Insurance Asia (May 2019) by Charlton Media Group

FROM THE EDITOR PUBLISHER & EDITOR-IN-CHIEF Tim Charlton

In this issue of Insurance Asia, we feature an exclusive interview with the CEO of Manulife Hong Kong, Guy Mills. He shares how Manulife quantifies customer satisfaction through its Net Promoter Score (NPS) as part of a relentless effort to integrate the customer at the heart of everything it does.

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We also got in touch with Daniel Neo, the newly appointed CEO of Sompo Holdings Asia, who shares the company’s plans to expand beyond Japan and capture the opportunities in the region in order to achieve the goals set out its ambitious blueprint: rank number one in travel insurance and crack into the top five in motor insurance, and international insurance group within Asia in four years. This issue also lays out one of the most pressing challenges for insurers across the region as they compete with insurtechs for brand recall against a backdrop of declining customer satisfaction rates. Customers, especially in developing countries, have displayed increasing likeliness to change insurance providers and purchase policies from BigTechs. Despite the challenge posed by new entrants, the growing prevalence of the ecosystems approach stresses the need to balance between cooperation and competition. You will also find a list of the top 50 largest insurance companies in Singapore and Hong Kong by total assets in our exclusive Surveys included in this issue. Enjoy the issue!

Tim Charlton

CONTENTS

CEO INTERVIEW HOW MANULIFE IS BREAKING GROWTH CEILINGS IN COSTLY AND RAPIDLY AGEING HONG KONG

06 Life insurance remains profitable in Singapore

FIRST KOREA REINS IN THIRD-PARTY AGENT SALES

RANKINGS

FIRST 04 Credit insurance takes off in APAC 05 Insurance deals up 40% in 2018

CEO INTERVIEW BEYOND JAPAN: SOMPO HOLDINGS ASIA’S JOURNEY TOWARDS A STURDY RETAIL PLATFORM

ANALYSIS

16 Check out Singapore’s largest

insurers in 2018

20 Insurtech, hiring spree shape Hong

Kong’s insurance scene

capitalise on underserved markets

28 Riding the digital wave in Asia-

32 Keeping up with healthcare: How

Published bi-annually on the second week of the month by Charlton Media Group 101 Cecil St. #17-09 Tong Eng Building 2 INSURANCE SingaporeASIA 069533

Ecosystems model gains momentum

24 Insurers up digital game as BigTechs

OPINION

08 A new industry model for insurtech:

Pacific: Can insurers meet the $58t mortality gap?

Singapore can remain an attractive expat destination?

For the online versions of the insurance stories, visit the website

insuranceasia.com

CO-PUBLISHED CORPORATE PROFILE

Breaking down barriers and sparking cultural change with creativity

Find out how Grey Group is transforming lives through its groundbreaking campaigns and best-in-class

or over a century, Grey Group has been at the forefront of using unparalleled creativity to solve business problems. With its data-driven insights and trailblazing content and strategies, Grey Group has become the partner of choice for the world’s largest companies throughout the decades. Insurance Asia sat down with Nirvik Singh, Chairman and CEO of Grey AMEA, to discover the group’s value proposition and the secret behind its continuous success. What is the company’s edge over other agencies with similar expertise? Our north star is ‘Famously Effective’. We are dedicated to creating lasting consumer connections and breaking new ground in brand experiences. Our work has sparked cultural conversations because we believe in applied creativity. It requires full integration across all marketing and communication disciplines – traditional advertising, activation, mobile, social media, shopper marketing and other best-in-class marketing tools. How do you ensure that campaigns are getting through to your audiences? How do you cultivate brand loyalty? By becoming part of popular culture and engaging with consumers in a memorable and enriching way. You have to add to people’s lives in a positive way and prioritise relationships. If you get that right, and if you consistently produce great ideas and work, brand loyalty will follow. For insurers, the choice of channels and mix would depend on the business model. Is it a Direct to Consumer (DTC) onlineonly model? Are you selling through intermediaries or brokers? Is it sold through a physical outlet? Most people think of insurance brands in two scenarios. One, when they need to make a choice to buy an insurance product and two, when they need to make an insurancerelated claim. For the first, a mix of presence across search, online video, programmatic, aggregator sites, comparison sites, mobile brand sites, and apps would be appropriate. For the second, forums, social media, email, messaging, website, and phone would be a good start. If you are doing any sort of

