-insurance-industry-achieved-04-per-cent-growth-in-2019-uplifted-by-sustained-trajectory-ofannual-premium-business 1 2 3
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many Singaporeans taking advantage of these products and future-proofing their lives. According to the Life Insurance Association (LIA) industry report in 20205, Singaporeans are being proactive in planning for their retirement. The industry recorded a significant increase in the uptake of retirement policies. The fact is, to be able to enjoy your retirement without having to stress about finances, you will need to have a steady income even after you stop working. To help with that, HSBC Life Singapore has launched the HSBC Life Variable Annuity, a retirement plan which combines the assurance of a steady guaranteed base level of income and the ability to generate significant upside income potential. What makes this solution so unique is that it ensures Singaporeans remain invested and protected from any sudden market fluctuations while allowing them to take advantage of any potential upside. HSBC Life Singapore is the only insurer to offer this unique product currently. This capital guaranteed single premium retirement solution allows you to fully participate in the market upside by locking in higher guarantees along the way. Its ratchet feature increases the policyholder’s guarantee on a monthly basis whenever the account value is higher than the existing guarantee. HSBC Life Variable Annuity also protects against downside risk as the policyholder’s monthly payout will never decrease even when the market falls, and allows the flexibility to access to the account value without surrender charges. At the end of the day, living to a ripe old age is a blessing, regardless what precautions or actions you have put in place in your youth. But planning ahead to protect your health and wealth will definitely give you greater peace of mind as you look to the future. HSBC Life Variable Annuity is underwritten by HSBC Insurance (Singapore) Pte. Limited (Ref.No.195400150N). This article contains general information only and does not have regard to the specific investment objectives, financial situation and particular needs of any specific person. This is not a contract of insurance and is not intended as an offer or recommendation to buy the product. A copy of the product summary may be obtained from our authorised product distributors. You should read the product summary before deciding whether to purchase the product. You may wish to seek advice from a financial adviser before making a commitment to purchase the product. In the event that you choose not to seek advice from a financial adviser, you should consider whether the product in question is suitable for you. Please refer to the policy contract for the exact terms and conditions, specific details and exclusions of this product. As buying a life insurance policy is a long-term commitment, an early termination of the policy usually involves high costs and the surrender value, if any, that is payable to you may be zero or less than the total premiums paid. It’s also detrimental to replace an existing life insurance policy with a new one as the new policy may cost more or have fewer benefits at the same cost. HSBC Insurance (Singapore) Pte. Limited reserves the right to review and amend the subscription of units and fees including the Asset Management Fee/ Accounting and Valuation Fee by giving you at least 30 days’ advance notice. Information is correct as at 10 January 2022. This advertisement has not been reviewed by the Monetary Authority of Singapore. Protected up to specified limits by SDIC.
HSBC Life Variable Annuity helps ensure you stay secure through the ups and downs of life. Learn more at insurance.hsbc.com.sg/va.
HSBC Life Variable Annuity (the "product") is underwritten by HSBC Insurance (Singapore) Pte. Limited (Reg. No. 195400150N). This advertisement contains general information only and does not have regard to the specific investment objectives, financial situation and particular needs of any specific person. This is not a contract of insurance and is not intended as an offer or recommendation to buy the product. A copy of the product summary may be obtained from our authorised product distributors. You should read the product summary before deciding whether to purchase the product. You may wish to seek advice from a financial adviser before making a commitment to purchase the product. In the event that you choose not to seek advice from a financial adviser, you should consider whether the product in question is suitable for you. Please refer to the policy contract for the exact terms and conditions, specific details and exclusions of this product. As buying a life insurance policy is a long-term commitment, an early termination of the policy usually involves high costs and the surrender value, if any, that is payable to you may be zero or less than the total premiums paid. It’s also detrimental to replace an existing life insurance policy with a new one as the new policy may cost more or have fewer benefits at the same cost. HSBC Insurance (Singapore) Pte. Limited reserves the right to review and amend the subscription of units and fees including the Asset Management Fee/Accounting and Valuation Fee by giving you at least 30 days’ advance notice. This advertisement has not been reviewed by the Monetary Authority of Singapore. Protected up to specified limits by SDIC.
CEO INTERVIEW
PGA Sompo is looking to expand the accessibility of insurance services led by digital services and embedded insurance services
The life-changing ‘crash’ of PGA Sompo’s CEO that sparked an interest in insurance
How a car accident propelled Fumihiko Harada to a career in the insurance industry.
I
t took driving his self-modified car off a cliff and crashing down an embankment during his university days for Fumihiko Harada, PGA Sompo Insurance Corporation Director/President and CEO, to decide to pursue a career in insurance. Talking with Insurance Asia, Harada-san, amusedly explained that during his university days, he had a part-time job that involved modifying second-hand vehicles, which he tried to do with his own car. But because the modifications he did were not fit for his car, he got into an accident that propelled his car straight off a cliff. Fortunately, he was fine, but the car was another story as it was a total wreck. However, even though his car was completely destroyed, he managed to recuperate the losses because it was insured. “I never realised the importance of the non-life insurance industry before so that situation was an eyeopener for me, that insurance is something that can help people. And that is the reason why I started my career in insurance.” Harada-san said. 14 INSURANCE ASIA
I never realised the importance of non-life insurance before, so that situation was an eye-opener for me
A hands-on approach Harada-san, who is now based in Manila, typically starts his day by catching up on what is happening with their customers, the industry, and the country. He then proceeds to talk with department heads, personally seeing that everything is working smoothly. “I’m more of a hands-on guy. Since our office is smaller compared to other offices, it’s easier to change the direction of the company and to manage everything because it’s just one office,” Harada-san said. In his 28 years of experience in the general insurance industry, 16 years were spent working outside of Japan, China, Hong Kong, and SOMPO’s regional headquarters in Singapore. Harada-san has already worked with nine SOMPO subsidiaries in South Asia and Oceania before becoming the president and CEO of the PGA Sompo in the Philippines in 2016. “Despite having knowledge of the industry, the dynamics of day-to-day local operations are different, especially in managing teams through cross-cultural communications. It requires hands-on experience and
CEO INTERVIEW
Fumihiko Harada, Director/President and CEO, PGA Sompo Insurance Corporation
an understanding of the local context and the story behind it,” Harada-san explained. Since Harada-san’s appointment as CEO, PGA Sompo has prospered under his guidance with its portfolio almost doubling and profits increasing by almost 20 times. At the height of the COVID-19 pandemic in 2020, PGA Sompo broke its records, posting the highest gross written premiums in its history at PHP2.408m ($47k). This is 20% more than their numbers in 2019. PGA Sompo also recorded a 34% increase in profit to PHP120m ($2.34m) in 2020 compared to 2019, a testament to Harada-san’s achievements. Non-life insurance trends In a market report by AM Best, an insurance ranking firm, the Philippines’ non-life market is maintaining a stable growth after signs of recovery were noted by the end of 2021. The report revealed that net premiums increased by 7.6% to $700m. It also noted that the Philippine government’s “Build Build Build” programme, which consists of around 20,000 infrastructure projects nationwide, has now resumed and is expected to drive the Philippines’ economic recovery. This is just one of the three major trends PGA Sompo is looking to take advantage of this year. The second trend is expanding the accessibility of insurance services led by digital services and embedded insurance services and increase in insurance awareness in the country. According to Harada-san, PGA Sompo has a keen edge when it comes to supporting the Philippines’ infrastructure development as they have one of the biggest acceptance capacities in the market. “Our risk acceptance capacity is backed by our head office SOMPO in Japan, which is around 13 times
PGA Sompo’s mindset is deeply rooted in a concept called ‘omotenashi’
bigger than the entire Philippines’ non-life insurance market in terms of its premium. Our strong capacity continuously supports mega infrastructure businesses,” Harada-san said. PGA Sompo can also provide professional indemnity (PI) that covers design risk in construction—which, according to Harada-san, only a few insurance firms can give at the moment. “We have also started to delve into this trend by creating insurance products. An example is our collaboration with e-wallet giant GCash in providing online shopper protection,” Harada-san said Finally, the third trend is that the country has become more aware of insurance. PGA Sompo has, therefore, focused on this by selling through platforms like LAZADA, RedDoorz, and Rewire. “Embedded insurance services can provide broader access points of insurance protection to consumers. Innovative insurance solutions will provide new opportunities to reach out to new customers across digital touchpoints to support people’s everyday lives.” Harada-san added. ‘Omotenashi’ PGA Sompo’s mindset that led the insurance company to excel in the insurance industry is deeply rooted in a concept called “omotenashi,” meaning “to wholeheartedly look after guests.” “It is an implicit understanding that there are no unnecessary tasks if the result ensures great experiences for a guest. With the Japanese rooted high-quality pursuing mindset, we have been developing our services and digital solutions. We care about the user experiences (UX) of our sales portal. Our portal is simple and easy to use with quick action. We are focusing on developing our customer experience by providing high-quality services,” Harada-san explained. It was this kind of mindset that led Harada-san and PGA Sompo to win Insurance Asia’s Insurer of the Year - Philippines last year. In his parting words, Harada-san said, “I am a strong believer in the functionality of insurance. Insurance is really about caring about people, or supporting someone in their time of need.”
PGA Sompo is also selling through platforms like LAZADA, RedDoorz, and Rewire
INSURANCE ASIA
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INTERVIEW
Smart calculator figures out financial weaknesses Xplore with Ally helps Singaporeans figure out their financial satisfaction.
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ow often have insurance agents gone up to someone and offered them insurance products, only to be turned down saying they already have insurance or are happy to remain uninsured as they believe their financial position is ‘quite stable’? Probably, a lot. This attitude towards financial planning is what AIA Singapore has been trying to solve with their app, Xplore with Ally, a multi-needs financial calculator that helps Singaporeans understand their financial needs and goals. Created to become a digital partner for their agents, Xplore with Ally was designed to take a snapshot of customers’ current financial health and coverage adequacy to better give them an idea of what vulnerabilities remain as they try to reach a certain goal. In an exclusive interview with Insurance Asia, AIA Singapore’s Chief Customer and Digital Officer Melita Teo explained how they used Xplore with Ally’s unique personalised features to entice customers to take the next step in their financial wellness journey. Could you tell us about Xplore with Ally? How did this product come to be? Since 2018, we have been increasingly focused on our digital transformation journey to equip our AIA insurance representatives with the tools and capabilities to provide better service our customers. In a bid to better understand our customers’ attitudes and behaviour towards financial planning, we learned that our customers need an avenue to understand their financial needs. Whilst there are financial calculators available in the market, most are targeted to focus on singular needs, such as a particular milestone as opposed to a holistic overview. We also found that the majority of customers continued to reach out to an AIA insurance representative to have more indepth discussions and reviews of their financial health and needs so that they can purchase policies that are best suited and catered to their goals. That was how Xplore with Ally was conceptualised. It was designed to provide a snapshot of customers’ current financial health, not just a particular concern but their multiple needs and goals in different stages of life, and personalised overview/insights for AIA insurance representatives to follow-up with better guidance and advice. What makes Xplore with Ally a must-need, especially for your market in Singapore? In a mature and saturated market, like Singapore, it is especially easy to be overwhelmed with numerous goals, needs and choices. For our customers, especially young adults and families, protecting one’s finances and planning for the future has always been key challenges, with multiple
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In three minutes, Xplore with Ally enables customers to view a simplified personal snapshot of their current financial health and coverage adequacy (Photo: Melita Teo)
decisions at every life stage. However, many current financial planning tools are lengthy and complex, resulting in a lack of motivation for many to complete. In less than three minutes, Xplore with Ally enables our customers to view a simplified personal snapshot of their current financial health and coverage adequacy. This enables them to understand if they are adequately insured or under-covered in certain areas, with the app showing a potential coverage at a glance based on their financial goals and priorities.
