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Hong Kong - Innovation key to success, says regulator

Source: Asia Insurance Review | Feb 2016

Hong Kong’s Insurance Commissioner John Leung says innovation is not a luxury but a must to survive in an ultra-competitive home market. And insurers have responded in a positive way by engaging customers with more value-added services. 
By Ridwan Abbas
Q: What are your thoughts on the level of innovation in the Hong Kong market?
I have seen Hong Kong insurers develop new products and services that are more customer-centric, and using technologies to make the experience of taking out insurance and making claims easier, simpler, more transparent and less expensive. Online platforms and the social media are also widely and effectively used in the sales distribution channels. 
   For example, some insurers have introduced health insurance products that offer premium discounts to clients who participate in health and lifestyle management programmes.  Innovative devices and mobile apps are used to track fitness activities of the clients so as to encourage them to exercise every day. It demonstrates how insurers have utilised technology to promote healthier lifestyles in society, creating value for customers through customised premium setting, and exploring new business opportunities within the younger and more tech-savvy generation.  The underwriting risks of insurers will also improve as a result.
   Some insurers have developed online platforms that allow customers to purchase general insurance policies on the Internet and let customers manage policies and submit policy changes and claims online conveniently.
   I also notice that some insurers have developed new products that aim to fill protection gaps at different important life stages such as comprehensive pregnancy insurance.  These products help the public in coping with different risks.
Q: How can regulations foster innovation? 
I think the main challenge for the regulator is how to formulate a policy response that will embrace innovative business models enabled by new technologies, without compromising customer protection and tilting a level playing field.  
   The Hong Kong Federation of Insurers has set up a Task Force on Financial Technology Hub recently. Our office will work closely with the Task Force to explore how regulations can be adapted to facilitate innovation in the insurance industry so as to improve customer experience and reduce costs.
   On the broader front of promoting financial technology, Hong Kong has set up a Steering Group on Financial Technology in 2015. The Government is working with the financial sector, scientific research institutions and regulatory authorities to develop Hong Kong into a financial technology hub by providing policies and an environment conducive to the development of the industry. 
Q: What are the main drivers for innovation in the Hong Kong market? 
I think the main drivers of innovation for insurers in Hong Kong are customer demands, technology innovation and an open and competitive market.  
   Customers now demand more innovative, flexible and individualised solutions from their insurance providers.
   Technology innovation means that new sources of data and analytical techniques can be used.  It also facilitates the development of new distribution channels and interfaces with customers.  
   Given the open and competitive insurance market, insurers have to continue to strive to innovate to maintain their competitive edge.  Otherwise, they will fall behind their competitors.
Q: What are some areas where insurers can innovate or enhance current practices? 
Underwriting risk is an analysis of historical patterns of behaviour and an estimation of future trend. Development and growth of data tracking and mining have transformed the underwriting approaches of insurers.
   In the Big Data era, insurers with stronger processing power are expected to excel through adoption of sophisticated risk management models that measure and manage risks more accurately. 
   Through these new practices, I envisage that insurers could operate at lower costs, offer a broader spectrum of products and reduce premium charges for customers.
   Another area would be providing better digital support to agents and brokers in the sales process. Insurers may use the underlying analytics to guide agents from a customer-centric perspective in selling products.
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