Despite the recent slowdown in China’s economy and a reduced growth forecast, speakers at the FT Asia Insurance Summit in Hong Kong remained optimistic in their views on China’s and the region’s growth potential.
Sluggish growth not China-specific
Economic keynote speaker Michael Spencer, Chief Economist and Head of Research, Asia Pacific at Deutsche Bank, said that China’s growth remains stable, albeit at a slower pace than expected. But the sluggish growth was not a China-specific issue; globally, export growth has also been “extraordinarily low”, he said.
Notwithstanding, Mr Spencer noted that the resilience of the Chinese economy has been “underappreciated” and expects that the market will see “stable to slightly higher growth in the quarters ahead”.
Many concurred that the Chinese insurance market still held significant opportunities though the challenge lies in finding ways to access the opportunities. Mr Keith Thomas, Zurich’s CEO of Global Corporate, Asia Pacific, said that growth-wise, it is too tough and competitive for foreign insurers to grow organically. Foreign players would likely need to look into partnering with local players to get a foothold into the market, he said.
Robust regulatory framework as safeguard to challenges
Meanwhile, on the regulatory front, Hong Kong Insurance Commissioner John Leung similarly noted the recent volatilities and fluctuations in the financial markets show that there remain many uncertainties in the global financial environment. As such, he stressed the need for vigilance and a robust regulatory framework to ensure that the industry can rise to all sorts of challenges.
As he gave an update on the regulatory developments in Hong Kong, he noted that some enhanced regulations may increase the compliance costs and “might affect profitability in the short term” as some of the new requirements may involve product revamp, greater transparency, better illustrations, and significant changes to the sales process “or even a paradigm shift in the mindset of insurers and intermediaries”.
However, he added: “But if we take a longer term view, and insurance, by its very nature, is a long-term business, the new regulatory requirements can be conducive to the healthy and sustainable long-term growth of the industry.”
RBC here to stay
Expressing similar views, former Thailand’s Office of Insurance Commission Secretary-General Pravej Ongartsittigul said that the RBC framework is “here to stay” and is now a starting point for countries in the region – for example Myanmar – that are starting to develop their respective insurance industries.
He noted that insurance regulation is “probably growing faster in Asia than anywhere in the world” and this is so as to enable the countries to attract reinsurance capacity and “we need to be in-line with international standards”.
However, Mr Moung Mo Lee, Managing Director, Analytics, A.M. Best Asia Pacific, noted that some fine tuning to regulations will be needed and regulators will have to be cautious of implementing too stringent requirements that may in turn stifle growth.
Ms Jaya Taylor, Regional Head of Legal & Compliance, Asia, at Allianz Global Corporate & Specialty, noted that there needs to be regular dialogues between key stakeholders so that when the time comes for implementation, there is an understanding and no surprises.
Effective distribution to differentiate
Turning to discuss effective distribution and customer outreach, Mr Matthew Cannock, Managing Director, Markel International Singapore, said that insurers belong in a very competitive market with very similar products. As such, distribution is one crucial way for players to differentiate themselves and to stand out.
Meanwhile, insurers must also work on innovating in the digital space. Aviva Asia Chief Strategy Officer Alex Kimura said that insurers are increasingly working with external organisations to bring data together; while analysing existing data is not difficult, the challenge remains in “making it more predictive”.
|Current digital challenge is in “putting data to good use”
There is currently no insurance company at the forefront when it comes to “putting data to good use”, said Mr Alex Kimura, Chief Strategy Officer, Aviva Asia, on the sidelines of the FT Asia Insurance Summit. And by putting data to good use, he means the industry has yet to find a way to effectively mould data collected to predictively craft propositions for its customers.
Aviva, which has boldly stated their strategy to be “digital first”, is currently working on building up different product offerings – whether savings, protection or investment.
Mr Kimura said the insurer first builds them out as a “core” before “adding ancillary propositions around it”. These ancillary propositions will depend on the situation and life stage at which the individual customer is at.
“Take for example a savings product and the current ‘one-child syndrome’ in Asia, ie low birth rates in Singapore, Hong Kong etc. With one child, parents will naturally focus on, invest in and exhaust all their financial resources on that one child. So we need to look into how to optimise the situation and assist families to bring their child up to be a successful adult – that’s one of our propositions,” he said.