Major changes are upon the insurance industry and these include the shift of global growth towards Asia; accelerating industry disruption, which will change the way businesses are conducted; and "a new societal deal", defined by emerging risks, economic growth experimentations and a growing middle class. To compete and win in the next five years, insurers will not only need an overhaul of their businesses, including engagement, distribution, products - underscored by data - but must also reaffirm their purpose to customers, said speakers at the 28th Pacific Insurance Conference in Hong Kong yesterday.
Referencing a Chinese proverb about change and adaptability, keynote speaker and McKinsey Asia Chairman Kevin Sneader urged the industry to “find new ways to harness the winds of change”. And instead of building walls to keep change out, insurers should “build windmills” in order to improve both the industry and the world.
Disruptors are at the door and the industry needs to study its competition – non-conventional players like Tesla, Amazon, Tencent and Alibaba, which know their customers intimately; reassess its pain points and metrics of success; and make sense of unstructured data. The innovation message cannot be over-emphasised by Aviva Asia & FPI Executive Chairman Chris Wei, who summed it up candidly during the CEO panel: “There’s no way you’re going to win by being a follower. The laws of nature don’t allow it. In the absence of innovation, the default is size. And if you’re not large, then you’re [out].”
Although product innovation is good, experiential innovation is better, as it is harder to copy and is where digital and technology come into play. But a third (and higher) level of disruption, Mr Wei added, is innovating on marketing. Life players have always relied on distribution to do marketing and a change is due. The industry’s future success will depend on its ability to accept and translate unstructured data into actionable insights.
MetLife Insurance K.K. Chairman, President & CEO Sachin Shah offered a sobering point found in a Capgemini study that 40% of millennial consumers would prefer to buy insurance from tech companies, rather than insurance providers. Among other vectors of change he shared, the increasing ubiquity of AI means that intelligence and utility become default expectations in customer interaction. And in a world where frictionless relationships are becoming the norm, experience is everything. Re-thinking the life insurance experience is thus critical, he said.
Insurers also need to connect with and recognise the importance of consumers’ wellness and emotional well-being, as the latter expects insurance companies to help improve their quality of life, Mr Shah added. To this, SCOR Global Life CEO Paolo De Martin emphasised that insurers must listen to, and know clearly their purpose to customers, in order to drive authenticity in their engagement. “If a policyholder calls to say her husband died, and your company’s script is to ask for her policy number as its first required question, then your company isn’t ready to progress.”
Tackle disruption with tech, R&D
Meanwhile, Hong Kong’s Acting Financial Secretary, Mr Edward Yau, exhorted the insurance industry to move forward in the face of change and disruption through leveraging on technology and R&D. “Disruptive technology does not only alter or destroy. It brings opportunities as well.”
Mr Yau, who officiated the 28th PIC Opening Ceremony, congratulated the industry for its good performance in 2016, where gross premiums increased by more than four-fold to over HK$450 billion (US$58 billion). He highlighted the territory’s regulatory measures to support the industry through disruption, and its active engagement with the industry through the Future Task Force and other forums to seek new ways to boost development.
While customer service remains key to insurance, he said Insurtech, or technology application, will catalyse the development of personalised insurance solutions, especially in meeting individual risk-management needs. And two elements in this are artificial intelligence (AI) and data analytics, which will help insures enhance their offerings and to make suitable recommendations for different risk scenarios.
He noted the InsurTech Sandbox’s and InsurTech Facilitation Team’s introduction this year, adding that the development and application of Insurtech must be pursued in close collaboration with professionals in the industry, as well as technology providers.
Hong Kong will also double domestic expenditure on R&D to about HK$45 billion a year (an estimated 1.5% of its GDP by 2022, doubling current levels) and reduce taxes for R&D expenditures to boost innovation and technology, on top of the HK$2 billion Innovation and Technology Venture Fund launched in September to stimulate investment in startups.