There remains lots of adjusting to be done on the part of insurers as they try to harness the potential of FinTech, innovate to underwrite new risks, gain a deeper understanding of customers and leverage on the capabilities of IoT and Big Data while staying vigilant when it comes to the overarching threat of cyber risk. And add to that, rising economic and geopolitical risks, and insurance leaders today find themselves navigating their firms through complex yet exciting times.
Leadership in tough times
Today more than ever, CEOs need to show leadership to navigate their organisations through rough terrains. And while it is easy to be distracted by the road bumps, effective leaders need to always have the destination in sight, said Mr David Fried, CEO, Emerging Markets at QBE.
“While there is a lot of change happening in general and within our industry in particular… it is important as a CEO to always have the bigger picture in mind and to not be too distracted by short-term events.”
Open and focused minds
For Mr Alan Wilson, Regional CEO of MSIG Asia, the best way to manage uncertainty is through a three-pronged approach: open communication; forging a strong corporate culture; and remaining positive.
“Openness builds respect, trust, and solidarity, all of which in turn help employees stay focused on the task of running the business during challenging times. When employees are aware of the situation, it also helps ensure that they understand how to make a difference.”
On maintaining a positive outlook, he added: “Guiding the team to always see opportunities in a downturn and remain forward-looking despite the near-term pressures is important for growth.
“My focus continues to be identifying growth opportunities including through mergers and acquisitions in the region, if they can add value,” he said.
Upholding corporate values
But even as we operate in uncertain times, it is important for insurers to uphold their corporate social responsibilities, reminded Mr Benson Chen, President of Fubon Life Insurance (Taiwan).
“Regardless of the external environment, companies should always have their responsibility to all stakeholders in mind to achieve the objective of economic prosperity, social charity and sustainability,” he said, adding his company has set up a Corporate Governance and Sustainability committee.
Mr Wilson meanwhile believes that a strong company should remain focused on its strong culture, people and the values that bind them together, and not compromise brand equity for short-term gains.
Strategy & targets
Cliché as it may sound, several CEOs believe the climate of uncertainty presents opportunities for insurers.
Turning obstacles into opportunity
From a life perspective, Mr David Wong, CEO of FWD (Hong Kong & Macau) said insurance remains an attractive option for those looking for more defensive investment options.
“When economic uncertainties arise, people do look for investments or ways to minimise risk and protect their wealth, and insurance is a good fit for those looking to de-risk in uncertain economic times.”
Over in India, the country is currently gripped by economic uncertainty attributed to the government’s demonetisation drive – when it made invalid the use of all 500 and 1,000 rupee banknotes in a bid to curtail the country’s shadow economy. For Apollo Munich Health Insurance - an online health insurer – demonetisation and increasing digitsation in the Indian economy provides an ideal chance to promote the importance of online health coverage.
“Demonetisation and the rapid progress on digitisation is expected to help raise awareness of health insurance amongst those who were unaware or wary of health insurance as a financing tool, and preferred paying healthcare expenses in the past through their own finances,” said Apollo Munich’s CEO Antony Jacob.
Tailoring products
New technology can certainly disrupt the insurance model but it also provides insurers the chance to innovate and be more customer-centric than ever. In that regard, Mr Fried predicts insurers will increasingly customise their solutions based on the availability of more granular information and customer demands.
“The challenge for insurers and brokers alike will be to leverage new technologies to become even closer and more relevant to customers. And against this backdrop, we can expect customers to increasingly value bespoke or tailored services.
Mr Chen echoes a similar sentiment and believes it is important to meet the needs of different target groups by offering innovative solutions.
“Fubon Life will develop products based on the risk profile of different market segments. For example, we will be offering usage-based insurance products; such products are distinguished by their spillover effects like encouraging policyholders to exercise to reduce premiums,” he said.
Managing the workforce
Mr Chen added that companies need to stay nimble in order to sustain growth in what is a more fluid environment.
“Facing the challenging environment in 2017, we expect to adjust our business strategy in a flexible manner to respond to market changes.”
This includes exploring market expansion overseas as well as responding to the challenge of FinTech, he added.
“It is therefore critical for us to develop a more diversified product portfolio and talents with a diversified skill set,” said Mr Chen.
On the issue of FinTech, Mr Wong felt the sector may soon face a talent crunch – which may be a loss for the insurance industry as it curtails the development of InsurTech.