Xplore with Ally helps customers to better understand their financial wellness journey
Could you tell us about the app’s personalisation features that give it an edge over your competitors? In Singapore, whilst most individuals understand the importance of financial planning, many do not know where to begin assessing their financial health, and how to utilise the information to plan for their goals. As a multi-needs financial calculator, Xplore with Ally helps our customers to better understand individuals’ unique financial needs to determine their current resources, allowing them to have a preliminary review of their financial health based on their lifestyle needs and priorities, enabling them to take a step closer towards financial freedom. Based on a series of simple questions on an individual’s basic finances, goals, priorities, and living lifestyle
INTERVIEW preferences, Xplore with Ally analyses the available data and information to produce an Ally Score. Built on the mathematics of Prospect Theory, Ally Score measures one’s financial satisfaction score. This is calculated based on an individual’s desired financial goals in addition to their prevailing protection coverage, against simulated personal and market risks to indicate one’s future financial health. So far, how has Xplore with Ally performed in terms of lead generation? Do you have any numbers that you could share with us? Xplore with Ally is triggered by AIA insurance representatives to be sent to potential prospects/customers who wish to have a preliminary understanding of their needs and goals. We ran several advertising efforts on social media platforms and campaigns to interest our target demographics and generate awareness and usage of Xplore with Ally which contributed to approximately 1,000 leads generated in less than two months from the launch of Xplore with Ally. With the feedback and learning from this first release, we will be enhancing Xplore with Ally and expanding the avenues to enable the app and its services to reach a broader set of customers. What makes the personalisation of customer service a priority for an insurer? In your opinion, why is personalisation an important factor for consumers? Whilst the insurance sector has long invested in digitalisation and customer-centricity, the stress test presented by COVID-19—against a backdrop of disruptions—has reshaped how companies are creating technology-enabled competitive advantages. Customer centricity is an absolute business necessity, especially amidst continuously evolving customer needs, demands, and expectations. Brands and companies that can offer value in personalisation have seen high conversion rates and repeated engagement over time. With customers now accustomed to interacting online, a greater focus on customer-facing digital platforms and datadriven personalisation will remain a high priority. Beyond that, advanced technology will also be harnessed to help insurers better understand customers, from identifying their preferences and to better anticipate their future needs to deliver a more personal and empathetic customer experience. Personal and empathetic are key here. It is important to treat technology as an enabler and not a replacement for the human touch. Digitalisation strategies should be people-first so that customers can get a personalised interaction that they greatly appreciate, especially when it comes to making purchasing decisions for life insurance. How do you think insurers can strike a balance between automation and personalisation? With more and more people getting accustomed to living their life online, it is imperative that we in the insurance industry continuously leverage analytics to understand and uncover insights into customers’ ever-changing needs and demands to enhance our digital experience for them. At AIA Singapore, we believe that product and service automation can be a key driver to power and scale personalisation.
Leveraging analytics will better inform us of customer insights to create personalised campaigns, products, services, and other offers and to improve all of our customers’ overall end-to-end financial wellness journey. With AI and automation usage on the rise, how do you ensure that customers still have a unique personalised experience with your products and services? As a people-first and customer-centric organisation, we are committed to placing our customers at the heart of everything we do. Whilst we believe in leveraging digital technologies to embrace new norms, our team is also cognisant that our digital capabilities need to also encompass high-tech, high-touch, and high-trust for our customers to enjoy personalised user journeys. Our digital transformation strategy ensures that our digital ambitions are rooted in our brand promise of enabling healthier, longer, better lives—a unique position that AIA Singapore undertakes in the life insurance industry. What’s next for AIA Singapore? We will continue to improve our Technology, Digital, and Analytics capabilities and solutions to provide customers with an integrated ecosystem that is high-tech, high-touch, and high-trust for a seamless and fuss-free experience. Conducting explorative and ethnographic research to uncover our customers’ unspoken needs and pain points. Exploring collaborative ideation workshops across various departments to prioritise user-centric features and overcome potential biases and assumptions. Evaluating various variables (tasks, timings and platform preferences) in determining what is the best user interface. Do you have any last words for us? At AIA Singapore, our priority has been and always will be our customers as we are rooted in our brand promise of enabling healthier, longer, better lives. Ultimately, our mandate for leveraging digital technologies is guided by our brand promise and our new long-term commitment to environmental, social, and governance to ensure that we are positively impacting the health and wellness of our customers and the wider community including the environment. We are confident that this single-minded focus on our brand promise will keep us on the right track in delivering outstanding customer experiences, allowing us to stand out from the industry’s sea of sameness.
At AIA Singapore, the priority is the customers, rooted in its brand promise of enabling healthier, longer, better lives
INSURANCE ASIA
17
MARKET REPORT: STATE OF INSURANCE
Top three things killing the insurance industry
Thanks to these threats, 54% of insurers had an ROE below their cost of equity.
T
here have been three issues posing a threat to the insurance industry for a long while now; but come 2022, McKinsey & Company has finally rung the alarm bell. “These issues have now taken a greater urgency,” the global consultancy firm warned. The three threats, according to McKinsey, are the persistently low-interest rates, which pressure spread-based businesses such as life insurance; pricing pressures driven by fee transparency, digital attackers, and lower-cost options aggravated by price comparison websites; and organic demand that is growing only slowly in already mature markets. “The [third] is particularly worrying because growth in developed economies is coming
Globally, 50% of insurance companies have consistently traded below their book value in the past 5 years
mostly from price increases rather than from volume or new risks covered, highlighting a risk that the industry might lose its relevance over time,” McKinsey said. According to McKinsey & Company’s Global Insurance Report 2022, these threats are said to have resulted in the worst possible outcome—half of the industry players still do not earn their cost of equity even after decades of stable returns. McKinsey stressed that this is not a problem caused by a few underperformers, it is industrywide. 54% of listed insurers, representing around 52% of the global industry’s equity, had a return on equity (ROE) below their cost of equity over the past five years. McKinsey said this raised questions about the long-term economic
Half of the industry players do not earn their cost of equity after decades of stable returns
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viability of their business model which investors in the public markets have taken note of. Globally, about 50% of listed insurance companies have consistently traded below their book value in the past five years, which McKinsey said is a clear vote of no confidence in the industry and raises questions about the longterm future of insurance players, particularly in multiline insurance where about around 60% of players are trading below book value. Talent shortage McKinsey is not the only one ringing alarm bells for the industry. Deloitte also has a similar opinion, although it sees talent shortage as the biggest threat at the moment. In a poll they did amongst global insurers, respondents said they expect to increase headcount in most of their functional areas this year. Deloitte, however, said, “The big question insurers face is where will all that talent come from, and how will they be able to recruit and retain the skill sets to maintain
MARKET REPORT: STATE OF INSURANCE Global revenues by life insurance product and region, 2021E
Source: McKinsey Global Institute; McKinsey Global Insurance Pools
and advance increasingly digitised business operations?” An example of this talent shortage is already seen in Hong Kong. According to a survey by the Hong Kong Federation of Insurers last February, one out of three international insurers in Hong Kong are thinking about cutting back on their operations due to talent shortage. About 30% of respondents are mulling on relocating their global and regional teams, leaving only Hong Kong-focused staff behind. Even Hong Kong’s Insurance Authority reported that it is understaffed by around 10%. Also, if you narrow the scope to technology, insurers will not just be competing with industry peers but tech giants, as well. Another survey revealed that 43% feel that it is getting harder to find skilled candidates in a number of functional areas, with information technology topping that list in terms of recruitment difficulty. That same survey identified the top five talents most difficult to acquire are in cloud engineering, data science and analytics, artificial intelligence (AI) and machine learning, software development, and cybersecurity. Deloitte warned that talent shortage in these key areas could undermine transformation efforts at a time when digitalisation is expected to accelerate internally with staff and externally with customers and business partners.
Moreover, difficulties in talent acquisition in cybersecurity could slow down insurers’ efforts to protect themselves and their customers against mounting ransomware attacks. Last year alone, the IDC reported that 37% of global organisations fell victim to ransomware and cyber-attacks. Deloitte advised that insurers should take a three-pronged approach to attract, train, and retain tech-savvy workers. These three-pronged approaches are: looking for talent with adaptable skills; upskilling existing staff; and developing a compelling value proposition for would-be tech-savvy employees to choose insurance over technology firms. ‘Fight for consumers’ Another hurdle that insurers are likely to face is the ongoing ‘fight
Superior tech and healthy margins in insurance service businesses will challenge the traditional approach of many insurers
for consumers with so-called insurtech disruptors. It is not a stretch to say that insurtech is the one driving digital innovations in the industry. Trust in insurtech is growing with investments increasing from $1b in 2004 to $7.2b in 2019 all the way up to $14.6b in 2021. The main advantage of insurtech is that it is able to solve customer pain points through digitally enhanced client solutions and experience because they are more focused on the marketing and distribution segments of the insurance value chain. McKinsey said this is a potential threat to incumbent insurers because it believes that a distinctive digital customer experience—from both insurtech and insurers—will be a prerequisite for industrybeating growth. “Beyond distribution, superior technology and healthy margins in insurance service businesses will challenge the traditional approach of many insurers to own the whole value chain—they will be forced to form partnerships or make outsize investments to keep up,” the McKinsey report said. Still positive expectations Despite this warning from the analysts, multiple reports have agreed that currently, the industry is headed for growth. In Deloitte’s 2022 Insurance Industry Outlook, most insurers expect that the growth drivers for the year will be the accelerating
Difficulties in talent acquisition in cybersecurity could slow down insurers’ efforts against ransomware attacks
INSURANCE ASIA
19
MARKET REPORT: STATE OF INSURANCE Global revenues by nonlife insurance product and region, 2021E
Source: McKinsey Global Institute; McKinsey Global Insurance Pools
economic recovery in key markets and digital technology investments, with around one-third of its 424 global respondents observing ‘significantly better’ revenues for the current year. This positive outlook was supported by an industry-wide forecast by Swiss Re Institute expecting a rise in demand for insurance worldwide, with consolidated premiums growing by 3.3% in 2021 and 3.9% in 2022. The forecast also surmised that leading the way for global growth will be China, whose demand for insurance is expected to grow by 9% this year. Breaking down the numbers further, global life insurance is still expecting benefit from heightened risk awareness from COVID-19 and should grow by 4% this year whilst global non-life is forecasted to have a modest growth at 3.7%. Through the storm To conquer the storm, insurers must make environmental, social, and governance (ESG) considerations a core feature of their business model. This circles back to making climaterisk considerations not just in the investment process but also in new product and service launches and underwriting processes. McKinsey suggested that insurers take the opportunity to broaden the relevance of the industry’s traditional risk transfer to explicitly address risk mitigation. “Five simultaneous actions 20 INSURANCE ASIA
Insurers that want to make ‘work from anywhere’ a reality must be aware of associated risks
can make this happen: stress-test total exposure against projected climate hazards; build resilience and rebalance portfolios; help organisations mitigate climate risk; create innovative products to address climate-related risk, and revise investment strategies,” McKinsey said. Deloitte and EY, meanwhile, agreed that the future of insurance will rely heavily on human and technology interaction. Deloitte in particular sees a lot of opportunities in artificial intelligence (AI). It explained in its report that many insurers are already increasing investment in AI. Deloitte sees AI is instrumental for enabling insurers to adopt a new business model, as well as helping insurance professionals in areas such as underwriting, pricing, marketing, and claims such as how Mitsui Sumitomo Insurance uses an AI-powered “agent support system”
Insurers could face recruitment challenges in several key areas
Source: The Deloitte Center for Financial Services 2022 Insurance Outlook Survey.
to better determine a customer’s potential need by analysing internal and external data. However, Deloitte warns that insurers must watch out for questions frequently raised by insurance regulators and consumer groups about the accuracy and fairness of AI-driven systems. In fact, in Deloitte’s survey, only 24% are currently training AI and machine learning programs to identify algorithmic biases and ethical dilemmas. “Insurers should be taking more proactive measures to ensure that automated decision making is equitable and fair to policyholders and stakeholders and does not result in compliance and reputational risks,” Deloitte said. For EY, technology should be used to create a flexible work environment for insurers. Research by EY showed that insurance workers are looking for a more flexible arrangement and are bound to quit if their needs aren’t met. Flexibility here pertains to the ability of the employee to be able to work at home or from anywhere and even at any time. Two out of three insurance workers in Asia expressed a preference for a remote working setup with 45% of Gen Z insurance employees demanding a remote work arrangement. “Insurers that want to make ‘work from anywhere’ a reality for as many employees as possible must be aware of associated risks and requirements relative to tax policy, social security schemes, immigration status, and pay and compensation,” EY said.
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INSURANCE: SPECIAL NEEDS CHILDREN
Great Eastern crafts insurance package for special needs children Upon the parents’ demise, the payout from the insurance goes to the children’s SNTC trust fund.
