A new decade of the insurance industry in East Asia

It has already been more than six months since the world began fighting against the COVID-19 pandemic. Due to this unfortunate situation that forced many events to be cancelled and postponed, we were also unable to proceed with the 30th East Asian Insurance Congress initially scheduled for the end of August 2020 in Seoul.

It was indeed a painful decision for us to cancel and postpone the event, being the chief delegate and a member of the Seoul organising committee, as we dedicated great passion for the preparation of EAIC 2020. In this regard, we extend our gratitude to Asia Insurance Review for allowing us to embrace the current circumstances.

Even though we are unable to gather in person, the EAIC e-festival is truly a valuable opportunity for the 12 member cities of East Asia to share the latest insurance trends as well as future plans. It is all the more meaningful as we will celebrate the 14th East Asian Insurance Day together and reaffirm the significance of insurance in our society.

Progress and prospects for general insurance

Last year, Korea’s general insurance industry ranked number seven in the world in terms of premium income with KRW83.8tn which grew 4.4% year-on-year. The rise of premium was driven by the growth of general liability and long-term guarantee-type insurance. In particular, the implementation of new compulsory liability coverage requirements boosted the growth of general liability insurance market.

However, there still remain concerns over whether such growth could be sustained in the future. These stem from various issues such as market saturation, decreasing investment returns due to low interest rate, and certain lines’ loss ratios in risk of worsening.

General insurers in Korea are working vigorously to develop new products and services that satisfy consumer needs. They are trying to leverage advanced technologies such as AI and big data to innovate every step of the insurance value chain. At the same time, they are also mulling over new investment strategies that will maintain their financial health against the current environment of low interest rate.

Furthermore, insurers are also motivated to promote a culture of reasonable and fair medical consumption. We have been collaborating with relevant authorities to discourage unnecessarily exaggerated claims for medical indemnity and auto insurance products.

EAIC Congress 2022 in Seoul

The theme of EAIC 2020 was initially set as ‘2020, A Brave New Decade for Insurance’ as we mark the arrival of a new decade. I would be more than happy to discuss Seoul’s objectives and gain insight into other 11 member cities’ goals and tasks for the next 10 years.

At EAIC 2022 in Seoul, we will be able to focus on the role and vision of insurance amid the new paradigms. I look forward to discussing the accelerated shift to digital economy and contactless activities forced by the pandemic. The Seoul organising committee will ensure to prepare an even more fruitful and interesting congress since it will be held after four years of absence.

I sincerely wish for all of your health and safety. Let’s get through this together and meet at EAIC 2022 in Seoul. Thank you.

Challenges facing Taiwan’s insurance industry

The pandemic is negatively affecting global economic growth. According to World Bank forecasts, the global economy will shrink by 5.2% this year. Taiwan fortunately has no community spread. Its success in controlling the spread of COVID-19 has minimised the impact on its economy. However, amid bleak domestic demand and downbeat export activities, the impact on food services and tourism industry are still significant.

There is also a worrisome growth in the level of unemployment to consider. According to the initial estimate of the directorate-general of budget and statistics executive Yuan (cabinet), Taiwan’s economy shrank 0.58% year-on-year in the second quarter of 2020, less than initially thought.

The non-life insurance industry enjoyed growth of 5.82% in the first half of 2020. Direct written premium increased to TWD95.9bn, as compared with the same period of 2019’s TWD90.6nn. Direct premium income for the whole year of 2019 amounted to TWD177.1bn, a growth of 6.96%, which was higher than the growth of 2018’s of 5.68%.

The growth was attributed to the increase in automobile insurance and engineering insurance. Direct written premium of the life insurance industry for the first six month of 2020 reduced by 8.96% to TWD1.6tn from the same period of 2019’s TWD1.76tn. Throughout 2019, the total premium income of life insurance industry amounted to TWD3.47tn, a yearly reduction of 1.28% from 2018’s TWD3.51tn. The reduction was mainly caused by the drop in premium income of unit-linked (investment) insurance contracts.

In addition to the impact of the unpredicted COVID-19 pandemic, there are enormous challenges Taiwan insurance industry is facing. These include regulatory and compliance changes, long-term low interest rates, an ageing population, the FinTech wave and requirements to comply with international standards, such as IFRS17. Moreover, the ongoing Sino-US trade war and political wrestling have added to market uncertainties. Under the circumstances, how the insurance industry reacts to the changing environment and maintains a stable development of their insurance business will be the issue for them to endeavour and progress ahead.

EAIC’s threefold objectives are to exchange idea and information on insurance, discuss areas of mutual interest in relation to East Asian economic conditions, and to foster regional understanding and friendships. The COVID-19 outbreak is causing widespread concern and increasing economic hardship for consumers, businesses and communities in our region. It has become important for the insurance industry in the EAIC markets to co-ordinate and work in unison to implement control measures to overcome this difficult time. From the 2003 SARS epidemic, Taiwan’s health authority has gained first-hand experience in combating pandemic. We are ready to share what has worked for us.

In Taiwan, our National Health Command Center (NHCC) holds daily press conferences to keep the public updated on the COVID-19 pandemic. They coordinated different industries to boost our daily mask production from 1.8m to 15m.

Citizens strictly follow the guideline of social distancing and face mask rationing. Border control was implemented immediately in response to new developments of the pandemic. The civil service, in collaboration with the IT Community, utilised open data to keep the people informed of the maskinventories in real time. Owing to these measures, Taiwan has not locked down any cities. We would love to share our success in controlling the spread of COVID-19 with the EAIC community to prevent more people from losing their jobs or life.

