A willingness to experiment and embrace disruption among Asia-Pacific insurers holds the key to the industry’s future, according to a recently released report from consultant EY.
Its insurance outlook for 2019 report reveals that both the life and non-life sectors are growing in the region, against a backdrop of weak growth in insurance markets globally. While the life sector has been driven by rising incomes and expanding populations, the non-life sector has benefited from the overall economic growth in the region.
But it is the use of innovation that the report highlights as a critical factor in the region’s insurance industry prospects.
Jonathan Zhao, EY Asia-Pacific insurance leader, says: “Markets across Asia-Pacific, in particular China, will continue to influence the future of insurance because of their intense focus on innovation and disruption.
“From product design to distribution and technology adoption, insurers in the region continue to experiment to capitalise on the near-term opportunities and drive the industry’s long-term growth.”
Non-life insurers have enjoyed particular growth in Asia-Pacific – 8.0% in the region as opposed to 0.9% globally, and while this growth is likely to slow down, there will be opportunities for the insurers willing to embrace “an innovation mindset”, states EY.
For example, the report recommends that commercial insurers follow China’s lead on digital distribution, employ more analytics and artificial intelligence, and focus on intangible risks.
The commercial insurance sector has not enjoyed the same level of growth as other sectors but intangible risks are gaining more attention, states EY. It cites the projected growth of the cyber insurance market, from €2bn in premiums in 2015 to $20bn in 2025.
Insurers feel compelled to offer cyber insurance and other intangible risk coverage, despite not yet fully knowing how to price or assess them accurately, states EY. But ongoing technology development and businesses’ increased reliance on robotics necessitates that insurers “figure out how to offer proper coverage”.
“If insurers want to remain relevant, they need to find a way to cover potential losses for these businesses,” states the report.
The successful insurers in the region will be “the ones that get the basics right” by gaining access to relevant data sources for intangible risks, partnering with specialised firms with expertise in specific risk areas, and clearly communicating the “value proposition” to clients.