physical media, it would be good to make sure it’s integrated with your online presence, so they all work together as greater than the sum of their parts. What’s the right mix between an online and a physical campaign and how do you strive to achieve this balance for your clients? The choice and mix of channels depends on audience behaviours, the channel’s role in driving end outcomes, and available budgets and resources. Each channel has its merits and shortcomings. Hence, it’s important to track performance of the initial mix and finetune based on agreed outcomes. Any examples of innovation with regard to an insurance client? Yes. Grey recently launched an app for an insurance company that was built for Google Assistant. It provides easy answers to the complicated questions that consumers might ask, in real time. To get access, users simply asked any Google Assistant to speak to the insurance company. The app was developed as an extension and enhancement of the company’s brand platform. Voice technology is just one way in which Grey is innovating. In Singapore, we have launched Grey Adventures, an initiative that hosts start-ups with complementary skills within our own office space. That means we are part of the disruption that is being led by new technologies, yet we are in a position to innovate and fast-track game-changing products and services. The best thing is our clients can benefit from having access and leveraging from this initiative too. How will the marketing landscape evolve over the next five years and how will Grey Group stay ahead of this changing industry? The future will be more consolidated, more integrated. We keep ahead of all this by investing in talent and technology and evolving our business. For example, we tackle our creativity with a ‘borderless’ approach. We seamlessly use the best talent and innovations from across the region, even the globe, ensuring that our clients receive

Nirvik Singh, Chairman and CEO, Grey AMEA

best-in-class creative & marketing strategies and solutions.This is crucial for Grey’s future growth and competitiveness. The industry is evolving at an extremely fast pace. How do you stay relevant? The key is remaining focused, having an obsession with the creative product, and investing in technology and talent. We have the infrastructure in place and have added to it with various investments. This includes the acquisition of a company in Thailand which produces global awardwinning work. In Korea, we have acquired a world-class digital design & creative agency that has a blue-chip client roster. In Singapore, we have enhanced our shopper marketing capabilities and represent a slew of brands. In India, we have a 360° social media and digital agency which provides various services. We have also added a rural marketing and activation arm. It’s about identifying opportunities and grasping them.

“We are dedicated to creating lasting consumer connections and breaking new ground in brand experiences.” INSURANCE ASIA

FIRST The challenging trade environment has also prompted players across the region to adopt an increasingly play-safe approach in demanding payment. Despite the openness to offer trade credit to B2B clients, companies do not appear as inclined to extend looser payment rules amidst higher perception of payment default risk. The survey revealed that those in Australia set the shortest payment terms at around 24 days from the invoice date. In China, payment terms fall at an average of 26 days and Indonesia at 34 days. Of its peers, Taiwan is more lenient at around 45 days, which is well above the 32 days average for the region.

NEST EGGS IN HK STILL $575,000 SHORT

Pension funds are not enough

Hong Kong’s ageing residents cannot solely rely on their Mandatory Provident Fund (MPF) to be able to afford expenses during retirement as they require around $575,000 (HK$4.5m) to be able to afford living without a constant source of income, according to a survey from AXA Hong Kong. The median of current individual total assets in Hong Kong stands at only $95,000 (HK$750,000), which is $480,000 (HK$3.75m) short of the expected amount. In fact, nearly three-fourths (72%) of those born in the 1990s have an individual total asset value of less than $32,000 (HK$250,000). The same can be said for 35% and 41% of those born in the 1970s and the 1980s. More than half (55%) of those born in the 1980s and 1990s also lack confidence in having enough retirement savings, and 39% fear that they might become a burden on their children in the future. According to the The Economist Intelligence Unit, Hong Kong ranks alongside Paris and Singapore as the most expensive cities in the world after climbing three spots from its fourth place ranking in 2018. Cultural hurdles The task of creating a sufficient nest egg also face a cultural challenges as over two-thirds of respondents (67%) believing that the concept of raising children for preparing retirement is outdated. Moreover, locals can still rely on their families for support as more than one-quarter (26%) of the parents who were born in the 1960s and 1970s admitting to have provided monthly living expenses for their adult non-school children. Nearly one in ten (9%) of parents also pay the down payment for a new flat for their children, reflecting that Hong Kong parents are still taking financial care of their adult children. The insurer commissioned market research firm YouGov to conduct an online survey of 1,013 Hong Kong people aged 18 or above in April.

4 INSURANCE ASIA

Companies are setting shorter payment terms.