The Great Eastern Cares Term Plan multiplies the financial provisions that parents intend to leave for their children
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reat Eastern recently launched a collaboration with the Special Needs Trust Company (SNTC), a trust company for parents with special needs children, to create the Great Eastern Cares Term Plan, a specifically designed insurance for parents with special needs children. It is a basic insurance package crafted together with the trust that multiplies the financial provisions that parents intend to leave for their children after their passing. Talking with Insurance Asia, Great Eastern’s managing director of group marketing, Colin Chan, and head of propositions and portfolio management, Eddy Lim, explained how this collaboration came to be. Special needs Starting with S$5,000 initial capital to set up a trust with SNTC, parents 22 INSURANCE ASIA
of special needs children will be able to purchase the Great Eastern Cares Term Plan via the trust. The insurance package is a specially designed term plan in collaboration with the SNTC. It provides affordable coverage to parents with special needs children by helping multiply the financial provisions that parents set aside for their special needs children. Meanwhile, the SNTC trust will help safeguard the funds that parents intend to leave for their children after their passing and disburse for the child’s long-term care according to their wishes. It provides basic protection against death and terminal illness at an affordable premium and provides a lump sum payout which ranges between S$100,000 and S$300,000 upon the demise of the caregiver, to the SNTC’s trust
Insurance can help in the legacy planning for families with special needs children
account of the dependent. To become eligible for the plan, parents must first contact SNTC to set up a trust account. From there, SNTC’s social workers will work with parents to develop the best care plan for their child and the estimated amount of money that the parents should set aside to provide for their child’s long-term care. They can then purchase the Great Eastern Care Term Plan and the payout of this policy will be nominated automatically to the child’s SNTC trust account. From there, SNTC’s social workers will work with parents to develop the best care plan for their child and the estimated amount of money that the parents should set aside to provide for their child’s long-term care. They can then purchase the Great Eastern Care Term Plan and the payout
INSURANCE: SPECIAL NEEDS CHILDREN
Colin Chan
Eddy Lim Many parents with special needs children struggle to save for long-term care
of this policy will be nominated automatically to the child’s SNTC trust account. According to Colin, Great Eastern felt that the special needs community was underserved. There was still more that could be done to help parents with special needs children plan for the future. “We share a similar perspective with SNTC on how insurance can help in the forward/legacy planning for these families and are delighted to collaborate with them to make affordable insurance accessible to these parents,” Colin explained. Parents of special needs children wanted to have the assurance that there would be enough funds to support their children even if they are already gone. SNTC wanted to make sure that families, especially those with low incomes, could have peace of mind when it comes to their children’s financial security. Colin said they wanted Great Eastern to create an insurance product that would provide affordable coverage to parents with special needs and would afford them peace of mind for the future of their children. “The idea of actually multiplying the payout upon the parents passing will help the beneficiary a lot more than just relying on the trust account accumulating slowly. With the insurance, the money is better deployed and you get a higher
pay-off,” Eddy added. A first for Great Eastern According to Eddy, as far as they know this is the first time an insurer has partnered with a charity to make insurance affordable and accessible to help parents with special needs children. Many parents with special needs children struggle to save for long-term care for their children because their income is largely used to support the high cost of day-today needs. So it does not come as a surprise that many parents would struggle to raise the initial S$5,000 deposit to set up an SNTC trust. To address these financial
The special needs community is underserved
challenges, SNTC has launched the Gift Of A Lifetime (GOAL) Sponsorship Scheme to support eligible families by helping them put a plan in place to provide for their special needs children. Donations received under the GOAL campaign will provide eligible means-tested families with the initial deposit to set up an SNTC trust and also co-pay the premium of a term plan on the parent’s life. Sustainability approach Colin said Great Eastern is quite ready to do more collaborations like this as long as it is for the segments which are the most in need. This is all part of Great Eastern’s sustainability approach, which not only improves people’s lives but the environment, as well. Great Eastern, along with their employees and financial representatives recently raised funds to plant over 1,400 trees in support of NParks’ One Million Trees movement to bring nature back to the city as part of the Singapore Green Plan 2030’s City in Nature Pillar. “As we believe that environmental consciousness is best nurtured from young, this year we will partner with Zero Waste SG to engage multiple secondary schools to build advocacy and environmental awareness amongst students,” Colin said.
The SNTC trust will safeguard the funds that parents intend to leave for their children and disburse for the child’s long-term care
INSURANCE ASIA
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INSURTECH: NFT INSURANCE
How YAS MicroInsurance puts a price on non-fungible tokens
The insurtech firm is one of the first in the industry to insure NFTs.
YAS pioneered NFTY, an NFT insurance that protects digital assets from capital loss (Photo from YAS.com.hk)
I
nsurtech firm YAS MicroInsurance has done what many thought was impossible: putting a price on NFTs or nonfungible tokens—something a person cannot even get hold of. As one of the first insurtechs to give NFT insurance in 2021, Andy Ann, co-founder and CEO of YAS MicroInsurance revealed to Insurance Asia that pricing for NFT can be derived in a few ways, such as past transaction values. “First of all, NFT is a tangible asset, it is a smart contract, and we are insuring the smart contract on both theft and loss coverage. The pricing principle is similar to collectable insurance, which is priced in terms of premium and coverage. The premium pricing is based on risk levels calculations, and the coverage amounts up to x% of the asset is also standard practice. We target to lower 24 INSURANCE ASIA
Andy Ann
NFTs are the same as classic cars, therefore they needed an insurance solution
the premium when we scale up to a specific mass volume in the long run,” Andy said. In the An Emerging Sector: NFT Insurance article by Istanbul-based Gokce Attorney Partnership, nonfungible tokens are described as “blockchain-based cryptographic assets with unique identification codes and metadata that distinguish them from one another.” These are connected to each other through software codes in the form of what they call ‘smart contracts’. Embedded in these smart contracts are the terms and conditions to transfer NFTs. And of course, just like what Andy said, NFTs can represent both physical and digital items from works of art, real estate, music, or videos. The data processed on the field called “metadata”, determines what the NFT represents. According to Andy, all the NFTs
that they in YAS MicroInsurance have insured so far are on average 2-5 ethereum (ETH) with the bigger sizes ranging from 12-22 ETH. “As it’s a very new product, we have started to compute premiums at 20% of the NFT price and cover 90% of the purchasing price,” Andy added. Andy explained that the NFT market is currently growing at an accelerating rate. In 2020, the market was worth around $350m which ballooned to around a staggering $24b at the end of 2021. According to Andy, the initial idea of launching an insurance product for NFTs came from their partnership with several musicians, artists, exhibitions, and galleries. As the rapid growth in asset value of NFT grew, YAS believed that NFTs are the same as classic cars, therefore they needed an insurance solution. With that, YAS pioneered NFTY, a non-fungible token insurance that protects these digital assets from capital loss such as theft or malicious attacks on digital wallets and the digital marketplace. Unlike current insurance products that protect physical assets, YAS dedicated its policies to “digital collectables only” that are uniquely registered on the blockchain. As all the NFT data is stored on a public blockchain representing digital property rights, YAS’s contract insurance policies define the NFT values and fully insure at their market value. Need for protection Andy explained that this is the perfect time to launch this product because as the market for NFTs grows, so do attacks and thefts. “We have seen a handful of hacks such as the Banksy scam with fake banksy NFT was listed on Open Sea and sold for $350,000; hacks on Nifty Gateway; Evolved Apes; Bored Monkey Yacht Club phishing scam stole $2.2m; and most recently we
INSURTECH: NFT INSURANCE As the market for NFTs grows, so do attacks and thefts
With NFTY, 90% of the purchase price of the NFT is covered (Photo from YAS.com.hk)
have seen Monkey Kingdom also had a phishing link that over $1.3m worth of cryptocurrencies were stolen,” Andy explained. In an interview in January, Adam Morris, co-founder of NFT Club, an NFT educational site said there has been an increase NFT scams, like replicas and fake assets being sold. These scammers would often impersonate support staff of legit crypto marketplaces or wallets to fool people into revealing sensitive information regarding their NFTs. But how can something created digitally and filled with so many safeguards have such a high risk? It’s because when an NFT is created it has both a public and private key. The blockchain ledger is accessed by the public key and the private key serves as the proof of ownership. Insurance is something an NFT owner will be glad to have in case they lost their private key through fraud-related methods and to protect themselves from those selling fake and fabricated digital assets made to look like originals. With NFTY, 90% of the purchase price of the NFT is covered. However, theft coverage can only be activated if it is reported to local authorities within 24 hours of its theft or if the insured item is not stored in a secure location with at least two-factor authentication. NFTY also covers and pays administrative costs directly to the NFT minting platforms that offer such services for accidental loss. However, in case of disputes, the insured must deal with the platform
directly. Coverage for the loss will not be paid if it is not reported to the insurer within seven days of loss in order to activate the insurance policy. In order to activate the insurance policy, YAS will need to verify the policyholder and its wallet address. YAS’s KYC process includes the policy holder’s ID, email, and wallet address. Threats and future outlook Some countries still have a negative stance on cryptocurrencies. Singapore, for example, recently discouraged and warned cryptocurrency service providers not to promote their services to the public as “highly risky and not suitable for the general public.” Could this have a domino effect on NFTs? “As digital assets represent an increasingly large percentage of all investment portfolios over time, the
need for digital asset insurance and risk management, such as for NFTs, will only increase as well. We don’t see NFT as a form of currency, rather, we see it as an asset, similar to a watch, a classic car, or a piece of physical artwork,” Andy explained. Looking to the future, Andy believes that the NFT market would grow a hundred fold in the next few years representing the beginning for the insurance business of the market as artists, photographers, gamers, musicians, collectors, brands, and all kinds of curators come together. “We have overwhelming requests from all kinds of businesses calling us including marketplaces, platform owners, hot and cold wallets, exchanges, custodian, payment gateways and brands. All these companies will need to protect their clients in NFT investments, and protect themselves from the volatility of the crypto currency and the risk of thefts and attacks on NFT wallets,” Andy explained. For the moment, Andy sees NFTs eventually taking over the art industry because of its underlying blockchain technology. “Without a centralised team or even us as a centralised team to validate art and artists, scammers are likely to flood the market. So NFT insurance can definitely help to prevent scammers from stealing art and money. I think 2022 will be a hot market trend for NFT insurance,” Andy added.
Companies must protect their clients from the volatility of cryptocurrency and the risk of thefts and attacks on NFT wallets
INSURANCE ASIA
25
INTERVIEW
No man left behind: How insurtech is solving the underinsurance mess
Most problems in the industry seem to be ‘self-created’.
I
n its over 300-year-old history, the insurance industry has yet to bridge the underinsurance gap, especially in Asia—and the incumbents in the industry are to blame for making insurance inaccessible, an industry expert said. Talking with Insurance Asia, Igloo Co-founder and CEO Raunak Mehta said that, currently, the digital insurance penetration rate in Southeast Asia (SEA) is at 2% and is bound to grow to 10% over the next five years. Generally, this may sound good, but for Raunak, this is troublesome. SEA has the biggest smartphone users in Asia. In fact, smartphone penetration stood at 75% in the region. “This means that they have access to basic data. So why is the digital insurance penetration rate still at 2%? That tells you that there’s a massive accessibility issue,” Raunak explained. He then summarised the root of
the problem: an issue of supply and demand meaning that most products available in the market are either too pricey or too complicated and inflexible to the needs of those who need them the most. Most insurance products in the market do not cater to the people in the low- to middle-income population segment. And this segment, according to Raunak, takes up most of Asia’s population. In SEA alone, 60% to 65% of the population are low- to middle-income earners. Raunak explained that most of the insurance prices being supplied for low- to middle-income earners are over their financial capabilities. At the same time, these insurance products are offered through channels not frequently accessed by this segment of the population.
