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Apr 2024

Reflecting on 2017, hoping on 2018

Source: AIR | Dec 2017

Asia InsurTech

As we look back at 2017, what will you take from it? The past year is probably the most exciting one for the financial services industry yet, if we may say so ourselves. Despite the pool of plentiful insights gleaned from digital movers and shakers, we’ve seen both leaders and laggards; the latter, very much entrenched in legacy and preferring to stick with the “same old, same old” that have served them well since the start. But the question is: For how long more can the old model sustain, against the digital disruption at their doorsteps?
By Chia Hoe Seng and Dawn Sit
We’ve met and heard from our fair share of people, both entering and leaving the market. Newcomers to insurance have frankly expressed shock at the industry’s approach to fresh ideas and change adoption, which is generally sluggishness; priority appears to be on ensuring BAU. But while these market newbies – full of life and energy (pun intended) – bring with them fresh thoughts, eager to help insurance companies regain relevance, they still lack understanding in insurance fundamentals, particularly the technical and regulatory intricacies of the business.
   Those who exited on the other hand, leave behind knowledge vacuums that are not easily filled. While some have retired to reap the fruits of their labour, others left to seek new challenges elsewhere. New challenges elsewhere you say? We question if this is a testament to the statement that the insurance sector lacks the agility and willingness to change. But there’s an upside to this.
   Overall, we see a significant lack of chemistry between new entrants and incumbents. Needless to say, cross-industry collaborations are quite a rare and treasured sight. So this is where those who have left insurance fit in as perfect ambassadors – bridging that gap between their new ventures and old strongholds to drive greater cross-collaboration.
   Gone are the days where one looks internally to innovate and change. The new world is one of collaboration – the more one partners and shares, the more one becomes enlightened and competitive. There are simply no more secrets in the new world economy.
Being “digital”
Digital and innovation are such broad and loosely-used terms – but what exactly do they mean to you and your organisation?
   By its traditional definition, digital is an adjective expressed as a series of binary digits, and that probably doesn’t make sense in our context. To some industry veterans, their idea of digital could simply be having a website. But approach a millennial working on social media campaigns, they might take weeks, or even months to explain the purpose and meaning of their work.
   Meanwhile, the concept of innovation also differs across markets and organisations. From our observation, many legacy insurers count the automation of manual processes as innovation. Granted, that could be a first step. The worry is that the transformation stops there.
   At the end of the day, an organisation has to evaluate what these concepts mean to them – internally as they strive for operational efficiency, and externally as they seek to compete with peers. Otherwise, to quote an industry champion: “In the absence of innovation, the default is size. If you’re not big, you’re screwed.”
   The way we see it? You’re either digital or you’re not – there is no going.
In search of meaningful solutions
According to KPMG, global investment in FinTechs hit a whopping US$8.2 billion across 274 deals in 3Q2017, while Asia accounted for US$1.2 billion (41 deals). In the InsurTech space specifically, Willis Towers Watson reported global funding volume for 3Q2017 at US$312 million, a 36% rise from the same period last year. Startup activity in China and emerging Asia, WTW said, is certainly on the rise.
   Despite so much capital pouring into new technologies today, we’ve yet to see a standout solution that has impacted insurance the way tech giants like Google and Apple have done so for consumer markets. Sure, there were a few that seemed promising during their debut; but as monetary payoffs began to be embedded within goals, these ventures resulted in products that reflected and delivered what shareholders wanted, rather than staying true to original intentions.
   That being said, we have encountered meaningful InsurTech solutions that have thrived and scaled reasonably well. And we think their success stems from the founders’ personal struggles and conviction to leverage technology and improve the individual’s and society’s well-being. From the get-go, there needs to be a clear vision – what is to be achieved and where does one place in the value chain – that remains the core of the business. Startups should take note not to succumb to neither investor nor insurer pressures.
Crystal-ball gazing (of sorts)
So as we look to 2018, what will you bring to it? As InsurTech continues to gain even more traction, here’s what we expect to see in the New Year:
  1. The rise of nano insurance and its integration into the digital ecosystem;
  2. More non-Asian start-ups coming to Asia;
  3. Increase in Chinese firms’ presence in Southeast Asia;
  4. Uptick in Japanese insurers’ InsurTech involvement;
  5. InsurTech taking off in Korea; and
  6. The decline of innovation labs
   Why the decline of innovation labs one may ask? Innovation labs have served insurers as a starting point on their intent to innovate. But beyond the hype, there has been intense pressure from management to deliver returns on their investment in these incubators, a task more challenging than insurers would care to admit. However, the fault doesn’t lie entirely with the innovation team as internally, many organisations are simply not ready for digital transformation for various reasons.
   Successful organisations don’t talk about their labs anymore, for the simple reason that they have successfully integrated the innovation team into their ecosystem. Case in point: a German insurer recently announced a changeover of its in-house incubator into a venture capital investment arm with the aim to bolster its digital and core technology. That being said, every company has its unique set of challenges and change takes time; after all, Rome wasn’t built in a day. But what is crucial, we say, is the will to transform.
   So, are you ready for 2018? A 
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