Credit management Respondents are also converting their past due invoices into cash in 48 days, seven days earlier than the previous year with overdue invoices collected within two weeks of the invoice due date on average. “This reflects clear recognition of the risks associated with credit sales and the more challenging trade environment,” Atradius said in a report. To mitigate default risks, businesses India appears have been beefing up their credit to be the most management policies. Across impacted by late invoices. On the region, Singapore companies the other hand, emerged as one of the most stringent Japan is the last in assessing the creditworthiness of a buyer prior to making a trade credit affected in the decision at 53%, which is higher than region. the regional average of 39%. One of the most prominent credit management tools is reserving against bad debt so as to offset potentially inaccurate screening of a buyer’s financial position, a tool that is mostly used in Taiwan and Indonesia.

Credit insurance takes off in APAC TRADE CREDIT

ompanies in Asia Pacific are placing increasing importance on trade credit for B2B transactions as the openness of the regional economy renders it all the more vulnerable to weak global trade, according to a report from Atradius. Across the region, Australia leads the way with 71.5% of sales to B2B clients made on credit, up from 47.7% in the previous year. Japan follows at second place with 67.2% of transactions on credit terms and Singapore rounds out the top three at 65.7%. On the other hand, Taiwan stands at the other end of the spectrum with only 42.8%. “Payment defaults across the globe are rising and with them, we anticipate a steady rise in insolvencies in the coming years. Asia-Pacific economies are not immune to this, because they are an integral part of the global supply chain,” Andreas Tesch, Member of the Management Board and Chief Market Officer of Atradius said in a statement. Across Asia, India appears to be the most impacted by late invoices at 39% whilst Japan stands on the other end of the spectrum with only 13.2%.

Total B2B sales made on credit in APAC

Source: Atradius

FIRST Most of the deals are not consolidations as they are international in scope as insurance groups look to build out platforms.

How did other regions fare? Despite rapid growth in APAC, the Americas still remained the most active region for insurance M&A with a total of 189 deals, with 97 deals in the first six months and 92 transactions in the latter half. Eleven of the year’s largest deals worldwide involved acquirors which were based in the region, although insurers are increasingly looking at cross-border targets as was the case when Canada’s Fairfax Holdings made acquisitions in Hong Kong and India in 2018. Europe had a total of 122 completed deals in 2018, from 118 in the previous year, as it retained the position as the second most active region for M&A deals even amidst the uncertainty of Brexit, with big deals including Phoenix Group’s $4.1b acquisition of Standard Life Aberdeen’s insurance arm and Jersey’s Blue Bidco Limited, a subsidiary of funds advised by Bain Capital Private Equity, buying Esure Group for around $1.5b. On the other hand, the Middle East and Africa (MEA) region saw a total of 8 deals, with four each during the two six-month periods as insurers were compelled to remove skilled manpower in response to expats leaving the country.

Japanese and Chinese players are amongst the most active.

Insurance deals up 40% in 2018

ACQUISITIONS

fter a quiet 2017, the AsiaPacific insurance sector witnessed a flurry of deal activity as the number of completed M&As rose to 59 in 2018 from 42 deals in the previous year, according to a report from law firm Clyde & Co. In a breakdown, there were 25 deals in the first half of 2018 and 34 deals in the last six months, which means that the region witnessed three consecutive six-month periods of growth for the first time in nearly eight years. “Positive insurer sentiment around the region is driving transactions,” Joyce Chan, Partner at Clyde & Co Hong Kong, said in the report. “Most of the deals are not consolidations; they are international in scope as insurance groups look to build out their platforms in particular countries to access new customers and drive growth.” Regional powerhouses Across the region, Japan had the highest number of deals at 29 as reinsurers have been amongst the most active on the acquisition trail for the last few years. Two of the largest deals involving Japanese buyers was when MassMutual Life Insurance Co. acquisition ofNippon Life for $980m as well as MS&AD Insurance Group Holdings, move to increase its stake in

