20 minute read
Smart calculator figures out financial weaknesses
INTERVIEW Smart calculator figures out financial weaknesses
Xplore with Ally helps Singaporeans figure out their financial satisfaction.
How 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
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)
Xplore with Ally helps customers to better understand their financial wellness journey
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.
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
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
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.
There 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 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
Half of the industry players do not earn their cost of equity after decades of stable returns
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.
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
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 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” 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.
Insurers that want to make ‘work from anywhere’ a reality must be aware of associated risks
Insurers could face recruitment challenges in several key areas
Source: The Deloitte Center for Financial Services 2022 Insurance Outlook Survey.
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
Great 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 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 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.
Insurance can help in the legacy planning for families with special needs children
Many parents with special needs children struggle to save for long-term care
Colin Chan
Eddy Lim
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 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 special needs community is underserved
The SNTC trust will safeguard the funds that parents intend to leave for their children and disburse for the child’s long-term care
