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What's next for InsurTech?

Source: Asia Insurance Review | Apr 2018

Asia InsurTech Technology

Most insurance companies have now come to accept the importance of digital and have sought to incorporate some form of InsurTech as support and enhancement for their operations. But is it sufficient? Can the transformation agenda from analogue to digital progress purely by incorporating digital as a business support function? Or should the concept of integrating InsurTech look beyond the current paradigm of performance metrics and utilise new, forward-looking ones to allow digital as a separate business unit to be judged on its own worth?
By Dawn Sit
The insurance industry is presently at the tail-end of the first phase of its transformation, having been focused on applying digital to create efficiencies and incremental improvements across the business over the last three years. 
   That approach, Mr George Kesselman, President of the InsurTech Asia Association said, has largely been regarded as a “safe bet” to allow insurers to strengthen their bottom line without upsetting traditional distribution channels and partners.
Next phase in digital transformation
But it is now clear that the next phase of transformation must and will see an acceleration of digitalisation and the creation of dedicated business functions that are focused on digital growth. He highlighted that “until that happens, digital will always be marginalised under a ‘cost centre’ label.”
   Mr Kesselman is of the opinion that the transformation agenda will be advanced only if digital is recognised as a business function in companies, and that such recognition “will just be a start”. He went on to predict that eventually, digital should and will become a “horizontal core” that is integrated across insurance operations to “touch every single aspect of the business in the very near future”.
   Using the example of the rapid development of the Chinese market as an example of things to come, he said: “If we look at China as an example of how digital is becoming a robust transformational force within insurance, we can see that there’s a clear delineation of incumbents who are too slow to embrace InsurTech and digital, and those who are quickly learning to put digital at the heart of their business.”
Digital must be set apart
The notion that digital must be set up as and apart as a core function appears to tie in with the views of market players whom Asia Insurance Review spoke with. 
   Ms Phoebe Lee, Head of Digital & Technology Transformation at Allianz Asia Pacific, shared that for them, digital has been set up as a separate core business function to enable its quick and agile operation to keep up with industry developments. “For us to meet the expectations of our new and existing customers, we recognise that digitalisation is a core component of our business. And we continue to develop and implement digital technology to engage in more meaningful ways with our customers.”
   According to her, putting digital at the heart of and across all Allianz’s operations entails not only equipping its traditional agency distribution with the digital tools needed to meet customer needs, but also “expanding our reach in the region and to have Allianz play a larger role in the digital ecosystem”. 
   This, she added, means pursuing active partnerships not only within the financial services industry, but also start-ups and e-commerce players outside of insurance with the potential to reach a wider customer base through their commercial platforms and distribution systems, including ride-hailing platforms Go-Jek and Uber Indonesia, home improvement site and property rental platform Speedrent.
Independent of legacy
No stranger to driving the transformation agenda, Mr Chris Wei, Global Chairman for Aviva Digital and Executive Chairman for Aviva Asia and FPI, explained Aviva’s approach and mindset regarding digitalisation: “We realised early on, that if we want to make an impact, we have to take digital seriously.” 
   Accordingly, Aviva put into place measures to implement the same by establishing their strategic digital activities as a separate business function, supported by a considerable annual investment of GBP100 million (US$140 million) to implement Aviva’s digital transformation, which according to Mr Wei, is the most spent among insurers in the UK.
    “Operationally, carving off digital as a business function of its own enables it to function under separate regulations, a unique culture, with a targeted focus on digital. An independent P&L also helps to foster a stronger sense of responsibility and financial discipline.”
   The insurer took its digitalisation plans a step further by orchestrating an internal cultural, environmental and talent overhaul with its “Digital First” strategy from as early as July 2014 and has since launched three digital garages in London, Singapore and Toronto, dedicated to fostering innovation, collaboration and testing of new insurance ideas.
Weave digital into organisational fabric
Mr Ryan Cheong, Managing Director of Strategy and Transformation for Great Eastern Life Assurance, offered a slightly differed perspective on the growing prevalence of digitalisation in the insurance industry. 
   While technology remains a key enabler for the company’s strategies, Great Eastern’s view on digital is not restricted purely to the introduction of “technology or InsurTech per se”. Instead, the insurer sees digital as an increasingly useful enabler, an “overarching banner to reshape the relationship between customers and insurance”, given that consumers today live a greater portion of their lives in the digital space.
   Great Eastern’s vision, he said, is to make insurance an enjoyable and seamless everyday experience for the customer, while at the same time, it sees the development and growth of digital products and strategies as a way to “constantly challenge ourselves to see how we can bring benefits to customers in their lives beyond insurance solutions”.