ReAssure Jersey One Ltd in a $820m deal. Large players such as Tokio Marine and Sompo Holdings, have also announced that they are on the lookout for possible targets and have the necessary capital to finance bigticket transactions. Japan was followed by China which saw 14 deals over the full year period. A slew of regulatory developments, which removed hurdles for foreign investors and paved the way for domestic consolidation, also bodes well for liberalisation ambitions of the second largest economy. “Chinese re/insurers also have overseas growth ambitions and the acquisition of Chaucer by China Re for $940m may herald more outbound activity into the Lloyd’s and wider international markets,” the report added. Australia rounded out the top three with seven deals in 2018 as shareholders raise pressure on re/ insurers to focus more on core activities. “This has driven deals throughout South East Asia as companies move to divest regional assets – we expect more to come,” according to Avryl Lattin, Partner at Clyce & Co Sydney. Although there are signs of sustained deal activity from the region’s top three players, Southeast

Asia is also stepping up by offering exciting insurtech growth prospects, notably Indonesia, Singapore and Vietnam. “Vietnam is also attracting attention as an alternative manufacturing location to China. As foreign investors enter the country their insurers aren’t far behind, with moves expected by South Korean insurers,” added Clyde & Co.

Insurance deals by region (2010-2018)

Source: Clyde & Co

INSURANCE ASIA

FIRST Life insurance remains profitable SINGAPORE

Korea reins in third-party agent sales

Number of insurance agents employed by insurers and general agencies

K KOREA

Life insurance premiums are expected to grow by around 5% in 2020 as sustained growth in annual premium products, moderate demand for single premium policies and benefits from improved pricing sufficiency of integrated health plans continue to boost the sector’s growth prospects, according to a report from credit rating agency S&P. Life insurance premiums averaged about 5.6% of GDP over the past five years as the industry has thrived thanks to an established regulatory landscape implementing a regular review process that has been in place since 2004. “We view the life insurance sector’s asset-liability mismatch (ALM) risk as moderate. That’s because participation products dominate the industry’s liability profile (averaging about 64% for the past five years) and insurers have the flexibility to adjust bonuses based on their profitability and solvency,” S&P said. Cash cow Although low rates and market volatility continue to pose an earnings risk, the sector will remain profitable with return on equity of around 15%, according to S&P. “We estimate that the sector’s average return on assets was about 1.4% over 2013-2017. This reflects disciplined underwriting strategies amid investment market volatilities,” it said. Singapore insurance industry distribution mix was dominated by traditional agents in 2018, although financial advisors are slowly gaining market share amidst a gradual shift in bank channels. The number of employees in Singapore’s life insurance industry hit 8,309 in March from 7,594 in 2018, according to a report from the Life Insurance Association Singapore. The number of tied representatives also continued to rise to 15,384 in March from 14,817 in 2018.

6 INSURANCE ASIA

orea’s insurance industry will receive a transparency and productivity boost after the country’s financial regulator proposed to tighten rules governing general agencies (GAs) or third-party insurance agencies that cross-sell multiple insurers’ products, according to Moody’s Investors Service. After experiencing strong growth in 2013, GAs have become one of the main distribution channels for Korean insurers to outnumber tied agents in 2015, as the prospects of high early-on commissions and the flexibility to sell multiple products lured individuals to switch sides. The number of GAs with more than 1,000 agents rose to 35 in the first half of 2018 from 24 in 2014. With the rapid rise of GAs, however, came a higher number of policyholder complaints and mis-selling cases as users increasingly lamented insufficient financial disclosure by agents and lack of transparency with third-party agent selling. Data from the Financial Supervisory Service (FSS) show that policies sold by GAs have a surrender rate of more than 30% within two years of their sale, whilst the number of regulatory violations by GAs increased to 28 cases in 2018 from 15 in 2016.

Source: Moody’s

With the rapid rise of GAs came a higher number of policyholder compliants and misselling cases.

The tighter internal control measures set by the FSS will therefore require GAs with more than 1,000 agents to establish an independent compliance division and establish minimum tenure for a compliance officer of two years. Candidates seeking to become a compliance officer will also face tougher hurdles as the required work experience is raised to 10 years from five. Another prominent measure will come in the form of enhanced 12-hour training through mandatory group sessions that aim to prevent mis-selling. The sessions will focus on mis-selling disputes, criminal cases and consumer protection guidelines. Insurers and GAs will be required to report any regulatory violations and their agents’ training completion rates on a regular basis, using a centralised public database The measures are expected to be rolled out from H2 2019 to 2020.