Why is digital insurance penetration rate still at 2%? There’s a massive accessibility issue
Insurtech’s role Insurtech’s role in the insurance space is clear: they create insurance
Most insurance products do not cater to the low- to middle-income population, which takes up most of Asia’s population
26 INSURANCE ASIA
products that target specific needs of consumers at low premiums. And how insurtechs, like Igloo, do it to create real-life applicable products for consumers to purchase. As an example, Raunak detailed how his insurtech firm Igloo and a digital partner created a policy for food delivery riders. In essence, food delivery riders are contract workers for food delivery services. This gives them a disadvantage of not having an employee-employer relationship. What Igloo did was identify the dangers that food delivery riders face every day, the first being income protection in case the rider, during his duties, is to be hospitalised for a number of days. It also created a policy that would cover repairs for motor vehicles and smartphones. This is a one-of-a-kind service that insurtech is able to provide. Igloo works together with a partner company, identifies a specific need
INTERVIEW Igloo’s number one goal is “insurance for all”
Raunak Mehta, Co-founder and CEO, Igloo
in the market, and provides it. An example is how Igloo helps Thailand telecom giant, AIS, develop its Phone Screen Protection insurance cover and Mobile 360. The cover encompasses repair services for more than 200 mobile brands and models. Another role insurtechs bring to the table to help fill the underinsurance gap is that it makes insurance a lot cheaper and therefore a lot more accessible for lower- to middle-income earners. According to a report by McKinsey, consumers are attracted to insurance products created by insurtechs and partners because they sometimes offer selective discounting based on the intersection of smart devices and risk-minimising behaviours from activities, such as exercising or even just going out for a drive. Insurtechs are also majorly focused on marketing and distribution. This enables them to solve customer pain points through a digitally enhanced client experience more efficiently than insurers. This is because, along the insurance value chain, 37% are active in distribution whilst 23% are in pricing. Within distribution, around 75% of insurtechs are focused only on enabling distribution by making products available to customers at their convenience, facilitating product comparison, and simplifying the purchasing process. A tech company first With Igloo dominating in SEA, their next target is the rest of Asia and the
world. Raunak said that as Igloo’s leader, he is aiming to reach their number one goal: insurance for all. “For the countries, we have already entered [into], we are planning to penetrate the markets more. Provide our superior technology, provide the wide range of insurance products that we can bring to the markets with our industry partners,” Raunak added. Insurance for all Raunak’s track record with Igloo since joining the company in 2018 has been abundant. He spearheaded the company’s entry into the Philippines, Vietnam, Thailand, Indonesia, Australia and Malaysia. whilst establishing partnerships with industry leaders such as Lazada, Shopee, Bukalapak, AIS, RedDoorz, foodpanda, Lotte Finance, and Ahamove across a range of insurance products. With more than 30 marquee partnerships and an ever-increasing regional footprint, Raunak said they are on track to achieve their goal of facilitating 5% of General Insurance Premiums in SEA over the next five years. In 2021 alone, Igloo’s insurance solutions helped underwrite over 75 million policies in Southeast Asia. These achievements are also acknowledged by their investors. In its last funding round, Igloo closed a $19m Series B funding round led by Cathay Innovation, a global venture capital firm, with participation from ACA and other existing investors including Openspace. This brings Igloo’s total fundraising to over $36m.
Igloo is currently busy with left and right partnerships in different markets in SEA. In Indonesia, Igloo worked together with one of the country’s top e-wallets DANA in creating Gamer’s Protection, targeting avid video gamers in Indonesia who worry about health risks associated with gaming. This was the second insurance product created by the two since the launch of Electronic Gadget Insurance in October 2021. The company is not just stopping with tech firms. It has also continued to grow from various partnerships with insurance firms. Most recently was its expansion in the Philippines where it signed up with local insurers like Etiqa, Malayan Insurance, PGA Sompo Insurance Corporation, and Mercantile Insurance, as well as 12 other commercial partners across finance, logistics, lifestyle, and travel sectors. Igloo’s most successful partnership is with the country’s top e-wallet provider GCash where it managed to offer microinsurance plans such as Online Shopping Protection cover, Gadget Insurance, and Pet Insurance to GCash’s 60 million users. “We are a tech company first and then comes insurance because we believe that using technology the right way [and] building the right infrastructure will help us scale faster and better than the competition and thereby bring a good value proposition in terms of good products and services to the end consumer,” he concluded.
Insurtechs solve customer pain points more efficiently than insurers
INSURANCE ASIA
27
INSURANCE RANKINGS: SINGAPORE
The top 50 insurers from Singapore gained $313b in assets
Singapore’s top 50 insurance firms reveal increase in assets Digital dominance and healthtech helped them mitigate losses.
T
he top insurers of Insurance Asia’s annual insurance rankings have their eyes dead set on digital dominance, healthtech, and environmental, social, and governance (ESG) practices. Incorporating these factors helped them mitigate potential losses from the looming threats of climate change and at the same time capitalising on growth opportunities presented in a net-zero economy. In Insurance Asia annual review of the insurance sector, the top 50 insurers from Singapore gained $313b in assets in 2020, a 17.22% increase from $267b in 2019. Insurers still saw their assets grow; however, some showed signs of a slower increase rate compared to 2019’s rankings. Great Eastern retained its spot at the top of the list in terms of assets at $69b in 2020, a 13.1% jump from $61b in 2019. AIA Singapore followed close behind at $58b, rising at nearly the same rate at 13.7% from $51b in last year’s rankings. Prudential Singapore maintained its third ranking with its assets stepping up by 13.3% from $45b to $51b. 28 INSURANCE ASIA
30% of Singaporeans are expecting to spend more on digital financial and healthcare services postCOVID
However, the rate of increase fell by a few points from its 19% increase from last year’s rankings. Meanwhile, NTUC Income, with an increase rate of 10% from $40b to $44b decreasing from its 14.1% growth rate in 2019, held on to the fourth spot. Rounding out the top five of the list is Manulife Singapore with $27b worth of assets in 2020, up from $19b in 2019. Digital dominance NTUC Income’s CEO, Andrew Yeo, said that digital-first insurance propositions will continue to gain traction. This is especially as digital consumers makeup 79% of Singaporeans aged 15 and above, according to a report by Meta. “There is a growing appetite for digital services with 30% of Singaporeans expecting to spend more on digital financial and healthcare services post-COVID. This will spark new demand for digital-first insurance offerings and insurance innovations that make insurance accessible and meet the needs of a growing digitalfirst population,” Yeo said.
Yeo said they have seen the sign since SNACK by Income, their lifestyle-based micro-insurance and investment platform, was launched in 2020. The take-up rate has been increasing with over 70% of SNACK customers being new. Allied Market Research, a global market research firm, said that the digital insurance market has the potential to reach US$279.51b by 2030, with the surge in demand for cost-effective platforms and personalisation of insurance products driving the growth of the global digital insurance market. However, time-consuming processes of digital transformation and privacy and security concerns restrain the market to some extent. On the other hand, an increase in the adoption of digital solutions presents new opportunities in the upcoming years—which Yeo believed should be taken advantage of. Insurers should consolidate learnings and experiences from the roll-out of digital-first insurance offerings locally to capture the firstmover advantage by bringing these innovations to overseas markets. However, AIA Singapore CEO Wong Sze Keed has this to say: “It is important to treat technology as an enabler and not a replacement to human touch. Digitalisation strategies should be people-first so that customers can get a personalised interaction and experience that they greatly appreciate, especially when it comes to making purchasing decisions for life insurance.” According to a research by Deloitte, although businesses are developing online channels and reducing in-person services, human interaction will continue to be an asset and suggested that real-time response and interaction capabilities be included in digital platforms in order to enhance user experience. Concern for health grows There also has been an increase in health awareness amongst Singaporeans since the pandemic. A recent survey by Prudential found that around 61% of the respondents use personal health technologies. According to Goh Theng Kiat,
INSURANCE RANKINGS: SINGAPORE chief customer officer of Prudential Singapore, insurers can take advantage of rising health enthusiasts by establishing stronger partnerships with healthtech providers to develop more innovative initiatives and projects to promote healthier lifestyles. For example, Prudential plc recently established a partnership with Smarter Health to enable users of the Pulse app to access a directory of specialist doctors and health screening services and to make appointments online. As concerns on health rise, life insurance also saw positive growth last year with new business increasing by 38% year-on-year, according to the latest numbers by the Life Insurance Association of Singapore. Sze Keed added that this must be because consumers have realised how unsettling it can be to be under-protected, which is why Singaporeans are becoming more proactive in seeking insurance solutions for their peace of mind. Climate impact and ESG In a study by Blackrock, nine out of 10 insurers globally are worried over the impact of climate risks. According to Charles Hatami, global head of the financial institution group and financial markets advisory at BlackRock, an overwhelming majority of insurers view climate risk as investment risk and are positioning portfolios to mitigate the risks and capitalise on the transformational opportunities presented by the transition to a net-zero economy. A climate risk report also tallied that the Asia Pacific experienced an overall economic loss of US$50b of which US$9b were insured. Globally natural disasters cause around US$120b of which US$110b were insured. The threat of climate change is pushing insurers to adopt more ESG practices. According to an industry poll from August to November 2021 by GlobalData, 21.6% said that mitigating long-term risks caused by climate change is the main driver for the adoption and integration of ESG. GlobalData Senior Insurance Analyst Beatriz Benito said that the challenging outlook of climate risks will continue to encourage insurers, especially those who have yet to
embrace ESG into their corporate values and operations. “The increasing frequency and severity of certain natural catastrophes have caused insurers to rethink their approach to underwriting coverage. Asia is one of the most exposed regions to the damaging impacts of climate change including intense heat waves, drastic increases in heavy rain and temperatures leading to diseases, and extreme weather resulting in floods and droughts. Insurers should rethink their strategies and approach to undertake responsibility and action to help tackle challenging effects of climate change,” AIA Singapore’s Sze Keed added. Meanwhile, for Prudential Singapore’s Goh, insurers can do their part to mitigate the effects of climate change by providing more options for people to participate in sustainable investments and supporting the inclusive transition towards a low carbon economy. NTUC Income’s Yeo said that it’s important for insurers to assess climate-related risks to their business and understand where their material impact lies. He said that by understanding their carbon footprint across their lines of businesses, insurers can then make an informed assessment on the type and extent of actions that they can take to influence corrective behaviours and drive change internally and externally. The future of insurance With the insurance industry continuing to shift and change, these industry veterans shared their insights on what changes insurers can expect in the future. For NTUC Income’s Yeo, they believe insurance will increasingly become lifestyle-driven. That’s why they have begun to cater to today’s digital-first consumers with their products and services to make insurance more accessible, available, and affordable. Additionally, insurance players should expect increased competition, brought about by more partnerships between insurance firms and tech companies. Yeo also predicted that there will be a growing emphasis on ESG practices in the industry as
Wong Sze Keed
Goh Theng Kiat
The increasing frequency and severity of certain natural catastrophes have caused insurers to rethink their approach to underwriting coverage
climate change increasingly becomes a global priority with insurers doubling down on their efforts to drive sustainable growth. For Prudential Singapore’s Goh, he believes that life insurance is changing from being traditionally about mortality protection to getting a more active role in customers’ health and wellness needs. He added that as Singapore’s ageing population is expected to rise to 25% of the population by 2030, the chances of falling ill and requiring medical treatment rises which insurers should be prepared for. Goh also believes that there will be greater integration of artificial intelligence in services and solutions as customers demand more near realtime service in areas such as claims processing or having customer queries answered at any time. Meanwhile, AIA Singapore’s Sze Keed agreed that insurers would likely leverage more technologies and adopt insurtech to create higher value creation for customers however they must still place greater emphasis on customer centricity and ESG matters at the heart of their customer operations and strategy. “When a company has a peoplecentric focus, it will open up an exciting stream of possibilities in fulfilling a company’s brand promise and business objectives,” Sze Keed said.
