Old is Gold

By Ridwan Abbas

The ageing of societies is a phenomenon that is happening at an accelerating rate around the world, and especially here in Asia – with the number of people above 65 projected to reach 450m in the region by 2035. Two-thirds of this population will live in China, while South Korea, Singapore, Thailand and Hong Kong are among the world’s fastest ageing societies.

In a recent report by Swiss Re titled ‘Who pays for ageing?’, insurance has only a 5% share globally on average when it comes to funding the needs of seniors. The other 95% is paid for by the state, individual savings or the family.

“The current private insurance’s share of the average ageing wallet is extremely low – 7% in Japan, 4% in Korea, and only 2% in China. This is a global trend rather than merely an Asia problem in funding the needs of the ageing population,” Swiss Re managing director – head of life and health globals and South Asia Marianne Gilchrist told Asia Insurance Review.

While governments are keen to spread the financing load to the private sector, the take-up for private insurance is still low and there is a lot more to be done. Pacific Life Re managing director (Asia and Australia) Andrew Gill believes the industry needs to put in more resources and thought in addressing the unmet needs of seniors.

“Insurance products in the market today generally cater to young people whether explicitly through product features or implicitly through product design. For example, there aren’t many annuity products in the market and underwriting questions ask about conditions that are prevalent in seniors but doesn’t mean they are uninsurable lives.

“Overall, this presents a big opportunity for insurers and reinsurers to introduce protection products that are more suited for this segment of society,” he said.

Segmenting the market

It’s been said that 60 is the new 40. Today’s 60-year-olds certainly cannot be compared to sexagenarians of previous generations. In much of Asia, they are generally more active than those in the past and are in better physical health.

On the whole, ‘seniors’ could be viewed as at least two distinct cohorts with their own specific market characteristics: Those of ages approximately 55 to 70 and those older than 70. And each of these two groups represent various levels of physical, mental and financial health.

And while technology is a big part of the solution when it comes to serving the health needs of seniors, the generation currently over 80 may typically be less comfortable with IT. For them, it may be a question of training caregivers to use the technology on their behalf.

Products and services

From a product perspective, the industry has been making progress to address some of the needs of seniors in Asia. There are now dementia products in markets like Korea and Japan, as well as family-focused products in Hong Kong and Singapore that cover multiple generations including aged parents, said Ms Gilchrist.

Innovation has to be about making the products simpler so that it is easier for people to understand and relate to, felt Mr Gill.

“In Korea for example, the industry has launched simplified (3/2/1 underwriting questions) critical illness products particularly to provide protection for this group. The products also include riders such as nursing care, surgery, and other benefits that are relevant for this group.”

And in a job market where retaining senior talent and building an age-friendly workplace will become a major priority given the ageing trend, this could potentially be another area of opportunity for insurers.

Long-term care insurance

Despite several attempts to create demand for traditional long-term care insurance, the product has had minimal success in Asia – with the exception of Japan.

“One of the obvious market conditions that challenges the demand for long-term care protection in some countries in Asia such as Singapore, Hong Kong and Taiwan, is the easy access to foreign fulltime domestic helpers. Many consumers prefer at-home care provided by helpers rather than nursing home care,” said Ms Gilchrist.

“In other Asian countries like Japan and Korea where hiring foreign domestic helpers is less common and more expensive, we expect a more acute demand for holistic long-term care insurance,” she said.

Beyond paying claims

Today, insurers are increasingly looking to wrap added services to their products, and this is particularly relevant to seniors whose needs range beyond merely a financial pay out. This could extend from ageing in good health, ageing in place or remaining connected to society.

Disease prevention and wellness is another area where life (re)insurers have been chipping away at for some time. Chronic diseases, which are avoidable, are on the rise globally. Hence, insurance products are being designed with prevention in mind.

Besides services for physical health, monitoring of psychological wellbeing is another key area that requires attention.

“Services that support the social and emotional aspects of retired people and their caregivers are where we would like to see further developments, as it can be physically and emotionally stressful for family members when taking care of their frail or sick parents,” said Mr Gill.

Bancassurance: What’s next in Asia’s markets?

By EY Asia-Pacific insurance transactions leader Dustin Ball

Over the last six years, multiple billion-dollar bancassurance deals have been creating headlines and pushing up the proportion of insurance products in the suite of wealth management offerings sold by Asia’s banks. Although the region has yet to reach the 38% penetration levels in Europe for life insurance, new deals and renewals of original alliances are extending the reach of bancassurance into new markets.

Notably, bancassurance has not come at the expense of agents but, instead, has helped grow the overall market.

Bancassurance inroads

Bancassurance channels now have significant penetration right across Asia, with Vietnam shaping up as the next big battle ground. With lots of upside, the market is continuing to surge, driven by economic growth, rising incomes and expanding populations that are increasingly aware of the need for, and value of, insurance products.

 The exception is China, where the rise of the bancassurance channel has been slowed down recently by the new capital regime, which penalises short-term, high money value products, and misleading sales practices that have drawn public scrutiny and tarnished the industry’s image.

However, with new regulations to curb mis-selling in place, the right-sized industry looks set to get back on its previous growth path.

Digital will drive growth – but branch channels will remain important

Throughout the region, insurers are increasingly looking to digital transformation to innovate product distribution, drive operational efficiency, and improve the experience for customers and sales intermediaries. For many insurers, large-scale transformation programmes, particularly in automating back-office operations and adopting integrated digital platforms are the answer to shrinking margins and a path to creating value for customers in innovative ways.

 However, bank branches are still critical in selling insurance. Commanding strong customer connections, these traditional channels will continue to drive a major portion of life insurance sales in the years to come. So, rather than being completely taken over by direct digital channels, existing branch channels must be digitally enabled and integrated with the rest of the business.

Where will product innovation lead?

Leading bancassurance channels will enhance their reach through digital platforms, leveraging AI and robo-solutions to improve acquisition costs. We’ll soon see the rise of analytics to help predict what a customer should be buying and might want to buy – and which customers to target at what time with what product.

How can insurers escape the mis-selling stigma?

Insurers should also be mindful that the region’s considerable bancassurance growth potential will be tempered by regulation to curb mis-selling through the bank channel – especially in the light of fallout from the findings of Australia’s Royal Commission. The report has had a noticeable secondary effect as regulators throughout Asia are seeking to ensure that the sales practices in their markets are meeting the needs of customers.

In this environment, insurers must ensure the bancassurance sales culture focuses on good customer outcomes and not on meeting sales targets alone. Also, as customers become increasingly aware of their data privacy rights, insurers must take every possible measure to protect consumer data – and be seen doing so.

Yet, despite these challenges, the mid-term outlook for bancassurance remains positive. Even in a digital world, the channel will remain relevant as insurance sales continue to grow across the region.

The views reflected in this article are those of the author and do not necessarily reflect the views of the global EY organisation or its member firms.