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ccording to management consulting firm Oliver Wyman, the rules to building a successful business are conceptually simple: identify customer needs, build solutions to meet those needs, distribute — repeat. This cycle, it says, has started getting shorter as customer needs rapidly evolve and the pace of change is accelerated by digital solutions. However, Oliver Wyman says life insurance companies have failed to keep up with these changes. ‘For many, the need for and immediacy of change wasn’t as high as business performance, for the sector seemed stable and the threat of competition was quite low. The few players that did think about innovating around customer problems were burdened by legacy systems, poor data and internal resistance to change.’ The global firm adds that large-scale digital transformation programs have seen only incremental improvements over the past few years. ‘At the heart of it, we have an industry with very complex products, long underwriting times, cumbersome claims processes and disengaged customers. ‘The issues in the life insurance industry are deep rooted and can’t be simply solved by digitising the easiest steps in the customer journey or plugging existing products into digital ecosystems.’
Distribution in Asia Pacific Given this, it’s perhaps no surprise that Bernhard Kotanko, senior partner, Hong Kong, McKinsey & Company, says: ‘AsiaPacific insurance in most markets is dominated by agency channels. This is very different from the model in Australia and New Zealand. Bancassurance is equally important in many markets, especially for savings-oriented products. ‘Digital and telemarketing only play a minor standalone role but are critical
enablers as part of an integrated digital hybrid distribution.’ Angat Sandhu, head of Asia Pacific Insurance at Oliver Wyman, notes that bancassurance is now one of the dominant channels across most countries in Asia. Bancassurance accounts for more than 40 per cent of sales in many countries (see breakout pg. 48) but just 10 per cent of sales in Australia and 35 per cent in New Zealand. ‘In most markets, bancassurance has emerged as a strong competitor to agency channel,’ says Sandhu. ‘The exceptions are Vietnam, where agency channel still has a market share of more than 80 per cent, and India, where agency has an 80 per cent share at a market level — although bancassurance is the largest channel for private players,
‘Asia-Pacific insurance in most markets is dominated by agency channels. This is very different from the model in Australia and New Zealand.’ Bernhard Kotanko / McKinsey & Company
excluding the state-owned Life Insurance Corporation of India. ‘Direct online still remains nascent but is fast emerging, especially in China where it has an 8 per cent market share and India where it has 2 per cent market share.’ Sandhu says that telemarketing and overall direct distribution still have relatively low market shares across Asia. And he adds: ‘The takaful insurance market is still small but is growing fast and increasing market share in Muslimmajority countries such as Malaysia and Indonesia.’ In contrast to most Asian markets, Kotanko says independent financial advisory channels and brokers are most relevant in the Australian market.
The agency channel Kotanko says that, on one hand, the AsiaPacific agency channel has not materially changed in decades. ‘It is based on self-employed entrepreneurs working on an exclusive basis to distribute products of one insurance company. On the other hand, agency has fully transformed and shifted from part-time, opportunistic selling to professional, full-time, advicebased and digitally enabled sales forces.’ Sandhu says there are two main categories of agency channels in Asia Pacific: > TIED AGENCY: Advisers and agents are exclusive to life insurance companies. Generally, more support is provided to tied agents, and there is also a higher level of engagement and supervision. > INDEPENDENT AGENCY: Advisers are autonomous and work with multiple insurers, which means they can offer product options across insurers to clients. Typically, the level of support and engagement is relatively lower compared with a tied agency.
ANZIIF.COM // ISSUE 02 2021 // JOURNAL