Andrew Yeo, CEO, NTUC Income
INSURANCE ASIA
29
INSURANCE RANKINGS: SINGAPORE 2020 TOTAL ASSETS*
2019 TOTAL ASSETS
2021 RANKING
INSURANCE COMPANY
1
GREAT EASTERN LIFE
LIFE
$69b
1
$61b
2
AIA SPORE
LIFE
$58b
2
$51b
Classification
2020 RANKING
3
PRUDENTIAL
LIFE
$51b
3
$45b
4
NTUC INCOME
LIFE
$44b
4
$40b
5
MANULIFE
LIFE
$27b
5
$19b
6
AVIVA
LIFE
$11b
6
$10b
7
HSBC INSURANCE
LIFE
$11b
8
$7b
8
TOKIO MARINE LIFE
LIFE
$11b
7
$8b
9
AXA INSURANCE
LIFE
$5b
9
$4b $4b
10
TRANSAMERICA
LIFE
$3b
10
11
ETIQA PL
LIFE
$3b
12
$1b
12
QUILTER INTERNATIONAL
LIFE
$2b
11
$2b
13
NTUC INCOME
GENERAL
$2b
13
$1b
14
SINGAPORE LIFE
LIFE
$1b
27
$386m
15
SWISS LIFE
LIFE
$1b
14
$1b
16
FRIENDS PROVIDENT
LIFE
$1b
15
$997m $834m
17
MUNICH RE
LIFE
$924m
17
18
FIRST CAPITAL
GENERAL
$920m
16
$866m
19
ZURICH INTERNATIONAL
LIFE
$877m
18
$830m
20
ST. JAMES'S PLACE
LIFE
$847m
20
$608m
21
MSIG
GENERAL
$592m
21
$568m
22
CHINA TAIPING
LIFE
$550m
36
$219m
23
AXA INSURANCE
GENERAL
$550m
19
$615m
24
INDIA INTERNATIONAL
GENERAL
$542m
22
$548m
25
AIG ASIA
GENERAL
$528m
23
$538m
26
CHINA LIFE
LIFE
$510m
30
$348m
27
TOKIO MARINE INS
GENERAL
$448m
26
$426m
28
LIBERTY INSURANCE
GENERAL
$408m
28
$367m
29
CHUBB INS
GENERAL
$404m
25
$430m
30
CHINA TAIPING
GENERAL
$386m
29
$353m
31
LLOYD'S ASIA SCHEME
GENERAL
$350m
31
$294m
32
UTMOST WORLDWIDE
LIFE
$297m
35
$220m
33
GEG
GENERAL
$269m
33
$237m
34
UOI
GENERAL
$238m
32
$258m
35
QBE INS
GENERAL
$232m
34
$224m
36
XL INS
GENERAL
$227m
40
$195m $213m
37
SOMPO INS
GENERAL
$219m
37
38
ALLIED WORLD
GENERAL
$217m
38
$208m
39
SWISS RE ASIA
DIRECT
$214m
24
$432m
40
CIGNA EUROPE
GENERAL
$191m
42
$166m
41
ALLIANZ GLOBAL C&S
GENERAL
$185m
41
$184m
42
FACTORY MUTUAL
GENERAL
$179m
45
$161m
43
RGA INTL
DIRECT
$174m
50
----
44
SINGAPORE RE
GENERAL
$173m
39
$202m
45
ETIQA PL
GENERAL
$161m
44
$161m
46
CHINA REINSURANCE
DIRECT
$156m
49
$50m
47
COFACE
GENERAL
$155m
46
$157m
48
ASIA CAPITAL RE 2
GENERAL
$155m
43
$164m
49
BERKSHIRE
GENERAL
$132m
47
$129m
50
LIBERTY SPECIALTY SINGAPORE
GENERAL
$129m
48
$129m
TOTAL
$313b
*Derived from the Monetary Authority of Singapore’s audited statistics for 2020 30 INSURANCE ASIA
$267b
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Established in 1996, Pru Life UK is the pioneer of insuravest, or investment-linked life insurance products, in the Philippines and is one of the first life insurance companies approved to distribute US dollar-denominated investment-linked life insurance policies in the country. Since its establishment, Pru Life UK has expanded its reach to over 190 branches in the Philippines, with the biggest life agency force of about 35,000 licensed agents. The company ranked first (1st) among the country’s life insurers based on the Insurance Commission’s Full Year 2021 rankings in terms of new business annual premium equivalent. Pru Life UK is headquartered in Uptown Bonifacio, Taguig City. Pru Life UK and Prudential plc are not affiliated with Prudential Financial, Inc. (a company whose principal place of business is in the United States of America), Prudential Assurance Company (a subsidiary of M&G plc, a company incorporated in the United Kingdom), Philippine Prudential Life Insurance Company, Prudentialife Plans, Inc. or Prudential Guarantee and Assurance, Inc. (all Philippine-registered companies). Pru Life UK is a life insurance company and is not engaged in the business of selling pre-need plans. INSURANCE ASIA 31
INSURANCE RANKINGS: HONG KONG
Health and wellness will continue to be a trending focus in Hong Kong’s insurance industry
Time for a comeback? Hong Kong’s top 50 insurers show a 9.75% surge in assets Health and wellness products still remain a priority for the industry.
W
ith the skies clearing, Hong Kong consumers will still make sure they have an umbrella handy—something Hong Kong insurers took note of as they ready health and wellness products for 2022. Insurance Asia’s 2022 Insurance Rankings has revealed that the industry’s top 50 insurers total assets surged by 9.75% to HK$709b in 2020 from HK$646b. AIA International continued to retain its number one spot in the rankings despite its total assets declining to HK$126b in 2020 from HK$141b in 2019. This was also the case for Prudential (HK) Life. With its total assets dropping from HK$111b to HK$92b, it still managed to retain the second spot in 2021’s rankings. China Life took the third spot with HK$67b in assets with Manulife following close behind at fourth with HK$63b. Completing the top five is HSBC Life at $54b. Going by the numbers More Hong Kongers are starting to act upon their future, instead of just
32 INSURANCE ASIA
More Hong Kongers are starting to act upon their future, instead of just worrying about it
worrying about it. This has been evident in Hong Kong’s Insurance Authority’s (IA) annual report with the Individual Life business remaining to be the dominant line in the business, making up HK$458.5b or around 87.9% of total long-term business. The report also saw a modest rise in total office premiums for in-force long-term business by 2% to HK$521.4b in 2020. What probably slowed down the long-term business is the 20.9% decrease in office premiums for new individual life business to HK$119.6b in 2020, including HK$106.8b from Individual Life (NonLinked) business and HK$12.7b from Linked business, which recorded a decrease of 23.4% and an increase of 8.8%, respectively. The total number of new policies decreased by 20.8% to 1 million in 2020. Office premiums for the new Individual Annuity business decreased by 36.3% to HK$13.3b. Meanwhile, the general insurance market performed admirably despite the considerable challenges in the past two years. Total gross written premiums recorded a growth rate
of 8% to HK$59.8b in 2020. Overall underwriting profit hit HK$2.3b, a major increase from HK$869m back in 2019. The IA said that the biggest contributor to the general insurance market’s growth was property damage, general liability, and pecuniary loss business. Rate increase and new business continued to fuel property damage and general liability business which both showed double-digit growth of 17.6% and 10.4% each. Upward adjustment of the maximum property values for the Mortgage Insurance Programme propelled forward mortgage insurance business, driving an upsurge of 57% in the Pecuniary Loss business. The pandemic, however, took its toll on direct sales of medical and travel insurance and had dampened the accident and health business, which saw a decline of 3.5% in 2022. Health and wellness Despite challenges in sales of medical insurance, however, HSBC Life Hong Kong CEO Edward Moncreiffe said that health and wellness will
INSURANCE RANKINGS: HONG KONG continue to be a trending focus in 2022. Moncreiffe said that customers see health across three dimensions, namely physical, mental, and financial health. He added that this was supported by a global study they conducted last year which saw eight out of 10 believe that they need to be both physically and mentally healthy to enjoy their financial wealth. This was seconded by Damien Green, CEO of Manulife Hong Kong and Macau, adding that retirement funding needs in Hong Kong remain huge, as well. “Today around 30% of total health care expenditure in Hong Kong is ‘out of pocket’ which represents the big job on our hands to properly insure our community,” Green said. For Green and Manulife, they are also preparing for an influx in demand from mainland Chinese residents for health and retirement insurance solutions. According to Manulife’s recent customer research, Chinese mainlanders in the Greater Bay Area are eager to visit Hong Kong, with 70% of respondents saying they plan to purchase insurance products whilst in the city. 2021 in a nutshell In summing up 2021 for HSBC Life, Moncreiffe said it has been a challenging year for the whole industry, with COVID-19 waves persisting throughout and international borders largely closed. “Despite this, HSBC Life demonstrated extremely resilient performance with our Annualised New Premiums and Value of New Business growing 20% and 34%,
respectively. As the Hong Kong population continues to adjust to new ways of living as a result of COVID-19, our strategic investments in digital propositions have continued to yield positive results,” Moncreiffe said. For Manulife, it has been a busy year as they report a 17% increase in core earnings in 2021 compared to 2020. “Our leading high-value Agency franchise continued to be a key contributor to our strong results, accounting for 66% of total annualised premium equivalent sales. On top of this, we achieved leading growth in our overall number of agents last year. We had more than 11,600 agents by the end of the year, representing 9% growth over 2020,” Green said. Looking ahead Moncreiffe said that this year, HSBC Life will be gearing up to tackle the aftermath and uncertainties caused and left by the pandemic. “We expect this will continue to manifest in multiple ways. It will continue to emphasise the need for operational resilience, it will change the way that customers look to buy and service their insurance policies, and it will increase the expectations that customers have for their insurers to be agile, always-on, fair and transparent,” Moncreiffe added. Inflation is also a growing concern. Moncreiffe said there will be entire generations of savers who for the first time are exposed to wealth-erosion effects of inflation. “Life insurers, and their intermediaries, will need to anticipate this fast, help their customers understand how to plan financially
Edward Moncreiffe
Damien Green
There will be entire generations of savers who, for the first time, are exposed to wealth-erosion effects of inflation
Inflation is a growing concern. Life insurers must anticipate this fast and help their customers plan financially
in such a climate, and make sure that they can offer long-term savings and retirement solutions that protect against these risks,” Moncreiffe added. Moncreiffe said HSBC Life is in the business of making promises and they would continue to deliver by meeting the health, protection, retirement, and legacy needs of their customers. “We write High Net Worth life insurance coverage to US$100m per individual, and yet we also provide term coverage that can be as low as below HK$2 per day. It is this ability to serve the needs of all segments of Hong Kong society that keeps us close to our customers and will ensure that we stay at the vanguard of exciting new product developments in 2022,” Moncreiffe explained. 2022 and beyond Meanwhile, Manulife Hong Kong is arming itself to be ready for the upcoming strong demand from mainland Chinese visitors. Green said they accelerate investments in Hong Kong and Macau by enhancing their customer service and upgrading their self-serviced digital platform. They are also aiming to hire more agents with knowledge and connections in the mainland to better capture business prospects in the GBA areas. “Once the border with mainland China reopens, we are well-prepared to serve our customers across the region by ensuring their access to high-quality health protection and retirement offerings,” Green said. Though the aftermath of the pandemic will remain a challenge, Manulife Hong Kong continues to make preparations such as being on track with its HK$400m investment in 2021 and 2022 to further transform its digital applications for its agents and customers as well as improve virtual face-to-face interactions with customers. “Manulife is the longest continuously operating life insurer in Hong Kong today, and this year we are celebrating our 125th anniversary in the city. Over the years, as we navigated the ups and downs together with the city, we are proud of our longstanding commitment to Hong Kong’s development and we will continue to cement Manulife as a household name in the city,” Green said. INSURANCE ASIA
33
INSURANCE RANKINGS: HONG KONG 2021 RANKING
INSURANCE COMPANY
Classification
2020 TOTAL ASSETS*
2020 RANKING
2019 TOTAL ASSETS
1
AIA INTERNATIONAL
LIFE
$126b
1
141b
2
PRUDENTIAL (HK) LIFE
LIFE
$92b
2
111b 76b
3
CHINA LIFE
LIFE
$67b
3
4
MANULIFE (INT'L)
LIFE
$63b
5
59b
5
HSBC LIFE
LIFE
$54b
4
59b
6
BOC LIFE
LIFE
$39b
6
38b
7
SUN LIFE HONG KONG
LIFE
$32b
11
16b
8
AXA CHINA (BERMUDA)
LIFE
$30b
7
30b
9
FWD LIFE (BERMUDA)
LIFE
$28b
-
-
10
TPLHK
LIFE
$20b
10
16b
11
HANG SENG INSURANCE
LIFE
$18b
8
21b
12
FTLIFE
LIFE
$13b
12
12b
13
YF LIFE
LIFE
$10b
13
11b
14
BUPA
GENERAL
$10b
20
4b
15
AXA GENERAL
GENERAL
$9b
17
4b
16
BEA LIFE
LIFE
$8b
14
7b
17
CTPI(HK)
GENERAL
$6b
23
3b
18
FWD LIFE (HK)
LIFE
$4b
9
21b
19
HONG KONG LIFE
LIFE
$4b
25
2b
20
CHUBB LIFE
LIFE
$4b
16
5b
21
AIA INTERNATIONAL
GENERAL
$4b
30
2b
22
AXA CHINA (HK)
LIFE
$4b
19
4b
23
BOC GROUP INSURANCE
GENERAL
$4b
27
2b
24
GENERALI
GENERAL
$3b
33
1b
25
SWISS RE (ASIA)
GENERAL
$3b
-
-
26
QBE HKSI
GENERAL
$3b
35
1b 4b
27
ZURICH INSURANCE
GENERAL
$3b
24
28
TLIC
LIFE
$3b
-
-
29
AIG INSURANCE HK
GENERAL
$3b
26
2b
30
BLUE CROSS
GENERAL
$3b
34
1b
31
FUBON LIFE HONG KONG
LIFE
$3b
18
4b -
32
HKMC ANNUITY
LIFE
$3b
-
33
CIGNA WORLDWIDE GENERAL
GENERAL
$3b
-
-
34
LIBERTY INT'
GENERAL
$3b
-
-
35
AXA CHINA (HK)
GENERAL
$2b
19
4b
36
ASIA INSURANCE
GENERAL
$2b
-
-
37
PRUDENTIAL (HK) GENERAL
GENERAL
$2b
39
1b
38
TPRE
GENERAL
$2b
-
-
39
TARGET
GENERAL
$2b
-
-
40
BLUE
LIFE
$2b
45
879m
41
CHUBB INSURANCE
GENERAL
$2b
32
2b
42
ALLIED WORLD
GENERAL
$2b
43
1b
43
UTMOST WORLDWIDE
LIFE
$2b
-
-
44
ZURICH INTERNATIONAL
LIFE
$2b
29
2b
45
MSIG INSURANCE
GENERAL
$2b
41
1b
46
LLOYD'S
GENERAL
$1b
-
-
47
SUN HUNG KAI
GENERAL
$1b
-
-
48
AGCS SE
GENERAL
$1b
44
929m
49
AIA (HK)
LIFE
$1b
40
1b
50
AETNA
GENERAL
$1b
-
-
TOTAL
709B
*Derived from Hong Kong Insurance Authority’s audited statistics for 2020
34 INSURANCE ASIA
CORPORATE SUSTAINABILITY ATTAINED THROUGH SERVICE EXCELLENCE
Corporate Sustainability
Asia Responsible Enterprise Awards
Achieve Glory and Excellence World's Top 100 Most Valuable Insurance Brands Brand Finance Insurance 100 2020
Social Inclusion Award
Na�onal Recogni�on
Only One Awarded in the Insurance Industry
Na�onal Brand Yushan Award
8 Awards from The Asset
IDC Digital Transforma�on Awards
Best Life Insurance Brand, Taiwan 5 awards from Micro Insurance Contest
Financial Supervisory Commission Insurance Contest 2020
Best Digital Insurance Experience and Digital Insurer of the Year, Taiwan
New Insurance Product and Claims Ini�a�ve of the Year, Taiwan
ESG Investor of the Year for Insurers and Insurance Investor of the Year, Taiwan Editors’ Triple Star
Investor of the Year- Insurance Company, and Green Project of the Year, Asia Pacific Green Project of the Year, Taiwan
The Asset Triple A Sustainable Inves�ng Awards 2020
Brand Finance Insurance 100
Digital Innova�on
Global Brands Awards 2020
Taiwan Corporate Sustainability Awards 2020
The Asset Triple A Digital Awards 2020
Top 100 in the world
Insurance Asia Awards 2020
The Asset Triple A Infrastructure Awards 2020
Taiwan Life Insurance Co., Ltd. www.taiwanlife.com
INSURANCE ASIA
35
ANALYSIS: CLIMATE RISK
Climate risk is burning billions and Asia remains vulnerable In 2021, the costliest recorded natural disaster in the region topped $2b.
