Digital insurance: the view from asia

By Hugh Terry, founder and managing director of The Digital Insurer

By 2030, Asia is expected to be home for two thirds of the world’s middle class and is already the leader in the use of smartphones. So what are the prospects for digital insurance in Asia?

The face-to-face sale of individual insurance through tied agency and bancassurance partnerships between banks and insurance companies is dominant in Asia. Existing insurers face a range of fundamental challenges including the economics surrounding distribution and the relatively slow move away from bundled products, such as endowments. For now growth rates and profits remain impressive.

Established insurers are moving to reinvent these channels and make them more appropriate. This is a transformation that starts with existing business practices and adds in digital components with the aim of improving the customer experience and making a step-change in efficiency; in short, driving up revenue while reducing unit costs.

AIA, one of the world’s largest life insurance companies, headquartered in Hong Kong, has made significant investments in the digitisation of its agency salesforce and more than 30,000 policies are now sold on a digital, paperless basis each month across more than ten countries using a proprietary point-of-sales tablet.

Mark Tucker, AIA’s group chief executive, says: “The iPOS tablet initiative has allowed us to connect digitally to all our advisers and customers. The benefits are far beyond improved policy issuance as we now have better channels of communication, access to more data, better and more consistent customer engagement methods, as well as the ability to do more transactions in real time, more accurately and at much lower cost.”

Do existing insurers have time to retool their models? New entrants are challenging incumbents with greenfield initiatives leveraging large customer databases from established brands outside the industry. Asset-light infrastructure is being deployed quickly using digital-first principles that resonate with 21st-century consumer expectations and in our increasingly smartphone-enabled world.

In China new entrants have been able to take advantage of new digital insurance licences and a more evolved online fulfillment capability than in most other countries. WeChat, a complete ecosystem allowing contextual ads, messaging and in-app payment and fulfillment, is proving to be an excellent enabler for digital insurance.

Zhong An has led the way with a shipping returns insurance offering for users of TaoBao (similar to eBay) that resulted in the acquisition of more than 150 million customers and the sale of more than 600 million policies in its first 18 months. It successfully raised $500 million in 2015, and has launched innovative and analytics-priced digital products across a number of lines of business.

Asia analyst Paul Schulte, author of the recent report The Insurance Asteroid: An Extinction Event?, says: ”In China we are seeing almost perfect conditions for disruption – tech-savvy and well-funded internet companies such as Alibaba and Tencent are reinventing insurance models from a digital-first perspective in a supportive regulatory environment. These models could be exported around the world faster than expected.”

We are seeing increasing interest in creating and developing new partnerships to exploit opportunities for digital insurance

With so much untapped market potential in Asia, historically insurance chief executives would have been comfortable saying they are focused on driving growth through traditional models. Until recently interest in digital disruption was pretty low. But, as we close out 2016, it is a rare insurance company indeed that has not developed and activated some form of digital strategy.

Simon Phipps, head of insurance advisory at KPMG China, says: “We are seeing a wave of change building across the sector, and increasing interest in creating and developing new partnerships to exploit the opportunities for digital insurance. To stay relevant, the mindsets of the existing players need to keep moving from “how do we do this?” to “how can we do this with others to get further, faster, more cheaply, together”.

Asia is a highly attractive insurance market with opportunities for local insurers, multinational and non-traditional new entrants to thrive. The region will more than punch its weight on the world stage in the years ahead – and in many cases it already is.