PEOPLE

Allianz PNB Life names Alexander Grenz as CEO Alexander Grenz has moved up the corporate ladder at Allianz PNB Life Insurance Inc., after being appointed as CEO in June following more than three years of service as COO. In his new role, Alexander will be responsible for steering the growth and value creation of Allianz PNB Life, and continue to develop the close collaboration with Philippine National Bank (PNB). Alexander Grenz An industry veteran, Grenz has spent over 15 years in Allianz SE Group where he brings a deep understanding and experience of insurance management in the region and in the Philippines. As COO, he was tasked to oversee operations, technology and transformation functions. Insurance penetration rates in the Philippines - measured as total insurance premiums as a percentage of GDP - rose to 1.64% in 2017, indicating a massive growth opportunity to tap the Philippine office tech-savvy demographic.

ANALYSIS: INSURTECH

Since 2017, there have been over180 partnerships struck between (re)insurers and tech companies globally.

A new industry model for insurtech: Ecosystems approach gains momentum The winning model for collaboration requires the combination and implementation of traditional strengths brought by established insurers and new skillsets by agile insurtechs, according to McKinsey.

nsurance companies should pay close attention to insurtechs—not because they’re coming to attack, but because they’re coming to collaborate. For established insurers, insurtechs can be digital enablers that drive the adoption of digital technologies along the value chain. To realise the potential, it’s important that both sides focus on the strength they’re bringing to the table. Insurtechs are maturing According to McKinsey research, more than $10b has been invested into insurtech since 2012. And, whilst investments have somewhat tapered off in recent years, we have observed three key trends that underscore how the insurtech space has developed and matured over time: diversification, professionalisation, and collaboration. In the beginning, insurtechs focused primarily on P&C and distribution. Now, digital technologies play a role in many more areas. Diversification highlights the fact that insurtechs today are creating digital solutions along the entire business value chain as well as across all lines of business. This allows for many more avenues for integration into existing business models. The second trend, professionalisation, typically accompanies maturity. To survive in the highly complex insurance market, 8 INSURANCE ASIA

Currently, less than 10% of insurtechs are seeking to disrupt the insurance business model whilst nearly twothirds focus on specific parts of the value chain.

insurtechs must stay abreast of new rules and regulations. Innovation is driven by companies willing to take big risks, but it also requires patience, careful planning, and a solid go-to-market strategy. Which leads to the third trend: collaboration. Currently, less than 10% of insurtechs are seeking to disrupt the insurance business model, whilst nearly two-thirds focus on specific parts of the value chain, aiming to meaningfully integrate with established insurers. The challenge is no longer “insurtech versus traditional insurer”—but rather how the two can work together to create tangible value for the customer. When considered comprehensively, these three trends are clearing the way for a new industry model, in which insurtechs and carriers work together closely to drive the digital transformation of the industry. Partnering for strength What the winning model of collaboration will look like remains to be seen, but it’s clear it will require a combination of traditional strengths from established insurers and new skill sets brought by insurtechs. Many incumbents benefit from the fact that they are trusted brands, with hard-won reputations earned through decades of service to customers. This loyal existing

ANALYSIS: INSURTECH save in the long term, especially for retirement purposes. Yet in Asia–Pacific, ULPs have underperformed overall in recent years, with varied relevance and performance by market. Since 2014, their overall market share declined from approximately 16% of total premiums to 10%, whilst traditional products, such as participating funds and protection, make up most of the rest. Using McKinsey’s Global Insurance Pools data, we investigated the state of ULPs in Asia–Pacific life insurance. In general, we see an opportunity for ULPs to catch up with other life products, especially considering fast-growing personal financial assets in the middle class, an ineffective allocation of assets, and a growing retirement gap which can be addressed through ULPs.

Total insurance premium growth (2015 vs 2020)

Source: Swiss Re, Oxford Economics

customer base has also generated huge volumes of data that offer the potential to shape strategy and consumer engagement. Robust teams of experienced, skilled employees—from underwriters to claims agents—provide incumbents with a strong operational foundation. Furthermore, the size of incumbent carriers affords them the financial security to enter new markets, make strategic bets, and support the rollout of new products and enhanced services. New skills: Insurtechs are often start-ups with simple business models and narrow areas of focus, whether it be artificial intelligence or machine learning. In addition, many insurtechs have data-analytics capabilities. They are digital organisations with the ability to respond to market opportunities much more quickly than global insurance companies. As such, they are more likely to boast an agile culture that pursues and rewards innovation, as well as a mind-set that puts them at the forefront of changes in the industry. It’s easy to see the complementary nature of incumbents and insurtechs. The challenge becomes finding the “sweet spot,” where collaboration is most successful—and then implementing it. It’s a shift in thinking, but there are ways to make collaboration easier. Traditional insurers working with open platforms, for example, are facilitating the integration of new digital solutions via standardised application programming interfaces (APIs), which many insurtechs offer. The future industry model will be shaped extensively by partnerships where incumbents retain ownership of the end customer whilst insurtechs act as digital enablers that drive the adoption of digital technologies along the value chain to help advance the digital transformation journey. Players that realise the potential of digitisation early are likely to further benefit from the strengths both sides bring to the table. A catch-up play for unit-linked products in AsiaPacific insurance Unit-linked products (ULPs) are a pillar of the global life insurance industry. They combine individual investment strategies with the protection of an insurance policy under one plan, providing customers with an incentive to