N
atural disasters are definitely inevitable, but what continues to worry insurers is that these catastrophes are costing them a heftier price tag than ever. In Aon’s Weather, Climate, and Catastrophe Insight, global economic losses for 2021 alone were estimated to be around $343b with only $130b insured. This marks the seventh costliest year on record, with a protection gap of at least 62%. Whilst this is not a recordbreaking year, far below the peak losses of $615b in 2011 and $532b in 2017, it was still above the average of $272b and the median of $265b of the 21st century. Comparing the last decade, between 2011 to 2020, economic losses were just 4% higher than the average and 15% higher than the median. Economic losses were found to be solely resulting from weather- and climate-related events defined as atmospheric-driven phenomena, totalling $329b. This is the thirdhighest loss on record. Aon pointed out that driving the cost of these economic losses that topped the $20b global
Our interconnected and interdependent global system is incredibly fragile and vulnerable
threshold were just four individual environmental events, namely Hurricane Ida, the July Flooding in Europe, the Summer Season Flooding in China, and the February Polar Vortex in North America. These four economic losses collectively topped $300b. If this continues, it would be impossible for insurers to properly cover these losses without a hike in premiums. Asia’s vulnerability Speaking at the Willis Towers Watson (WTW) Asia Pacific Risk Virtual Conference, Gillian Tan, Assistant Managing Director of the Development & International Group of the Monetary Authority of Singapore, stressed the urgent need for climate action, especially in Asia, as it is geographically prone to natural catastrophes. “The costliest natural disaster in 2021 was the flood in Henan province in July which resulted in a total economic cost of over $2b as of September last year, and this number is only expected to head north,” Tan said. In Aon’s report, economic loss from flooding events between
The costliest natural disaster in 2021 was the flood in China’s Henan province with a total economic cost of over $2b
36 INSURANCE ASIA
1 June to 30 September 2021 in China stood at $30b. This makes it the number one most significant natural disaster event in 2021 in the Asia Pacific (APAC). Aon said flooding events make up 55% of the economic losses in 2021, with China flooding events being the most significant natural disaster event for the second year in a row. What is even more alarming is that, out of the $30b, only $2b were logged as insured losses. Out of the $78b of economic losses, only $9.4b or around 12% were covered by insurance. This highlights the underinsurance gap in the region. “Amidst this sobering backdrop, what has been taken for granted all along is now clear: our interconnected and interdependent global system is incredibly fragile and vulnerable,” Tan said. Losses in 2022 In Aon’s Global Catastrophe Recap, global preliminary loss for the first quarter of 2022 is now at $32b, with public and private insurers covering around $14b. “The first quarter is typically the quietest of the year, though 2022 marked the sixth consecutive year to record more than $10b in insured losses,” Aon said. What contributed most to the global loss is fluctuations in temperatures and precipitation influenced by the continued effects
ANALYSIS: CLIMATE RISK capabilities, which all governments and corporates need to urgently develop, there will be opportunities for insurers and reinsurers to help build societal and corporate resilience and manage ever-present risks,” Tan said.
Global economic losses
Gillian Tan
Source: Aon (Catastrophe Insight)
of La Niña across the central and eastern Pacific Ocean. These influences resulted in notable hazard events, including prolific and record-setting rainfall along Australia’s East Coast, continued severe drought conditions in parts of Africa, South America, and the western United States, and an earlier start to severe weather season in the United States. APAC logged the highest percentage of first quarter economic losses at more than $15b, followed by Europe, Middle East, and Africa at $8b and the US at $6b. Aon predicts that economic loss totals will continue to develop in the weeks and months ahead due to many large-scale and impactful climate events in March. Demand for resiliency In her speech, Tan said there is a demand for resilience capabilities, as well as opportunities for the insurance and finance sector amidst the rising cost of climate calamities. The obvious danger that climate risk brings is that it will result in structural shifts to many firms’ riskreturn profiles. “More frequent catastrophic events can cause severe impairment to business models, lead to substantial income and productivity losses, and make certain tail risks uninsurable, or insurable only at unaffordable rates,” Tan explained. According to a research released by Swiss Re Institute, it was estimated that if no action
on climate change is taken, Asia’s economy would be 26% smaller in 2050 whilst ASEAN’s economy would shrink by 37%. “Asia’s insurance markets are growing, but the pace of growth will not be able to match the region’s growing protection needs from natural catastrophes. A distinct lack of high quality and standardised data to accurately quantify risk exposure for climate risks or to build reliable models also remains a key challenge,” Tan said. Tan pointed out that countries, communities, and corporations are keen to build resilience capabilities across multiple dimensions – human, financial, operational, and technological. These are done through different methods, such as partnerships between insurers and tech players, to help widen the reach of insurance through a more accessible medium. “Beyond these resilience
Some of these sectors form a sizeable part of global and Asian economies but are not inherently ‘green’
Green financing For Tan, it is not enough to close the underinsurance gap. Insurers, themselves, must shift focus to greener financing. Insurers provide risk financing, which is instrumental to the functioning of key sectors and infrastructure, including the energy and chemicals, aviation, and shipping sectors. “Some of these sectors form a sizeable part of global and Asian economies but are not inherently ‘green’. Risk financing and insurance can be an important lever in engaging the relevant stakeholders and supporting a progressive low-carbon transition of these sectors,” she said. Tan urged insurers to work closely with their clients in these sectors as part of the underwriting process. This will help them better understand and engage them on climate risk exposures, transition plans and pathways, and support them with risk management analytics and insights. “Ideally, insurers should journey alongside clients so that they make concrete and progressive improvements in their environmental performance over time,” Tan said.
Top 5 most significant events in Asia Pacific
Source: Aon (Catastrophe Insight)
INSURANCE ASIA
37
INSURTECH WATCH: GOALSMAPPER
Why this SG-based fintech firm is ending the pen-and-paper era of financial advisors GoalsMapper used its cloud-based platform to support more than 80,000 financial advisors.
G
oalsMapper, a Singaporebased fintech software-asa-service firm, said that the pen-and-paper era for financial advisors and financial consultants should be over and done with as traditional methods lack the accuracy to cater to a client’s needs. This was based on the experience of GoalsMapper co-founder Dato’ Wayne Chen. 14 years ago, Wayne was an independent financial advisor. During those times when he was offering his services to clients, he found it difficult to prepare materials that would accurately capture a client’s financial snapshot and instead found himself relying on a standardised presentation and script. “Due to the lack of clarity of a client’s situation, the product that I recommend to them during a meeting might not be the best fit for them. What I have observed is that I will require more meetings with a client before getting the right solutions to them as I will require more time on the side to prepare calculations and materials in order to help clients visualise the possibilities in the solutions,” Wayne explained during a quick chat with Insurance Asia. He quickly identified the problem: a lack of real-time digital tools. This was the spark that motivated him to build GoalsMapper. The platform To address and solve the traditional problems of financial advisors, GoalsMapper created three important products for its more than 80,000 users called GM Planner, GM Brand, and GM Connect. The GM Planner is a financial planning tool with goals and scenarios projections via interactive charts that allow clients to stress test and visualise their portfolios. This means financial advisors can create a simulation of how clients’ can achieve their financial goals. “GM Planner allows financial providers personalised financial 38 INSURANCE ASIA
To address the traditional problems of financial advisors, GoalsMapper created the GM Planner, GM Brand, and GM Connect
Dato’ Wayne Chen
There is an urgent need to close the financial literacy gap for normal everyday people and the financial consultants
advisory, taking into consideration the client’s goals and different life scenarios,” Wayne explained. Meanwhile, GM Brand was created to help the image of the financial advisor. It helps them create personalised websites in just a few clicks. Wayne added that GM Brand was tailor-fitted for financial advisors to help them enhance their brand and image. The last product, GM Connect, helps financial advisors maintain communication with their clients. It helps automate post-sales engagements like premium reminders and policy reviews. GM Connect is essentially a task manager that stores notes of appointments with clients, helps financial advisors remind clients about premium dates, and stay in communication with clients. An interesting product they created was the recently launched GM Rewards. This product was created through the focus group GoalsMapper has created to get more ideas from platform users on how to improve their product. GoalsMapper found out that a lot of financial advisors have difficulty
giving tokens of appreciation to clients, especially on holidays. This is especially true for financial advisors who have between 100 to 300 clients. “We came up with GM Rewards, where financial advisors can easily give gifts to their clients. The feature allows financial advisors to collate their gifting orders, customise it for clients, and coordinate delivery as well,” Wayne explained. Expansion Every year, since its inception, GoalsMapper expanded its reach from Malaysia, Thailand, and the Philippines. Most recently, it landed in Indonesia. Wayne said they see a lot of potential for its Indonesian expansion because of its low insurance penetration rate at 3.23% and a financial literacy rate of 15.8% in the underserved market. “There is an urgent need to close the financial literacy gap between normal everyday people and the financial consultants. We see a potential 600,000 life insurance agents that the platform could support,” Wayne added.
INSURTECH: EMBEDDED INSURANCE
How embedded insurance is cutting out the middleman Without third-party providers in the picture, insurance is made more affordable by boring down on a specific need.