   When it comes to driving transformation however, Mr Cheong noted such changes will undoubtedly require “a new DNA to be injected into the company”, and a paradigm shift in thinking. While it has been consistently investing in technology, the Great Eastern aims to inject a different mindset and approach to using technology to solve problems, including “infusing design thinking principles” to tackle pain points, and analysing customer journeys “to create a common customer centric language”.
   To that end, Mr Cheong shared that Great Eastern has “progressively put all of our employees through customer journey workshops, which we believe will help in establishing common vocabularies in customer centricity”.
Digital benchmark
Given the relatively aligned views in treating digital as a separate function, this begs the next question as to what indicators should be adopted in gauging its effectiveness. Mr Kesselman offered his take on this by proposing that digital as a function is best measured against “VC-type metrics rather than traditional business metrics”.
   Taking B2C digital investments as an example, he recommended metrics such as revenue, gross profit, lifetime value, customer acquisition costs, and month-on-month customer growth as specific indicators of performance in relation to digital strategies. However, he cautioned it would be premature, and could possibly jeopardise the function’s long-term orientation, to pit these indicators wholesale, without modification against the same benchmark as regular financials so early in the game.
   In a similar vein, Ms Lee indicated that Allianz does not believe in the efficiency of tracking digital results and progress via traditional KPIs, but rather in more meaningful metrics including the number of innovations brought to market, customer engagement and satisfaction, as well as the growth of its digital partnership and reach, among others.
   While Mr Wei noted that Aviva measures the effectiveness of its digital strategies through key insurance metrics similar to its other business functions, such as annual premium equivalent (APE) and value of new business (VNB), he highlighted that with digital still in its nascent stages, it would also be meaningful to consider operational metrics such as customer registration, usage and visit frequency, number of transactions, time spent and drop-off points, to name a few. 
   He added that these additional data points “enable us to better understand each customer, further refine our approach and systems, and therefore be better-placed to provide customised propositions for every individual”.
   It is perhaps also interesting to note that along with its organisational transformation, Aviva had implemented digital KPIs for all its key executives and geared its hiring efforts to include skillsets that would be in support of a more digital focused future.
   Great Eastern’s approach differed slightly by forming an internal specialist transformation group, called the “Q-branch”, which operates by one main precept and gauge, “If it works, it’s obsolete”. This approach, Mr Cheong said, has borne encouraging results since its introduction. The rationale behind this unique approach is that innovation and change cannot happen outside of the organisation and then be brought back in; such changes have to occur organically and “have to be seeded within the core of what we do”. 
   “As we work on solving problems, we further enlist more colleagues into the teams on an agile basis. We have only one rule with regard to the staff that come onto these teams. They must be 100% full time, working to find solutions to the problems.”
Different means to the same end
It would appear that the approaches taken by some of the major players in Asia’s insurance industry in relation to the adoption, integration and implementation of digital strategies and transformation are largely are in line with what industry experts expect. However, it is exciting to see the different approaches taken by the major players in realising the goal of digitalisation. 
   In the rapidly developing landscape surrounding such digitalisation efforts, choices and product options available to the consumer and insurance market as a whole have never been better. As to which approach espoused by the various players will prevail, it is impossible to say in this current age of disruption and innovation. Nonetheless, we can rest assured that the outcome for the insurance industry as a whole will be the better for it. A 
InsurTech in Asia 2018: 
Transformation phase II
Willis Towers Watson’s recent Q4 InsurTech brief reported a 36% rise in InsurTech investments in 2017 to US$2.3 billion. Insurance companies are evidently continuing to invest heavily in start-ups and technology in keeping up with the InsurTech revolution. 
     We ask the experts where they see the digital trend heading in 2018, as well as their plans for the year ahead.
Less hype, more substance  
“We will see a gradual cooling of hype that has surrounded InsurTech. Many early InsurTech start-ups that have failed to gain significant traction for their propositions will likely rush into a murky territory of raising capital via Initial Coin Offerings (ICOs), putting a final nail in their businesses. 
   Overall, we are entering a ‘disillusionment phase’, where the investment in InsurTech may potentially plateau and possibly even fall. At the same time, there are a small number of start-ups and digital-first insurers that are coming in to transform fundamentals quietly. Expect to see juicy InsurTech fruits of 2018 seeds work by 2021. 
   As for InsurTech Asia, we are focusing on continuing our efforts to boost awareness and collaboration between start-ups and insurers via various programmes around the region. We are also linking up to diverse ecosystems around the world to create a Global InsurTech Alliance that will reduce barriers for InsurTech innovation to grow around the globe, both to and from Asia.”  
– Mr George Kesselman
President, InsurTech Asia Association