COVID-19 Update – Thailand, Malaysia and South Korea

Thailand has a total number of 3402 cases as of 26 August with 58 fatalities and 3229 recoveries to date. The country experienced a peak in the number of COVID-19 cases from March-April this year and has been recording less than 10 cases per day for the past week. For the past three months, the country has been reporting only imported cases with no locally transmitted COVID-19 infection being detected.

Thailand has been coping with the pandemic by enforcing a state of emergency from March and has extended the order till the end of September to hinder a potential second wave of COVID-19 infections.

While the country continues to enforce strict border measures, it lifted a nationwide curfew on 1 July which allows most businesses and activities to resume with social distancing and hygiene measures in place.

Malaysia has a total number of 9285 cases as of 26 August with 125 fatalities and 8971 recoveries to date. The country has been recording below 20 cases per day for the past week.

To control the COVID-19 pandemic, the Malaysian gover nment has imposed a ‘Recovery Movement Control Order’ which is currently effective until 31 August.

Under this order, the government has eased some previous restrictions and now allows travel within most areas of Malaysia and additional businesses to resume operations. It has also removed restrictions on operating hours for some businesses where those were previously in place and allows. However, restrictions remain in place around gatherings and private vehicles (apart from taxis and e-hailing) are restricted to carrying members of a single household.

The government currently requires the use of face masks in places such as public transport, social and religious gatherings and business including stores, restaurants and shopping centres.

Malaysia also has strict border measures in place and restricts its nationals from leaving the country.

South Korea has a total number of 18,265 cases as of 26 August with 312 fatalities and 14,368 recoveries to date. With the country facing its second wave of infections, 2,600 cases were reported in the last 10 days with local infections rising daily. Most of the local cases are linked to flareups at churches, schools and traditional markets.

South Korea coped with the initial outbreak of the coronavirus in February with rapid testing and contact tracing as well as enforcing a government order for social distancing. However, it has now enforced strict restrictive measures during its current second COVID-19 wave.

The government recently imposed elevated social distancing measures, ordered masks to be worn indoors and outdoors as well as closed most schools in the capital city Seoul.

Across the country, the government recently banned large gatherings, closed beaches, shut nightspots and churches and removed fans from professional sports all. The government also warned that a stricter lockdown could be enforced soon.

Ecosystems for innovation

Insurers today need to respond to the growing demand from consumers for new, anywhere/anytime products. But before insurers can create these innovative products, they will need to create new ecosystems of providers and services – some of which may have no connection with the insurance industry as we know it.

This is already being done by two Chinabased insurers. One, Zhong An, is totally digital and online, meaning it operates with neither agents nor branch offices. Instead, Zhong An runs as a platform, complete with an ecosystem for services and products to both consumers and commercial customers. For example, that lets the insurer offer a service via the ridesharing site Grab that provides auto insurance for single car rides. And by working with other ecosystem partners, Zhong An can insure a wide range of activities, including shopping returns, merchant performance bonds, even airline flight delays.

The other company, Ping An, works both online and offline to provide an array of financial services offerings, including insurance, banking, brokerage services and asset management. Ping An provides insurance for healthcare, real estate and cars and operates both FinTech and health-tech businesses. The insurer does this with two elements: An online platform – combining AI, facial recognition, blockchain, the cloud and other technologies – and an ecosystem of partners.

Bold steps to the future

The insurance company of the future will develop new products and mitigate risk based on insights derived from its data. Such insurers will be capable of sensing data from all kinds of environments. They will also process this data along with other types of information, such as commercial and consumer data, as well as historical and current data.

Tomorrow’s insurers will also provide consumers with personalised and dynamic products and services. They will set up environments to collect data from consumers continually too, so they can inform them about new products and improved services.

To move toward that future, insurers need to do more than simply adopt individual technologies. Instead, they should create truly innovative platforms of converged technologies, then augment these with an ecosystem of equally innovative companies. In this way, insurers can create innovative business models that allow them to enter new markets, drive new revenue streams and serve customers’ changing needs.

A new kind of bancassurance?

Banks and insurers are no strangers to working together – after all, bancassurance is a popular and successful avenue for distribution amongst insurers in Asia, making up 30% of total new life insurance business in the region in 2019. Many attribute the success of bancassurance in Asia – the concept has never really taken off in Europe or the US – to the high regard the Asian populace gives banks. Banks are trustworthy and dependable, and the products they sell you are likewise.

But the lines between banking, insurance and technology get even more blurred as we look at the potential that exists in Grab or GoJek, two ride-hailing-turned-super apps that already offer insurance and e-wallets on the same platform. Grab is even vying for a digital banking license in Singapore, in partnership with local telco Singtel.

According to an official statement, Grab and Singtel’s digital bank “will aim to cater to the needs of digital-first consumers, who have come to expect greater convenience and personalisation, and SMEs which cite lack of access to credit as a key pain point”.

Grab Financial Group senior managing director Reuben Lai said, “In the past two years, we have launched and scaled financial services such as e-money, lending and insurance distribution into Southeast Asia’s largest FinTech ecosystem. The natural next step is to build a truly customer-centric digital bank that will deliver a variety of banking and financial services that are accessible, transparent and affordable.”

Another consortium aiming for one of Singapore’s digital banking licenses is led by technology company Razer, which also launched their own e-wallet in 2018. Razer’s consortium includes digital insurer FWD as one of its five partners and could possibly open up avenues for insurers to reach out to youths who are generally underserved by financial services.