Digital Disruption In Insurance Industry: Challenges And Opportunities In Asia Pacific/ASEAN

Entering the new decade, we face many challenges, such as the global pandemic and the digital transformations seen worldwide, so we should sustain, adapt, and stay relevant to the development of technology.

Insurers are looking at speeding up their innovations by incorporating technology into their insurance products, and sourcing ways to maximize their business’ value, especially in the three foundations: customer expectation, internal value chain, and organizational culture & talent.

This digital transformation era will give the insurance industry a chance to achieve increased productivity and profitability if data-driven strategies and fast decision-making processes are embraced into their systems.

Continue reading to understand how digital transformations disrupts ASEAN insurance businesses.

Disruptive Factors impacting insurance in ASEAN

1) Customers’ preferences

“There has been a big uptick in transactions for our online clients as well as traditional offline businesses seeking online payments”— Zac Liew, CEO of Curlec

Image source: https://firstclasse.com.my/zac-liew-curlec/

According to Capgemini, customers place great value in the personalization of insurance products, convenience, and efficient services. And now that customers are able to choose and compare from plenty of insurance options from multiple insurance companies, their preference may change rapidly depending on the world’s and their situation, switching from one provider to another easily.

Insurance companies have adapted to the constant change in preferences by having customers share more personal information to create personalized products, which digital transformation would then customize marketing efforts that can help target the right audience or niche.

Data analytics and artificial intelligence tailor and improve target marketing campaigns, making it easier for insurers to offer insurance products best suited for individuals’ needs with the best value based on their profiles, creating a consistent, personalized experience for customers.

2) Aging population

Aging is one key factor to take into consideration when it comes to insurances; as Investopedia quoted Huntley, “Every birthday puts you one year closer to your life expectancy and thus, you are more expensive to insure.” The older you get, the more vulnerable you are to risks.

Investopedia also noted that age is the primary factor that will contribute to the insurance premium rate when looking at permanent or term policies. More importantly, age will determine if an individual is qualified for life insurance coverage as medical examinations are becoming more strict. On top of that, digital technology has advanced the ability to monitor real-time events that may include your health. For example, medium.com stated that some startups collect data from sources such as mobile tracking and wearables developed by health insurers to assess the risks involved.

Technology needs large amounts of data to help monitor customer’s behaviors and health on a real-time basis, which could be seen as a benefit as it reduces the probability of claim inflation and the likelihood of claims. However, this requires insurers to share personal data, but before that could happen, individuals need to understand the importance of insurance companies acknowledging the factors of customers’ lives affecting the annual premiums besides age.

Other factors may include: health, if you had or is smoking, gender, family health history, travels, weight, etc., which helps policymakers decide on long-term decisions. Digital transformations in the insurance industry has created an effective way to prevent illness and improve customer’s welfare among the aging population.

3) Affordable insurance

“We want to help consumers get the best banking and insurance products because we want to help them get the most for their money”— Yuen Tuck Siew, CEO of Jirnexu

Image source: https://www.prestigeonline.com/my/profiles/siew-yuen-tuck/

Insurance may seem pricey, but for what it is worth, it is beneficial when you need coverage. Luckily, technology has developed significantly in the past few years, creating innovative and personalized products, which allows insurances to be more affordable. Technology, for instance, artificial intelligence (AI) and wearables, have made risk assessments on customers with accuracy.

How does it make insurance more affordable?

Wearables track your fitness and health level in real-time, helping to decide on your life insurance premium; some companies may be advanced enough to decrease car insurance premium if you become more responsible for driving.

The efficiency of the insurance value chain will increase with the support of the system’s digital transformation. SwissRe is an example of using technology to their advantage by providing affordable covers for all individuals who defer in income levels, enhancing their risk knowledge, effective claim handling, etc. The growth of digital disruptions gives the insurance industry opportunities to produce innovative solutions for insurances to be more affordable and reach out to the targeted groups, even those who may have a lower income.

4) Insurance companies Facing digital disruption

“Our main goal has always been to enable consumers to get the best banking and insurance products anytime, anywhere”— Yuck Tuck Siew, CEO of Jirnexu

Image source: https://www.prestigeonline.com/my/profiles/siew-yuen-tuck/

With the coupling of digital technology and the insurance industry, companies that utilize technology are categorized as Fintech, InsurTech, Peer-to-peer insurance, etc., have been released to the public and used widely. New technologies are essential to driving innovation in the insurance industry; however, there may be challenges to overcome when introducing a digital transformation.

BIS believes that supervisors and policymakers would have to re-evaluate and adjust to the new framework, to understand innovations and risks – employees would need to gain technical skills, construct collaboration mechanisms with stakeholders, and much more.

Besides challenges, there are far more opportunities with digital disruptions awaiting insurance companies to enhance their workforces, such as greater data collection to understand each customer better, increase the company’s efficiency, improved fraud detection and risk identification, better customer services and customer experiences, and cost reductions for both the insurers and organizations, etc.

“I think FinTech companies like us will continue to find creative and innovative solutions to assist our communities and do what we can to contribute to the economy positively.”— Ignatius Ong, CEO of TNG Digital

Image source: https://www.optionstheedge.com/topic/people/tng-digital-ceo-ignatius-ong-spearheading-change-cashless-landscape-malaysia

Below are a few cases of ASEAN companies that are taking part in the digital disruptions:

• KATSANA

Had a collaboration with some big insurance companies to develop an on-road safety mobile app, ‘DriveMark,’ it collects users’ driving profiles independently. The app records the user’s driving behavior and translates driving attitude into scores; a cohort analysis is conducted to understand this driving behavior.

• Tune Protect

Aimed to compete with the ‘on-the-go’ lifestyle, Tune Protect is a mobile application that allows insurers to manage their insurances digitally; customers do not have to worry about the loss of information as the company is secured. This company has created an interactive, accessible platform to buy and claim; customers can receive digital lifestyle protection.

• Senang

Senang offers insurances as low as RM1, many insurances packages, and offerings with the latest InsurTech approach such as access to API solutions built into your system applications, an online 3-step claim process, and a smart cloud system for insurance companies.

Insurance Companies need to grow data science, analytics, and AI capabilities to navigate the rapid disruptions happening worldwide.

Be the frontier in the insurance industry by embracing top in-demand digital technologies.

The Center of Applied Data Science is offering a 10% discount to MII members for any training and development courses for insurance professionals.

Find out more at our website or contact the Malaysia Institute of Insurance for more.