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Insurtech

Why insurance companies need to embrace innovation

The industry has been slow to adopt new technologies – and the rise of the smartphone makes it ripe for disruption

Written By:
August 30, 2017
Why insurance companies need to embrace innovation
An Acleda Bank employee talks a customer through the company's new app

The insurance industry has long been plagued by the ordinary, the mundane and even the frustrating. From convoluted car policies to agents laying on the hard sell, the industry rarely evokes particularly exciting, innovative imagery.

The sector is overdue for some disruption, as consumers increasingly demand to be educated, get a quote and buy a policy on their smartphone within 30 minutes. While it’s one of the last big industries to remain predominantly offline, last year saw a whopping $3 billion of investment poured into ‘insurtech’, the latest buzzword in an industry that’s scrambling to keep up with the demands of the digital era.

“Today’s world is driven by data. There is a huge opportunity for insurance to leverage big data and online-scoring platforms to help improve their operations in everything from sales to underwriting,” Vladislav Solodkiy, a fintech-focused venture capital investor, wrote in Forbes.

Chinese insurance heavyweight Ping An Health Cloud, for example, has completely changed its vision to utilise technology, operating a mobile healthcare app that allows users to consult with doctors through text, photos and video. Last year it completed a $500m funding round, bumping up the company’s value to $3 billion.

So, what exactly does insurtech provide, and how can it benefit both companies and customers? Realtime data streaming – this could be in the shape of wearable environmental sensors, for example – will allow insurers to better manage risk. Blockchain, meanwhile, will ensure customer data and history is protected, as well as streamline the policy process.

Telematics – the act of transmitting data – has helped more than 15% of the UK car insurance market transition to a usage-based insurance model, according to a recent Burnmark report. In the US, insurance companies are offering discounts to premiums of up to 15% to customers using health apps.
Life and health insurance is intrinsically connected to the health industry, so advancements in wearable health hardware and the surge in medical apps makes it even more essential for insurers to jump on the bandwagon.

What’s more, the consumer reliance on smartphones and apps to reach brokers makes it easier for brokers to find more business. Aggregators will be able to collate a one-stop shop for insurance, enabling more choice. “Collaborative ventures with mobile companies mean that premium payouts may be dispensed through alternative means like airtime, mobile money or loyalty wallets,” according to the website Tech in Asia. This could transform the insurance industry in Southeast Asia’s developing countries, which tend to have infrastructure deficits and where the most time- and cost-effective method of insurance coverage could be through digital and mobile solutions.

According to a PwC report from 2016, 74% of insurance companies saw fintech innovations as a challenge for their industry, yet only 28% had explored partnerships with fintech companies and less than 14% participated in ventures or incubator programmes. Players that are already showing  a willingness to move into the insurtech space will be well positioned as frontrunners in the new insurance era.



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