How InsurTech is reshaping insurance in Asia
The 2016 PwC Global Fintech Survey revealed that 74% of insurance companies believe that some part of their business is at risk of disruption over the next five years. Sixty-seven percent of Malaysian insurance companies surveyed by PwC estimate that they could lose as much as 20% of business to these startups.
Despite the recognition of the threat only 43% have Fintech at the heart of their corporate strategy. Moreover, even with the learnings from the banking sector, only 28% are exploring partnerships with Fintechs and only 14% are actively participating in or supporting Fintech incubator programs.
Arpitra Mitra (photo left), senior research manager at IDC Financial Insights, notes that whatever technology investments insurance companies are putting in today are geared towards managing the customer experience and customer engagement practices.
She defines InsurTech as technology that improves an insurer’s business. She notes that Tier 2 and Tier 3 insurance companies can benefit from the innovations as it gives them a platform to scale their business.
“They can easily use some of these solutions instead of themselves investing significantly before thinking of scaling to multiple countries or multiple segmentations. Larger insurance companies are collaborating with startup companies including PoC projects to see how InsurTech can be leveraged enterprise-wide,” she added.
In this exclusive interview with Fintech Innovation, Mitra discusses some of the hurdles and challenges facing the insurance industry in Asia. She also talks about the innovation investments including IoT, robotics automation and artificial intelligence.
She also touches on on-going digital transformation journeys occurring within the insurance industry. Finally she touches on the evolving regulatory landscape particularly around data leakage and identity authentication.
The PwC report “Opportunities await: How InsurTech is reshaping insurance” warns that incumbent insurers focused on catching up with their competitors around customer centricity are missing the opportunity to become proactive. The report suggests that these need to create a clear and consistent message that will demonstrate their willingness to play in the new InsurTech space and act accordingly – only such an approach will position incumbents to be frontrunners in the digital insurance era.
Figure 1: Asia Pacific Insurers thoughts on innovation and digital disruption
In early 2016, Sun Life of Canada (Philippines) entered into a strategic partnership with FINTQ, the financial technology arm of Voyager Innovations, the Department of Education, and the Land Bank of the Philippines with the support of the Bangko Sentral ng Pilipinas to paved the way for the country's first (which is probably Asia's first), micro savings and insurance program for the more than 23 million public school students from K to Grade 12.
The initiative is in support of government’s financial literacy and inclusion directive. Per the Insurance Commission, overall insurance penetration stood at 1.75% in 2015. With a goal to increase insurance penetration to 3% in 2019, insurers like Sun Life are looking to tap mobile technology to capture the opportunity.
The region will likely see more partnerships such as these as local insurers recognize the benefits of collaboration over going it alone. But if the PwC survey of Malaysian insurers is any indication, that path is long way forward.
Figure 2: Dealing with Fintechs (Malaysia vs the World)
Source: AICB and PwC Malaysia Fintech Survey 2016; PwC Global Fintech Survey 2016