The insurance industry is in the midst of a radical, digital shake-up. Governments and businesses are racing to be at the forefront of this technological revolution. Customers are embracing digital channels, and technologies such as the Internet of Things (IoT) and artificial intelligence (AI) have ushered in an era of new products built on data and analytics.
A recent piece of research by Microsoft in partnership with IDC Asia/Pacific predicts a dramatic acceleration in the pace of digital transformation across Asia’s economies. In 2017, about 6% of the region’s GDP was derived from digital products and services created directly through the use of modern digital technologies, such as mobility, the cloud, Internet of Things, and Artificial Intelligence. This is expected to surge to around 60% of Asia’s GDP by 2021.
Innovation to overcome challenges in the insurance sector
While insurers are exploiting digital initiatives and using technology to drive their businesses and enhance their services and offerings, innovation is the key to staying ahead of the competition, whether in the form of traditional foes or ambitious and nimble digital start-ups. Insurance providers are adopting innovative solutions to address industry-specific challenges. This effort is driven by several key goals, including:
- improving the customer experience,
- reducing operational costs,
- and proactively identifying and mitigating risks.
A wealth of potential
Insurance technology, or Insurtech, represents the opportunities offered by new technologies for digitally enhancing the entire insurance value chain. This trend will enable innovative products and services to be created for the benefit not only of insurers, but also consumers. Many insurers are stepping up the pace when it comes to adopting Insurtech to enrich their product mix and to tap into the younger, tech-savvy generation. These products incorporate a wide range of technologies, from mobility, big data, and cloud computing to blockchain, IoT, and AI.
Big Data and Artificial Intelligence taking over the insurance industry
Big data is part of every insurer’s DNA. Companies in this sector typically have a large amount of backlogged data in their database, but they often lack the resources to extract the maximum value from all that information. By using the correct tools, such data can be used to optimise business operations and gain insights into how business decisions impact growth. For example, historical data can be injected into AI-driven analytics tools to improve underwriting efficiency, fraud detection, and risk pricing, as well as for reducing risk and dealing with claims.
Indeed, Hong Kong’s Insurance Authority (IA) currently encourages insurers to use Insurtech or big data technology to reduce their costs and enhance their services. Leaders of the digital transformation in the region, including AIA, AXA, and Manulife, have introduced big data to analyse risks, determine premiums, and manage claims.
Is blockchain the next BIG thing?
Worldwide spending on blockchain technology is forecast to reach nearly USD 2.9 billion in 2019, up 88.7 per cent from 2018, according to an estimate by tech research firm IDC in March. A growing number of fraudulent insurance claims, a need for greater transparency and more trustworthy systems, a desire to reduce ownership cost and a long-standing yearning to eliminate the monopoly positions held by intermediaries will be the key drivers of this growth.
Even though companies in the APAC region (excluding China) have proven themselves to be slow to adopt blockchain technologies, leaders such as Blue Cross Insurance, are currently incorporating blockchain in their efforts to speed up medical claims and eliminate fraud.
However, while blockchain has great potential to transform products and services, there are growing concerns over its uncertain regulatory status, and a lack of common standards worldwide could slow its growth.
That said, the fact that numerous developed countries in the region are currently seeking ways to regulate blockchain technologies will likely accelerate growth of the technology in the APAC region in the coming years.
Customers and society to benefit
Several sociodemographic factors point to a positive outlook for Insurtech in Asia. These include a greater affinity for technology (particularly among millennials), societies with large populations, the inefficient nature of traditional insurance systems, and a friendly regulatory environment.
The receptive response among consumers shows that digital transformation efforts are headed in the right direction, as companies are providing bespoke solutions that better meet policyholders’ needs and bring state-of-the-art products and services to market. The authorization of Bowtie and Avo, the first virtual insurance companies in Hong Kong, marks a significant milestone in Insurtech’s development in the region. As the insurance industry in Asia gets a digital makeover, both consumers and society at large are set to benefit.
More from the “Future of Insurance” series:
- Top three insurance customer needs in 2019 – Only if insurers are familiar with the needs of their customers can they withstand the digital tsunami in the long-term.
- Why a data driven culture is essential for today’s insurers – Big Data is part of the DNA of every insurer. Despite this, insurance companies are still a long way from systematically using large amounts of data.
- What is the significance of Ecosystems for insurers? – Insurance companies will only succeed if they are part of the right ecosystem and offer the right products in this context.