How Insurtech is changing the ASEAN Insurance Economy
Nine out of 10 insurers surveyed by professional services firm PwC fear that they will lose business to Insurtech solutions; on a broader scale, 74% expect fintechs to disrupt and pose challenges for the insurance industry. Insurtech is the term used for technological innovations that boost efficiency, speed up transactions, and limit pain points within the insurance industry. These changes could help close the protection gap, otherwise known as underinsurance. Frontier Reconciliation reported efficiency gains of between 60%-80% after implementing automated solutions for reconciliation – a vital part of insurance claim processing
Europe and the US embraced Insurtech in the early 2010s, but they are slowly losing their monopoly. Asia, with China, Hong Kong, and India at the forefront, are now investing billions of dollars. Southeast Asia is also a growing market.
Singapore has made strong Insurtech moves
The Monetary Authority of Singapore (MAS) quickly recognised its importance and is working with the British government and several insurance representatives to promote insurtech in the region. Earlier this year, Australian insurance conglomerate IAG opened a new hub, named Firemark Labs, to drive Insurtech innovation alongside start-ups and technology providers. This hub complements MAS’ Fintech regulatory sandbox, which has already benefitted insurance start-ups like PolicyPal.
“Singapore is recognised as having one of the most developed fintech landscapes with a growing Insurtech scene,” IAG chief customer officer Julie Batch said.
In Malaysia, Insurtech is catching on
Malaysia’s delayed embrace of Insurtech ridicules its goal of being a fully digital economy by 2020. In May 2017, Malaysian Insurtech start-ups accounted for just four out of 102 launched in Asia. Heavy regulation of the insurance industry could be one reason for Malaysia’s sluggish rate of disruption.
The Life Insurance Association of Malaysia (LIAM) reported that only around half of Malaysians had life insurance and most of those were underinsured. U For Life wants to move that figure towards 75% by 2020. LIAM believes the goal is achievable, partly because the rise of Insurtech complements its existing pool of insurance agents and intermediaries.
In Thailand, Insurtech innovations are revolutionizing motor insurance
Thanks to a partnership between global insurance firm SSP and IMD Company Limited, insurers in Thailand can begin to digitise their services. “Ultimately our partnership will benefit Thai insurance customers as digital insurance focuses on better customer service, customer understanding and enabling customers to engage through their channel of choice, whether via agents, mobile, web or call centre,” IMD CEO Wiboon Thabsuwan declared.
Indonesia could be a potential growth area for Insurtech
Indonesia, the fourth most populous country, has a significant protection gap too. In November 2016, just 7% of Indonesians had life insurance.
There are already hundreds of fintech companies. CekAja and Cekpremi allow users to view, compare, and buy insurance online easily. Jagadiri sells life insurance directly to clients by putting them in direct contact with underwriters.
Dumoli F Pardede from Indonesia Financial Services Authority claimed that Insurtech companies could help close the gap. Insurtech companies break down traditional barriers to buying insurance by offering solutions to simplify insurance complexities that deterred customers previously. In the case of Cekpremi, it also aims to mitigate the negative perception Indonesians have of the insurance industry.
Confusion surrounding the current rules is putting off some firms from moving into the digital space. Indonesia needs more action, such as regulatory reforms.
The whole insurance ecosystem is evolving
The growth of Insurtech affects the traditional insurance sector. Traditional insurers must adapt their offerings or risk losing relevance amidst the changing marketplace.Customers benefit from reduced premiums. Usage-based insurance generates data which companies use to provide more accurate premiums, passing on savings to the client.
The rise of insurtech and the data it generates creates new possibilities. In the US, customers can send a selfie to insurance companies for assessment and coverage proposal.
For the moment, Singapore leads the way, but country-specific insurtech innovations such as motor insurance in Thailand can drive forward the insurtech movement in the region and potentially have a global impact.
An AIA statement issued in 2015 added, “The widening protection gap underlines the growing need for innovative compelling and meaningful savings and protection offerings by consumers in markets all around the region.”
Massive protection gaps prove that the insurance ecosystem was not working in Southeast Asia. While insurtech will not lift people out of poverty, it is already showing benefits by making insurance readily available, easy to customise, and more affordable to all. Insurtech is shaking the market up, and the gaps are closing.