InsurTech could spur total cost savings of around US$300 billion a year for the Asian insurance industry by 2025, according to Swiss global financial services company, UBS, in its report "InsurTech - Shifting Asia".
Competitive pressures should drive insurers to pass on a majority of the cost savings to customers, but UBS still expects the overall profits of Asian insurers to increase by around $55 billion a year.
In UBS's view, the biggest winners from the rise and mainstream adoption of InsurTech will be consumers – they will have more personalised solutions and better customer service for lower total costs. Insurers who are quick to adapt, meanwhile, will likely benefit from cost savings, improved profit margins and enhanced brand loyalty, perception and reputation. Incumbent insurers slow to adapt to digital transformation could see rapid market share erosion.
But like all technology-driven shifts, this will come with costs to employment; UBS believes that 1.5 million jobs in Asia’s insurance industry are at risk of being made redundant by new technological applications in the medium term, primarily in the operations and administrative support areas. While the agency channel will continue to play a key role, particularly in emerging Asia, UBS expects agency forces to gradually shrink as digital distribution becomes more popular.
The disruption by InsurTech may be more profound in emerging Asia than in the rest of the world. This mostly youthful growth region is very tech savvy but heavily underinsured, a result of low awareness, low incomes and low insurer penetration. With insurance processes increasingly gravitating to mobile platforms, and insurers’ ability to lower premiums thanks to improved efficiencies in distribution, risk pricing and product development, InsurTech has the potential to structurally alter the way Asian consumers view insurance – from a needless purchase to a necessary one.
Meanwhile, Asia is one of the most underpenetrated insurance markets in the world. Emerging Asia held 43% of the world’s population but only 13% of total premiums in 2016. Traditional distribution models are costly and inefficient in emerging Asia due to its large populations and geographical dispersions.
UBS expects InsurTech to accelerate the penetration of insurance protection in Asia. As the population of uninsured decreases, the burden on government resources should reduce meaningfully, freeing up excess funding for other public services such as education and infrastructure and benefiting the entire society.
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. Differentiation in pricing, services and customer engagement can induce meaningful shifts in market share in the medium term.
Incentive-based products could lead to positive shifts in customer behaviours. As these products become more prevalent, such changes could potentially occur en masse and have far-reaching implications. Even marginal changes in the prevalence of fire and car accidents, healthcare costs and employee productivity can yield immense benefit to society.