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Jan 2021

ASEAN: Insurers tread carefully when embracing digitalisation

Source: Asia Insurance Review | Nov 2019

The proprietary ‘going it alone’ digitisation of the existing value chain is the most preferred strategic approach to preparing for the digital future for a majority of non-life insurers in ASEAN, according to a regional survey. 
In the report ‘ASEAN Insurance Pulse 2019’ published by Malaysian Re and Dr Schanz, Alms & Company, going it alone is believed to add most immediate value, as it prioritises existing and well-proven business models. In addition, it is expected to allow insurers to defend the customer interface against challenges from disruptors and avoid being ‘relegated’ to mere risk carriers. 
Almost equally popular are hybrid strategies which combine proprietary efforts with some form of collaboration with external parties, be it technology start-ups or established platforms. 
The findings of the report are based on structured interviews with executives representing 43 regional and international (re)insurance companies, intermediaries, policy makers and trade associations. The interviews were conducted by Dr Schanz, Alms & Company, a Zurich-based research, communication and business development consultancy, from June to August 2019.
The survey findings also show:
  • A frequently mentioned driver of insurance digitalisation in the ASEAN region is the desire to bring down the cost of acquisition which, in some countries, can reach up to 20% of premium income. 
  • More than 80% of interviewees describe the state of their own organisation’s level of digitalisation as somewhat advanced, including online sales and web-based claims management capabilities. A number of executives point to a severe lack of IT and data sciences talent as a key constraint for their digitalisation efforts.
  • Over the next two years, distribution and marketing are viewed as those elements of the insurance value chain to be most affected by digitalisation. 
  • Over the next 5-10 years, the underwriting and claims functions are expected to be reshaped by advanced analytics which are believed to enable breakthroughs in risk-based pricing and the detection of fraudulent claims, for example. 
  • Most executive interviewees agree that the travel, personal accident and motor lines of business will be most immediately impacted by digitalisation. These products are relatively simple and exhibit a higher transactional frequency than others. There is also a broad agreement that in commercial lines the effects of digitalisation will not materialise any time soon. These classes are generally very much broker-driven and characterised by a high degree of tailoring and differentiation. 
  • The short-term impact of digitalisation on the premium growth trajectory is expected to be modestly positive, with a maximum additional annual premium growth of 5% anticipated by the majority of the executives polled. Online sales are growing rapidly but remain marginal in the overall distribution mix, with shares of less than 5% in most ASEAN countries. 
  • Interviewees are less upbeat on the impact of digitalisation on technical profitability. A majority expects no impact whatsoever in the short-run – a few interviewees even hint at a negative effect given massive investment needs. A 
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