The people factor also features prominently for Mr Wilson at MSIG, stating how employees need to identify and be aligned with the core values of the company in order to effectively rise to the growing expectations of customers.
“We need to have a comprehensive view of how our business operates in society; and aligning this broader mission to the company’s core goal of profitable growth is vital in building that sense of purpose for employees to go above and beyond,” said Mr Wilson.
Echoing a similar point, Mr Jacob added: “Companies that nurture talent and look ahead to the future to create better organisations that seek to fulfill customers’ needs tend to lead in today’s times.”
Key risks on the horizon
Cyber attack
When asked about the key risks facing their own domestic insurance sector, cyber threat featured prominently amongst the replies.
“Like some other industries, insurers are also highly dependent on electronic systems for critical functions these days. This makes data related to healthcare, medical and financial issues attractive to cyber criminals who could get more active,” said Mr Jacob.
Mr Wilson meanwhile believes the industry needs to stay attentive to cyber risk, which can represent both a threat as well as opportunity.
“As challenges become more complex and insurers embrace Big Data, telematics, advanced analytics and more, the industry needs to be agile, innovative and constantly rethink approaches to stay ahead of the challenges and monetise the opportunities.
Destructive competition
For Mr Fried, the main risk relates to unhealthy levels of competition in the Asia-Pacific market which has shown little sign of abating.
“It can lead to overly aggressive pursuit of market share by some insurers and as a result, the impact of cumulative price decreases will make navigating some markets more difficult.
“Hence, there could be situations where the best decision is to redirect our resources to products and channels that deliver the return that is required by our owners.”
Political & economic risk
The macro environment is looking fraught with uncertainty, and Mr Wong believes the historically low interest rates as well as political uncertainty and its relation to government policies are significant risks for many life insurers.
Demographics & technology
Meanwhile, demographic challenges such as an ageing population and high youth unemployment are major risk factors in Taiwan, according to Fubon Life. Hence, helping people achieve financial security in their retirement years, as well as provide employment opportunities for the young are both a strategic opportunity as well as a corporate responsibility for the company, said Mr Chen.
Moving further afield, he also cited the effects of a low interest rate environment globally, as well as responding to the FinTech phenomenon.
“Designing an insurance policy requires a certain level of expertise, the understanding of customer needs and the combination of follow-up customer service, which creates a higher entry barrier for the high-tech company compared to other financial products.
“But the insurance industry can partner with high-tech companies in the areas of Big Data analysis, cloud computing, machine learning, biometrics, or robot advisers,” he said.
Customer takes top priority
Insurance leaders have the task of moulding their organisations to be relevant and competitive for the future. In the face of new technology, insurers have had to re-evaluate current business models and find ways to adjust in the face of digitalisation.
For the CEOs featured, the key to being competitive in the evolving economy lies in being customer-focused.
“It is during these volatile times that service excellence will prove to be more important than ever. It is only by acting through a customer-focused lens that a company can stay relevant in this tough environment and changing world,” said Mr Wilson.
Mr Fried said being highly customer-focused means having the customer at the front of thought in every stage of the journey.
“While technology helps improve things like speed and convenience, such won’t matter much if customers are not – from their perspective – taken care of throughout the entire cycle of interaction. We have to deliver value from the customers’ points of view.”
For some time, the pendulum has been moving towards customer-centricity, not product or channel-focused. And Mr Wong believes that FWD is at the forefront of this shift in enhancing the customer journey through relevant and simplified solutions.
“As opposed to feeding the target segments with piecemeal products and services, at FWD we want to truly leverage technology to identify and anticipate customer needs and preferences, to appear and connect with them in ways fitting their lifestyles, and to offer more personalised, easy and flexible solutions that can really help them make more effective use of insurance in daily lives,” he said.
The Change Leader
From harnessing technology, rethinking the customer experience, and overseeing change management as well as geopolitical and economic challenges, the insurance leader of today is under constant pressure to adapt to change or risk being left behind.
Indeed, corporate leaders of today not only require high Intelligence Quotient (IQ) and Emotional Quotient (EQ), but they must also start to develop and increase their Digital Quotient (DQ) to excel in the digital age.
These traits include, among others: making decisions in real time in today’s age of speed – thus requiring leaders to possess clarity of purpose, thought and action; harnessing technology creatively to benefit their organisations; and finding ways to succeed in the ‘customer age’.
The race is on, and insurance executives in the region are all too aware and ready to step up to the challenge.