The insurance industry, as with other sectors, is facing the Fourth Industrial Revolution and is grappling with a fear of change. However, staying open and flexible in the new 'normal' is where the industry can seize new opportunities for growth, said speakers on the first day yesterday of the inaugural LIMRA-KIRI Insurance Conference hosted by LIMRA and the Korean Insurance Research Institute.
In Korea, over 80% of people are buying insurance and insurers are facing multiple challenges arising from a fast-changing industry landscape, growing market saturation and having to meet potential new risk-based capital ratios. Harnessing InsurTech will be the turning point for insurance, said Mr Soo-Chang Lee, Chairman of the Korea Life Insurance Association (KLIA). And in this new 4th revolution of connectivity and convergence, various parties, regulators and academia included, must join efforts to optimise and create an ecosystem.
“But InsurTech will not solve all problems… Companies cannot imagine what all the changes from the fourth industrial revolution will look like. Thus, they must look for new opportunities for growth, remain open-minded and flexible and create new value for the industry,” said Mr Lee.
Meanwhile, Mr Yongbeom Kim, Vice Chairman of the Financial Services Commission, highlighted some additional trends that would have a major impact on the world economy. One of the biggest game changers in the global economic landscape that has not been thoroughly appreciated and analysed by the intelligentsia, he noted, is the emergence of “mega countries” in the developing world as active consumers of goods and services of the global community.
Just looking at China and India, which make up 40% of the world population, the people in these countries are now key consumers rather than passive participants. “At the micro level we see companies adopting and taking advantage of this change; however, many researchers and regulators still view the world through the spectrum of the G7,” he said.
Another thing to pay attention to is not just change and technology in itself, but also the pace of such change. He cited the “VHS versus Betamax” video standards competition in the past, which was eventually won by the VHS format. But not long after VHS won, tapes were replaced by discs.
“Has anyone here bought CDs lately? Thus, we have to consider not only advancements in technology but which technology, and how long each will last. Analysing the pace of change in technology is important in helping us to prepare for our future,” said Mr Kim, citing Korea as a particularly relevant example, as it is known to be at the forefront of technology and mobile development.
Finally, he highlighted the challenge of the impact of zero interest rates around the world and said that the industry needed to consider how long this era will last, and what will be the impact to the real economy and financial markets around the world.
He noted that as a student, he was told that fiscal policy is the main tool to fight business cycles. “But we now know that free money is a very powerful tool, especially with global coordination. We now have a formula to fight global recession.
“Some people say 10 years is enough (for zero interest rates) and we now need to normalise, but I ask, what is ‘normal’ now?” he said.
He added that in Korea, the biggest disruption to the insurance industry was when the ‘normal’ interest rate environment was redefined—yet the industry is only now looking at this condition on a global basis, and the impact on the sector would be hugley profound.
Mr Kim’s comments on interest rates followed recent reports that the Bank of Korea is expected to raise rates for the first time in over six years later this month, though figures are not yet known.
“I feel like I’ve given you more questions than answers, but that’s the reality—to call upon you as the audience to find the unknown factors impacting us today,” he quipped.
The conference, which addresses the theme of “Inventing the Future of Insurance” and features many topics on innovation and technology, is held in Seoul and has drawn some 200 participants from 13 countries. It ends today.