Continuous collaboration  
“As InsurTech develops and evolves, we expect it to continue unbundling some of the complexities within insurance. This is not unique to Asia, and can probably be said for InsurTech in general. Digitalisation with a view to making insurance more accessible for more customers in the region has always been part of our regional strategy. We see InsurTech as a key part of the overall ecosystem that Allianz is part of, and we continue to actively collaborate, support and work with many of these start-ups in Asia. 
   For instance, we recently launched Thailand’s first InsurTech incubation programme called ‘Allianz Ayudhya Activator’, a specialised 12-week programme supporting more than a dozen start-ups across the areas of health, mobility and wellness. This builds on similar programmes we have run earlier in the region, and supports Allianz’s agenda to play a larger role in driving innovation in the industry.”  
– Ms Phoebe Lee
Head of Digital & Technology Transformation, Allianz Asia Pacific

Expect greater non-traditional competition
“Insurance has traditionally lagged behind the rest of financial services in terms of technological disruption, but the industry has now reached an inflexion point. 
   We are seeing growing interest in InsurTech – but while many are watching, few are investing seriously due to legacy issues. The past couple of years were still nascent stages, very much around Proof of Concepts and InsurTech buzz. 
   Moving forward, there will be greater non-traditional competition from the likes of Tencent, Alibaba and Amazon – companies with leading capabilities in data analytics and are savvy in engaging customers. To stay relevant, insurers need to be mindful of this shift and actively pursue synergistic partnerships from both within and outside of the industry.
   It was with this mindset that we entered an agreement with Tencent and HillHouse Capital in 2017, to develop a digital insurance company in Hong Kong. 
   We also remain committed to working with start-ups through Aviva Ventures, investing in digital and new technology businesses at the forefront of innovation. The fund has GBP100 million to invest by 2020 and most recently invested in Biofourmis, a Singapore-headquartered HealthTech company. 
   Internally, Aviva will also continue to invest in strengthening our analytics and proposition capabilities, so as to gain greater insight and a broader perspective on our customers.”
– Mr Chris Wei
Global Chairman, Aviva Digital
Executive Chairman, Aviva Asia and FPI

Pragmatism over popularity
“We take a ‘pragmatically bold’ approach towards InsurTech. In other words, we are clear that we should not chase InsurTech to satisfy the popular narrative of the day. We are constantly scanning the landscape for interesting technology solutions or InsurTech companies. Some of them offer solutions that can help us to achieve quantum jumps in capabilities. Others, while the solution may not solve any of our immediate problems, offer a glimpse into future opportunities.”  
 – Mr Ryan Cheong
Managing Director, Strategy and Transformation, Great Eastern Life Assurance
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