A
s a businessman with several offices in different countries, Alex was a frequent flyer—and things like flight delays due to weather and health risks are something he would like to avoid. Sometimes, Alex has to contact several insurers just to get health insurance because they do not cater to the specific country he has to visit. But what if insurance was sold as a set that came with the plane ticket he was buying? That is what embedded insurance is about. Chatting with Insurance Asia, Arijit Chakraborty, the Cover Genius’ Managing Director for Asia Pacific, described embedded insurance as a cover that is bundled together with another product. “It’s like buying an aeroplane ticket, [at the same time], I am sold an insurance, not only the conventional travel insurance, I’m also sold a COVID-19 protection insurance, and a flight delay insurance. In one click, I can buy that and it’s a more seamless and convenient journey than going to a third-party website and buying the same cover,” Arijit said. It is a model that anticipates the customers’ needs by offering tailormade and relevant coverages at the point of sale. Customer demand Arijit believes that demand for embedded insurance, especially in Asia, has increased because customers are looking for more hyper-relevant, contextual, and honest pricing in their insurance products. In fact, earlier this year, Cover Genius sold more than 10 million insurance policies and saw a whopping 1,900% increase insurance in policies sold for retail partners such as Shopee and Flipkart, with a 430% increase in Asia alone. This demand is the reason that Arijit believes that the future of insurance distribution lies in embedded insurance. In his experience as part of senior management in various insurance
Arijit Chakraborty
In embedded insurance, there is no intermediary in the picture
agencies in previous jobs, Arijit said that because most insurance products get distributed by intermediaries, products are mostly sold on the basis of commissions. “[In embedded insurance], there is no intermediary in the picture. Let’s say you are buying something and you want to protect yourself from contingencies. With embedded insurance, when you are making the purchase you are getting protection with a simple, straightforward policy. And this is disrupting the conventional way of insurance distribution,” Arijit said. This is another point on why embedded insurance is believed to be the future of distribution. According to a study done by Cover Genius, 60% of customers prefer to buy protection from their favourite online brands. One platform Leveraging on the increasing demand for embedded insurance, Cover Genius used its global distribution platform, XCover, to further help businesses add protection coverage as part of their product offerings for their clients and customers. XCover has an end-to-end value chain of insurance. Using XCover, partners can have Cover Genius do the heavy lifting such as risk management, pricing, underwriting,
issuance of policies, operations, and claims management. It is an all-inone tool for their partners. They also work with partners to design products to offer customers. But how does this help the partners of Cover Genius solidify their brand’s position? Arijit said that with embedded insurance, businesses can assure that their customers are protected all the time. This gives customers peace of mind when dealing with the brand, increasing trust between the two, as well as securing another revenue stream for their businesses. Second, it increases brand value. Including covers for products and services will imprint in the minds of consumers, making them associate that brand with protection. The third is product differentiation. By embedding insurance in another product, businesses can be differentiated from their competitors. “For example, you are buying a laptop on Shopee. You can see that they are offering insurance for that laptop but don’t see it from other e-commerce platforms. You may tend to buy the same laptop from Shopee because you’re getting a chance to buy the protection,” Arijit explained. In another study by Cover Genius, approximately 66% of consumers say that having the option to get insurance at the checkout would entice them to spend more, and even buy a higher volume of goods. Once insurance is bought, there is a high chance of insurance being repurchased again in the future, with 82% of people who bought insurance from a retailer saying they would buy it again in the same way in the future.
In one click, you can buy a set of insurance plans and it’s a more seamless and convenient journey than going to a third-party website
INSURANCE ASIA
39
COUNTRY REPORT: TAIWAN
Increase in profits still too slow for Taiwan’s insurance industry For a developed economy, insurance penetration remains low at 1%.
Growth is expected to pick up supported by demand for foreign-currencydenominated investment products and the ageing population
O
n the surface, Taiwan’s insurance industry may appear to be winning in terms of its financial report. But GlobalData is reporting otherwise, describing the industry’s growth to be moving at a snail’s pace. The insurance industry recodred a 2021 pre-tax profit of $14.15b, according to the Financial Supervisory Commission. Out of the total, the life insurance industry’s profits reached $13.37b for the year, an 88.5% increase compared to 2020. Meanwhile, non-life insurers logged $780m in profit for 2021, a 32.9% increase from the previous year. With the demand for foreigncurrency-denominated investment products and the ageing population, the growth in life insurance is even expected to pick up in 2022. 40 INSURANCE ASIA
The demographic shift towards the superageing population is expected to be a focus area for insurers
GlobalData, however, estimates that Taiwan’s life segment will only grow at a compound annual growth rate (CAGR) of 0.4%, from $107b in 2020 to $121.2b in 2025 in terms of direct written premiums (DWP). According to GlobalData’s Senior Insurance Analyst Deblina Mitra, after contracting in 2019 following years of slowdown, the industry had further contracted in 2020. Mitra said this was mainly due to persistently low-interest rates and capital market fluctuations that reduced yields from insurance investment products, lowering their demand. The downward trend continued in 2021 with a decline of 5.9%. The report identified that the decline was most prominent in whole life, term life, and endowment business lines which collectively
accounted for 75% of the life insurance DWP in 2020, registering a decline of 11.1%. Amidst the snail-paced growth of the industry, the government has not been idle. In June last year, the regulator increased the limit for life insurers who are operating in foreigncurrency-denominated insurance businesses, which offer better returns compared to the Taiwanese dollar, from 35% to 40%. “Taiwan’s life insurance industry’s growth momentum is expected to remain subdued over the next five years as challenges related to adverse market conditions, declining working-age population, and an existing mature market will continue to oppress the demand. The demographic shift towards the superageing population is expected to be
COUNTRY REPORT: TAIWAN Stable economic factors and gov’t initiatives to expand the general insurance industry are expected to support growth in 5 years
The Farmers’ Insurance Act in 2021 has positively raised the CAGR of the property insurance lines by 5.3%
a focus area for insurers with more products being launched targeting this age group,” Mitra said. Low penetration Meanwhile, the general insurance industry may have logged a greater CAGR than the life segment, but it remains to be inconsequential on the grounds that general insurance penetration in the country is very low. The industry is currently growing at a CAGR of 6.7% to $10.4b in 2025 in terms of gross written premiums (GWP). However, Mitra pointed out that despite Taiwan being a developed economy, the penetration rate, as a percentage to the gross domestic product (GDP), remains at 1%, which is way below the developed markets’ average of 4%. Mitra blames this on the low uptake of insurance lines such as property and liability. What most affected the industry is the decline in motor insurance which accounts for 53.7% of the general insurance industry’s GWP. Despite getting a boost from an increase in premium prices and strong growth in vehicle sales, the outlook for motor insurance, in the short term, remains negative due to the global shortage of semiconductors used for motor vehicle production. However, Mitra observed that Taiwan’s low insurance penetration and strong export-oriented manufacturing sector provide ample room for the growth of the nation’s insurance industry. “Stable economic factors coupled with the government’s initiatives to expand the general insurance industry
through new product development are expected to support its growth over the next five years,” Mitra said. The government, for its part, has been introducing several resolutions to bridge the insurance gap. One example is the Farmers’ Insurance Act in 2021, which prompted insurers to develop solutions such as covering risks faced by farmers. This has positively raised the CAGR of the property insurance lines by 5.3%. National health insurance One of Taiwan’s edges in the insurance industry is the government’s National Health Insurance (NHI) under the National Health Insurance Administration (NHIA). The NHI was first introduced back in 1995 and has undergone many changes. In the “An overview of the healthcare system in Taiwan” paper by Tai-Yin Wu, Taiwan’s healthcare was said to be characterised by good accessibility, comprehensive population coverage, short waiting
times, low cost, and the use of national data collection systems for planning and research. However, it is still plagued by problems, namely the quality of outpatient visits, a weak referral system, and its financial capabilities. For its outpatient problems, the paper said that the health-seeking behaviour of Taiwan, is at a very high level. Meaning it is part of Taiwanese culture to take medicines or seek medical help frequently, even for minor ailments. In fact, outpatient visits per person can sometimes be up to 14 times per year, a substantially higher rate than in other countries with the same NHI such as the UK. This results in general practitioners always seeing a minimum of 50 patients per morning, which amounts to about five minutes per person. This short time may result in poor patientphysician rapport and hasten medical judgment. As a result, many patients often inquire for a second or even third opinion contributing to even higher patient volumes and higher medical costs. Problems such as this are now being addressed by the NHIA. According to its annual report, NHI is now strengthening primary care capabilities and developing effective cooperation mechanisms amongst primary care clinics and hospitals. This is in hopes of enhancing not just medical quality and capabilities but also that primary care providers such as doctors can offer the public more superior care services to reduce the burden on large hospitals so they can direct their focus on emergency and critical care.
One of Taiwan’s edges in the insurance industry is the government’s National Health Insurance
INSURANCE ASIA
41
COUNTRY REPORT: AUSTRALIA
What can blindside Australia’s growing general insurance industry Natural hazard events may hinder the potential CAGR of 6.4% through 2025, analysts warned.
A
ustralia’s general insurance industry had a wonderful year of growth, albeit from a low base. In 2021, its profits were up by 281%, driven by the increase in gross written premiums (GWP) without a similar corresponding increase in claims costs. But according to KPMG, a looming threat in the form of climate change will potentially lead to a serious hike in premiums and make certain areas uninsurable. The industry showing improved performance did not come as a surprise. GlobalData previously projected that the industry will grow from $54.6b in 2021 to $73.6b in 2026 in terms of direct written premiums. This is an estimated compound annual growth rate (CAGR) of 6.4% over a period of five years from 2021. “As this growth is partially driven by rate increases in some product classes, it demonstrates
The industry alone may not be able to sustain insurance in flood-prone areas
the continued hardening of the market,” KPMG explained, saying that the 2021 growth is the highest percentage movement it has seen in years. This is despite the tapering off of premium increases as a response to the pandemic in 2020. Breaking down the performances of different segments of the general insurance market, personal accident and health (PA&H) insurance has now surpassed motor insurance as the largest segment in the market, accounting for 36.7% of the DWP in 2021. This is because PA&H insurance is mostly sold as riders or additional insurance not covered by the public health insurance system. The segment grew by 0.7% against its decline of 0.2% in 2020, supported mostly by an increase in premium rates by the government to counter rising medical costs. Meanwhile, motor insurance is now the second-largest segment, which experienced a lull in 2020 and
The frequency and severity of natural hazard events will push premiums up and make some areas uninsurable
42 INSURANCE ASIA
has been slowly inching up since 2021 as motor vehicle sales grew. Hurdle to growth KPMG believes that continued growth in GWP, with ongoing rate increases, will continue. However, natural calamities will also continue to hamper growth. In March, the East Coast Flood event came at a significant cost to the industry with the Insurance Council of Australia reporting an estimate of $1.71b in claims costs. “The industry is increasingly concerned that the frequency and severity of natural hazard events will significantly push premiums up and make some areas uninsurable,” KPMG said. This just means that government intervention is a must. The industry alone may not be able to sustain insurance in flood-prone areas, KPMG warned. For instance, the government should implement flood
COUNTRY REPORT: AUSTRALIA About half a million properties to be uninsurable by 2030
To create a more sustainable future for insurance, the gov’t will need to invest in mitigation measures
mitigation measures. However, the question remains: Is a reactive response enough? Review and advisory body, The Productivity Commission, recently found that across Australia, 97% of natural funding is spent after an extreme weather event, with just 3% spent on measures to improve community resilience. “To create a more sustainable future for insurance, where insurance is affordable, the government will need to invest in mitigation measures to lessen the impact of these extreme weather events on areas and communities,” KPMG added. Insurers’ response KPMG identified several key headwinds that insurers should consider in response to the threat natural calamities—such as floods, bushfires, and cyclones—will continue to pose. First is that there is a significant change in the weather of spring and summer of 2021 to 2022 compared to 2019 to 2020, which saw Australia suffering from the worst bushfire season on record known as Black Summer. This is the opposite of what will
characterise 2022 as the weather is wet, frequented with bouts of torrential rain and hail events. The changes in weather patterns have been linked to the switch from El Niño to La Niña conditions. With these factors, there is a threat of market failure and risk of underinsurance for some locations and classes of assets as natural perils become uninsurable. KPMG advised insurers to support industry initiatives. One example is the Climate Measurement Standards Initiative, which aims to provide consistent and comparable financial disclosure guidelines under the recommendations of the Task Force on Climate-related Financial Disclosures and support wider disclosure of climate change scenarios by the banking, insurance, and asset-owner sectors in Australia. Insurers must also demand or develop better climate modelling to further improve their risk practices. Finally, insurers themselves must spearhead customer education through the sharing of insight and analysis and develop new products that encourage customers to undertake mitigation plans and increase their climate reliance.
