Insurtech Set to Change Asia’s Insurance Marketby Fintech News Singapore September 11, 2017
UBS says that Asia’s underinsured market presents ripe opportunities for insurtech startups.
In a UBS report titled Shifting Asia, it noted that Asia is one of the most underpenetrated insurance markets in the world. Emerging Asia held 43 per cent of the world’s population but only 13 per cent of total premiums in 2016.
The report added that Asia will be home to around 64 per cent of the world’s middle-class population by 2030, up from 40 per cent currently. As disposable incomes grow, the middle class will demand greater protection for their health, wealth, families and property.
The strong and sustainable growth outlook over the medium term makes the Asian market an important battleground for insurers, said UBS.
The report highlighted that traditional distribution models are costly and inefficient in emerging Asia due to its large populations and geographical dispersions.
“With mobile apps and online aggregators, shopping for and purchasing insurance policies will become more convenient and efficient,”
“We believe most insurers will have their own mobile app with a full suite of capabilities, from product enquiry and direct purchase to claims processing. They could be equipped with AI chatbots to assist with customer queries, as machine learning allows AI to learn from interactions and improve customer services over time,”
Connected devices, advanced data analytics, artificial intelligence (AI), and digital distribution channels should result in accelerated market penetration, more accurate risk assessment and pricing, more personalised solutions, more efficient operations and processes, and most importantly, improved customer experience and satisfaction.
UBS also believes insurtech could spur total cost savings of around US$300 billion a year for the Asian insurance industry by 2025. Competition in Asia’s insurance industry will likely intensify as customers demand greater transparency and convenience, more tailored products, easier claims processes and better customer services.
Competitive pressures should drive insurers to pass on a majority of the cost savings to customers, but we still expect the overall profits of Asian insurers to increase by around US$55 billion a year.
Putting jobs at risk
The technological advances may lead to job losses in the insurance industry. UBS estimates 1.5 million fewer jobs in the Asian insurance industry in the medium term, primarily in the operations and administrative support areas.
“We expect insurtech to drive substantial cost savings for the industry in Asia, primarily in the following areas: operational efficiency: automation and streamlining of processes; underwriting and risk selection: improved pricing, better risk monitoring, and lower claims; fraud prevention: improved fraud detection and lower claims costs; marketing and distribution: targeted marketing, more effective cross-selling, and improved customer retention,”
said the report.
UBS surveyed three industry veterans and one start-up and found that suggest that there is enormous potential for Asian insurers to expand their digital distribution and improve customer engagement. They expect more insurers to move in a similar direction, but also see a number of challenges that could disrupt insurers’ digital transformation.
“These include legacy IT platforms, corporate culture and customer resistance,”
said the report.
Customers will eventually be the biggest winners of insurtech, benefiting from better services, greater convenience, cheaper premiums and more personalised solutions.
“Insurers will gain not only greater cost savings but also enhanced perception and reputation. Incumbent insurers slow to adapt to digital transformation could see rapid market share erosion,”
Featured image via Wikipedia