The share of unit-linked products in China in total premiums is only 2% whilst Hong Kong, Japan, Singapore, South Korea and Taiwan have similarly low market share in the range of 1525%.

Understand emerging and mature market dynamics Currently, the share of ULPs across Asia–Pacific is uneven. China is an extreme case, with ULPs making up only 2% of premiums thanks to a regulatory push against short-term investment products. Other big markets—Hong Kong, Japan, Singapore, South Korea, and Taiwan—also have comparably low market share in the range of 15 to 25%. In contrast, most Southeast Asian markets are dominated by ULPs—Indonesia, Malaysia, and Vietnam all have ULP market shares of around 50%. Understanding these differences and the dynamics of each market can help carriers better tailor their approaches to each market. Looking ahead, ULPs are well positioned to meet a variety of different market needs from both the demand and supply side. From the demand side, Asia–Pacific’s emerging markets have a burgeoning middle class with fast-growing personal financial assets. As customer sophistication increases, this group will be more open to allocating funds into tailored individual financial solutions, especially as an alternative to cash and real estate. More specifically, ULPs offer a potential solution to consumer concerns around retirement income, offering appealing investment and protection features. ULPs could also be a source for innovative underlying asset allocations and investment strategies appealing to affluent customers in mature markets. From the supply side, many insurers aim to complement their large general

Third-party insurance products sales are on the rise

Source: Moody’s

INSURANCE ASIA

ANALYSIS: INSURTECH account base of participating and guarantee products with more investment-oriented offerings to tap into a wider customer pool. Also, ULPs avoid spreading risks and have a lower capital requirement from asset liability management and market risks, which becomes more relevant as solvency regulations tighten across markets. Advance unit-linked product offerings Most ULPs across Asia–Pacific are structured around actively managed fund portfolios comprising mainly equities. Life insurers can tailor ULPs to better meet the specific needs of different customer groups, making them more distinctive and individual relative to other offerings. They can do this by broadening underlying asset classes and products, supporting their preferred investment styles, enhancing investment strategies, adding financial risk management, and guaranteeing options through reallocations and hedging. To develop these new offerings, insurers should enhance their in-house capabilities in investment operations, risk management, and marketing. Carriers should also focus on developing new kinds of partnerships with banks, asset managers, and reinsurers. Of course, the likelihood that insurers will succeed with this strategy depends on the availability of cash assets and the sophistication of capital markets as well as the regulatory environment. To advance ULP products, insurers should consider four actions including offering a broad range of assets, from low-cost exchange-traded funds solutions to more distinctive asset classes and products, including foreignexchange products, providing distinctive investment strategies and dynamic asset-allocation solutions that allow clients to adjust their risk-return preferences over time, offering financial risk management and capital markets–based guarantees, either through hedging strategies or through ULPs with contract terms that allow customers to adjust their risk setting as their risk profile changes, and combining flexible protection elements with unit-linked investments, allowing various insurance covers to be adjustable over time and provide a link to retirement income. More than half of Asia’s middle class has no financialplanning support. They are likely unaware of the benefits

Business value is skewed towards protection

Source: McKinsey

ULPs have lagged behind other life products in the Asia-Pacific market.