There is a threat of market failure and risk of underinsurance for some locations
O
ne in 25 homes—or 520,944 total properties in Australia—is in danger of being uninsurable by 2030, due to rising risks of extreme weather and climate change. This was according to the Climate Council of Australia, with these numbers rising to one in seven homes within Australia’s top 10 electorates most at-risk of climate impacts. According to the report, across all electorates in Australia, 3.6% of properties (520,944) or one in every 25 properties will be uninsurable by 2030. In addition, one in 10 (9%) of properties will reach the ‘medium risk’ classification by 2030, with annual average damage costs equalling 0.2% or more of the property replacement cost. Of the properties classified as ‘high risk’ by 2030, the majority (80%) of that risk is due to riverine flooding, making it the biggest threat to Australian properties. In a separate report, data and analytics firm GlobalData revealed that in 2021, home insurance premiums in Australia grew by 5.9% in 2021, the highest in the last seven years. The impact of natural catastrophe events is most severe on personal property insurance which accounted for 80% of claims that occurred in 2021. According to GlobalData’s senior insurance analyst, Swarup Kumar Sahoo, this will have a significant impact on home insurance premiums as insurers will pass this to the consumers to recover the losses. Rising insurance costs and increased frequency of natural disasters will leave around 4% of Australian homes uninsurable by 2030. “Increase in home insurance premiums will lead to underinsurance or no insurance as lower and middleincome groups will look to reduce policy coverage if they are unable to afford high premiums,” Sahoo added. INSURANCE ASIA
43
CASE STUDY: WORKPLACE EQUALITY
Women in insurance: What’s blocking the way to equality
Unconscious bias and ‘double shifting’ are just some of the known hurdles.
W
omen’s representation across all levels of the corporate ladder gained ground in 2020, according to the Women in the Workplace 2021 report by McKinsey. But persistent problems still plagued especially the insurance industry, blocking the way to diversity and equality. One hurdle, in particular, is unique to Asian women. It is called double shifting. The term double shift, also known as double burden, means that a woman is expected to work to earn money and, at the same time, be responsible for unpaid domestic labour. This was discussed by Violet Chung, McKinsey & Company, Partner, as she guested in the “Accelerating diversity in insurance” podcast by Kweilin Ellingrud, Senior Partner, Director of McKinsey Global Institute, and Leader of the Life Insurance Practice in North America at McKinsey & Company. “You do your work at work, and then at home, you are expected to take care of your family. It’s a societal expectation in many Asian communities—and it’s affecting a lot of women, especially in COVID-19 times,” Chung explained. Because of double shifting, 42%
Violet Chung
Kweilin Ellingrud
We have societally ingrained notions that a woman is going to prioritise her family instead of her job
of women say they are burned out, with some women interviewed by McKinsey & Company saying they are still expected to support their colleagues more than their male counterparts. Women are actually more burned out this year than the previous year, Chung said. In a Deloitte report, 53% of women surveyed said that their stress levels are higher than they were a year ago. This is making it harder for women to switch off from work and have their personal time. Of those surveyed, 34% rated their ability to switch off as poor; with 42% of these women worried that their career progression will be affected if they are not constantly available for work. ‘Less valuable employee’ Another problem is unconscious bias. Ellingrud cited an experiment they did in which they showed a group of people identical résumés with all the same bullet points, same font size, and same font type. One résumé showed a typically male name whilst the other holds a typically female name. They found out that 87% of the time the female is less likely to get the job. “Both men and women in the
Equality does not just affect leadership in the insurance industry – it could well affect the industry’s profits in the future
44 INSURANCE ASIA
group ascribe greater leadership and higher future potential to the imaginary John Doe. And that’s both conscious and unconscious bias that has been societally ingrained. That doesn’t just affect women and men at the entry-level—that affects people across the talent pipeline, as well” Ellingrud said. This is because we have societally ingrained notions that a woman is going to prioritise her family instead of her job and, therefore, will be a less valuable employee, she added. Not just an internal issue Equality is not just an issue affecting leadership in the insurance industry. It could well affect the industry’s profits in the future. In a report by Swiss Re in 2019, gender equality could bring an additional $2.1t in insurance premiums by 2029 or around a 45% increase in Asia. Additionally, under a gender parity labour market scenario, the health protection gap in 12 markets in Asia can be reduced by 11%. Bridge across differences A way to help increase equality and diversity in the insurance industry is through mentorship and sponsorship, Ellingrud said. McKinsey’s research shows that female leaders are supporting their teams between six to 11 more percentage points than the average male manager, providing emotional support, managing overall well-being, and ensuring that their team members have manageable workloads. “I have seen some insurance carriers make the bold move across senior leadership teams to ask people, [‘Do you mentor someone who is different from you?’] That pushes leaders to bridge across differences, meet new people, and get outside their comfort zones. If we can hold each other accountable for who we mentor or sponsor, that’s when we’ll start to make a difference,” Ellingrud said. According to Ellingrud, an action that leading companies have taken is setting a clear and aspirational goal— not a quota but a target that the entire company wants to get to—and then cascading that accountability across each line of business and function.
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45
OPINION
CARRIE TONG
Hong Kong insurers step up to seize opportunities in Greater Bay Area
D
espite the challenges arising from the ongoing global pandemic, Hong Kong, with its expertise and massive capital flows in the insurance market, will always be the Asian hub for multinational insurers. On top of that, the strong demand for insurance in Hong Kong shows no sign of abating. According to the Insurance Authority, total gross premiums of the Hong Kong insurance industry for 2021 reached HK$602.7b and new office premiums (excluding Retirement Scheme business) of long-term business were HK$166.8b, up 25% from 2020. Furthermore, with the rapidly developing Greater Bay Area (GBA), where Hong Kong has been positioned as an international risk management centre, the city’s insurance market is set to grow ever stronger. Since the signing of the Framework Agreement on Deepening Guangdong-Hong Kong-Macao Cooperation in the Development of the Greater Bay Area in 2017, development within the GBA has accelerated, from building infrastructure to knowledge and talent exchange within cities, contributing to rocketing economic growth. Yet, insurance penetration and density remain low in the region. The insurance penetration of nine other GBA cities is 5.5%, only one-fourth of Hong Kong (20.8%). In terms of insurance density, insurance premium per capita in Hong Kong amounts to nearly RMB70,000, more than 9 times of the nine mainland GBA cities (RMB 7,400). Demand, however, is soaring. Insurance purchase is the second reason for GBA residents to visit Hong Kong Manulife research conducted from November to December of last year surveyed nearly 1,600 respondents from nine GBA cities who have visited Hong Kong in the last 36 months and currently own or are interested in purchasing insurance products in Hong Kong in the next two years. Results from the survey showed that 96% of the respondents are eager to visit Hong Kong when the border reopens 46 INSURANCE ASIA
CARRIE TONG Chief Strategy Officer, Hong Kong and Macau, Manulife
within the first six months of the year. When asked about reasons for visiting, 70% of respondents said they plan to buy insurance products, which was the second reason behind leisure and shopping (84%). In addition, the research found that amongst those who are considering buying insurance, 93% tend to buy insurance in Hong Kong, which is higher than those opting for mainland China (78%), showing the considerable strength of Hong Kong’s insurance products. Growing intent to buy insurance for spouses and children Results further show that respondents have the desire to purchase not just one insurance product, but close to three on average. Respondents are most interested in purchasing critical illness and personal accident products, attracting 40% and 33% respectively. Additionally, respondents are interested in long-term savings insurance, universal life insurance, and investment-linked insurance. Amongst the respondents, 86% who are married plan to buy insurance for spouses, whilst 62% of parents are looking to buy insurance for their children, showing the growing trend of protecting family members. Pandemic drives investments in personal health People around the globe are now more aware of critical illness and medical products since the outbreak of COVID-19. Not only are they looking for long-term health protection, but they are also seeking comprehensive and flexible insurance products that enable them to withstand the unexpected and unknown. The mature Hong Kong insurance industry offers a wide range of comprehensive solutions designed for different needs. With the imminent resumption of cross-border travel, the insurance industry must be ready to grasp the opportunity to invest in service enhancements and product upgrades to cater to the increasing protection needs of GBA residents.
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47
OPINION
LIM SIANG THNIA
Moving towards a “higher bottom line” in the insurance sector in Southeast Asia
I
nsurers in Southeast Asia are bullish about their growth prospects for 2022, despite lingering concerns about the potential impact of COVID-19 variants on overall business recovery and returnto-workplace strategies. But beyond ongoing efforts to adapt to the pandemic’s aftermath, insurance leaders are also confronted with multiple fundamental hurdles that could potentially derail all of their current progress. These issues include, but are by no means limited to, integrating new technologies with core systems, adapting to shifts in consumer preferences, as well as quantifying and addressing climate risks – all of which would require insurers to double down on digital and talent transformation efforts, and re-evaluate their business models to embed sustainability and trust in their operational processes and investments. In this article, we take a closer look at several bottomline challenges that insurers are likely to face in the year ahead, as well as some of the considerations that they will need to take to secure their industry’s longterm growth. Scaling and refining pandemic-driven digital adaptations During the pandemic, insurers had been quick to implement various digital adaptations to support a virtual workplace and customer engagement environment. However, as the environment begins to stabilise, leaders will need to make sure that these adaptations remain aligned with evolving long-term technology strategies and shifts in consumer behaviour: • Integrate core systems with AI and analytics Insurers are looking to leverage new data and automation solutions, including artificial intelligence (AI) and analytics, to boost efficiency and revenue – many of which would likely be deployed on cloud platforms. To deliver tangible value to the business, the integration of these applications with legacy systems will be paramount, and many insurers whose core systems are reaching the end of their lifecycle may also find it necessary to modernise in order to support these new innovations and technologies. AI applications, in particular, are a growing area of focus for many insurers as they become increasingly proficient at performing tasks historically difficult for computers to execute – and insurers become more comfortable with utilising AI recommendations for decisionmaking in underwriting, pricing, marketing, and claims. Coupled with alternative data and advanced analytics, AI is expected to make a significant impact across the entire insurance value chain. To enable differentiation via alternative data, insurers will need to focus on building a strong data management system that is secure, scalable, and flexible enough to enable integration of multiple internal and external datasets. As data can often be fragmented and of poor quality, having a comprehensive data strategy can also help facilitate better data collection across various business units, and address integration across all platforms. 48 INSURANCE ASIA
LIM SIANG THNIA Consulting Partner, Deloitte Southeast Asia
• Shift to “right-channelling” Whilst digitisation is an important priority, insurers should not neglect the value of the human touch. In view of this, a shift to “right channelling” – thinking strategically about which interactions require digital versus human interaction – is needed to create the ideal experience for each consumer – and should guide insurers’ distribution and service strategies. For example, whilst preferences appear to be shifting toward increased digitisation and self-service capabilities in various areas of the insurance lifecycle, consumers tend to prefer human interactions when it comes to making decisions on more complex insurance products and processes. By investing in the right tools and applications, such as customer relationship management platforms, insurers will be better able to support their teams more effectively in engaging remotely with their customers. To reflect new digital realities, insurers should also rethink advertising approaches and their alternative strategies. Whilst many insurers in Southeast Asia are already embarking on digital media strategies to reach out to more consumers, developing customised offerings through the use of advanced customer analytics would be key to maximising prospects, acquisition, and retention of new and existing customers. Aspiring to a “higher bottom line” Insurers are the economy’s first financial responders, and are entrusted with helping policyholders cope with and recover from some of the most challenging times in their lives or businesses. Whilst insurers appear to have retained and even built upon this foundation of trust during the pandemic, they should also consider several ways in which they can aspire to a “higher bottom line” going forward: • Ramp up climate and sustainability efforts Insurers have been ramping up efforts to quantify and address climate risk in both their underwriting and investment portfolios, spurred on in part by increasing demands for data and evidence of concrete mitigation action from a wide variety of stakeholders. Globally, we have seen this trend play out with insurers appointing chief sustainability officers (CSOs) or equivalent to orchestrate organisation-wide environmental, social, and governance (ESG) strategies, and collect and report data on their outcomes. • Build upon a foundation of trust Insurance ultimately comes down to a matter of trust – the consumers’ confidence that in paying their premiums, insurers will pay their claims if they suffer a loss – and therefore maintaining and bolstering that bond should be an ongoing priority. Apart from being more proactive with ESG initiatives to limit the causes of climate risk at its source, insurers should also consider ways in which they can recruit a more diverse workforce, as well as launch products and services to alleviate coverage gaps for underserved communities.
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