and risks of most investment products, including ULPs, which allow individual tailoring and flexibility for customers in asset, investment strategy, and risk-return choices compared with more traditional insurance products. However, educating consumers requires carriers to build capabilities and enhance technical support. Today, only a few agents and relationship managers are equipped to offer this financial planning advice at scale. The carrier’s distribution channel and regulatory environment will influence which approach it takes to help consumers with financial planning. Insurers can enhance their financial-planning capabilities in three ways: -Strengthen customer financial literacy and foster an understanding of retirement and long-term savings and protection needs through B2C content marketing, communication, or simulation tools. -Improve the advisory skills of subgroups of agents and advisers through special training and even advanced licensing. -Provide tech-enabled advice tools to support agents or provide self-guided product configuration. Robo-advice tools could also improve customer-service quality and documentation of customer issues. ULPs have lagged behind other life products in the Asia–Pacific market, but we believe insurers can catch up. Indeed, there are reasons to be optimistic given evolving customer needs and interest in savings. Life insurers aiming to tap into customers’ growing personal assets and play a more meaningful role in their long-term financial planning can use ULPs as their value proposition.

Grab also ventured into the insurance space in 2018 Source: McKinsey & Company

10 INSURANCE ASIA

Life insurers: How to win in Asia–Pacific The region has been growing at a fast clip, but beneath the top-line numbers are countries with vastly different

ANALYSIS: INSURTECH mixed outcomes. The combination of “push” selling and uneven service has resulted in subpar customer satisfaction. This challenge creates an opportunity for those insurers committed to investing in several areas: developing a customer-centric proposition with tangible living benefits and service elements; adopting an innovation approach beyond “the next product”; shaping simple, digitally enabled customer journeys; and establishing a high-engagement brand and customer communications.

PRULife has a chatbot that responds to policy queries

prospects and consumers. To capture value in Asia– Pacific, carriers must gain a granular understanding within markets, segments, channels, and product lines. Only then can executives accurately determine where to play. That’s just the first step, however. Insurers must then devise strategies to win in their chosen value pools. For carriers that get it right, the rewards are substantial: our research found that life insurers in Asia–Pacific achieved a total return to shareholders (TRS) of 9 percent a year from 2016 to 2019, on average. The top performers were able to double that figure, yet many others fell well short. In our experience, value growth leaders follow five core lessons to succeed in their selected Asian markets:

Life insurers in Asia-Pacific achieved a total return to shareholders of 9% a year from 2016 to 2019 on average.

1. Become immersed in local markets A closer look at Asia–Pacific countries reveals a tapestry of local cultures, socioeconomic profiles, and regulatory environments. Winning insurers have been able to weave themselves into the specific local fabric and create a strong sense of local ownership and connectivity. Doing so requires becoming familiar with the needs and preferences of specific markets and stakeholders to tailor their strategy to local tastes. 2. Build quality distribution Insurers that have been successful in the region have prioritised quality distribution over additional capacity. Most of Asia’s agency networks, however, remain parttime with low activity, advice quality, and sustainability. China, for example, has around 8 million agents, but the overall level of professionalisation still lags behind other countries, with a few exceptions. In addition, the growing desire of middle-class customers to obtain quality advice expands the opportunity for differentiation through quality distribution. Besides agency, bancassurance is still in the early days for many partnerships, which have formed in past few years. 3. Innovate in customer proposition and experience Although customer experience has become a focal point for life insurers, carriers in Asia–Pacific so far have seen

4. Invest in talent and technology capabilities Life insurance in Asia–Pacific has grown and evolved so quickly that carriers must build core capabilities for performance to keep pace. Insurers have trained their sights on attracting top leadership recruits and transfers from other regions, but carriers still have to fill significant gaps not just at the upper levels of the enterprise but also across the organisation. In addition, the growing importance of data and analytics—particularly in customer segmentation, product pricing, underwriting, and claims—further increases the premium on talent. 5. Stay bold and resilient Asia–Pacific life insurance offers superior growth and value creation. But it is far from a leisure cruise. Success demands a bold and resilient approach that cuts through short-term volatilities and focuses on the long-term opportunities. Markets have rewarded players that stayed on course and developed superior performance over time. For multinational insurers, Asia–Pacific should be a meaningful pillar. For domestic carriers, it is about protecting the core and expanding from there. The five lessons described above offer a playbook for the region. If carriers want extra incentive as they develop their Asia–Pacific strategy, they need only to look at the potential rewards. The overall value at stake—currently more than $500 billion—means that the difference between leaders and laggards is likely the largest in global insurance. This article was originally published by McKinsey & Company in its insurance blog: A new industry model for insurtech; A catch-up play for unitlinked products in Asia-Pacific insurance; and Life insurers: How to win in Asia–Pacific

These five countries dominate insurtech investments from 2014 to Q3 2018 (number of deals)

Source: Fintech Global

INSURANCE ASIA

One in every four people in Hong Kong is a Manulife customer and we have many opportunities to cross-sell and up-sell our offerings to fulfil their evolving insurance and investment needs.

Guy Mills CEO Manulife Hong 12 INSURANCE ASIAKong

INTERVIEW

How Manulife is breaking growth ceilings in rapidly ageing and costly Hong Kong Customer satisfaction is quantified at Manulife which puts the customer at the centre of everything it does.

he view from the top is looking good for Manulife. After 120 years in Hong Kong and growing its customer base to over two million, the insurer has garnered more than enough firepower to zoom past its global rivals and hold a market-leading position in the city’s retirement scheme, Mandatory Provident Fund (MPF), with a market share of 23.1%. Despite its success in cracking the Hong Kong market, Guy Mills, CEO of Manulife Hong Kong, is refusing to let up as he leads the firm to unlock new pockets of growth, a feat made especially more difficult against an already mature insurance landscape that saw total gross premiums grow by 8.3% to HK$489.17m in 2018. Where others see challenges, Mills only sees opportunities especially against a backdrop of an ageing population and rising medical costs. In an exclusive interview with Insurance Asia, Mills shares the secret to their success and strategies to move forward. What initiatives of Manulife Hong Kong do you plan to introduce and enhance as CEO? The voice of the customer now permeates everything we do. When developing a digital product or service, we now deploy what we call the “Agile” approach where we keep creating different prototypes in short development cycles and ask customers for feedback to improve on the next prototypes. In this way, end users’ feedback can be fully and constantly plugged back into the development cycle, enabling us to deliver an end product that closely aligns with customer requirements by the time it’s launched. The eClaims solution launched in 2018, for example, was built using this approach. The Net Promoter Score (NPS) that we have set up is an important initiative that measures how happy a customer is with our interaction and service. Through this system, we have seen there are 50% more happy customers with eClaims than with paper claims. NPS is now an integral part of the matrix through which we measure our success. There are various customer listening sessions where we can hear real customer conversations and discuss how we can address their pain points and concerns. The Voluntary Health Insurance Scheme (VHIS) was launched in April to take strain off the public healthcare system. How do you plan to promote adoption? Hong Kong’s public healthcare system is outstanding, but it is under strain. Medical costs are rising, and in-patient bed occupancy rates at public hospitals hit 88.8% in 2017, and long waits for specialist care have unfortunately become the norm. VHIS will be a game changer in this complex environment. The scheme’s transparency and tax benefits make it all the more attractive to many. In a recent Manulife survey of working-age Hong Kongers, over half of respondents expressed interest in purchasing VHIS. About

60% of respondents with dependents also said they are considering buying VHIS products for family members, since premium expenses are tax-deductible. Manulife is ideally placed to help customers sign onto VHIS. As Hong Kong’s No.1 insurance brand and a top three medical insurer in terms of new business, we have a large pool of customers and deep expertise in medical insurance. Our Manulife Shelter VHIS Standard Plan and Manulife First VHIS Flexi Plan are designed to meet different customer needs. Our 8,700-strong agency force and distribution partners are proactively reaching out to customers to help them choose the right VHIS solution. The insurance sector in Hong Kong has not been exempt from the digital wave that has seen the city issue the first digital-only insurance license in December. What initiatives are you embarking on to ensure that you remain competitive against heightening fintech threats? Our Hong Kong customers have told us that speed, simplicity and human touch are all important. Our eClaims solution – claimsimple.hk – was developed with this in mind, and we are very pleased with the fast pick up of usage. Within a year, about 50% of eligible claims are being submitted through this platform. The success of eClaims in Hong Kong has led us to export this fintech solution to our operations in Japan and Vietnam. In tandem with the launch of our tax-deductible solutions, we rolled out our first online sales platform – BuySimple.hk. On this new site, Hong Kong people will be able to buy our VHIS Standard Plan, with quotes calculated in less than a minute, and open an MPF TVC account directly. They can also access our purpose-built Tax Savings Calculator to estimate their applicable tax breaks under VHIS, TVC and QDAP. Whilst digital channels like BuySimple.hk are increasingly vital for us to serve our customers, we never lose sight of the importance of human touch throughout the customer journey – from needs analysis to buying insurance and making more complicated claims.

The Net Promoter Score (NPS) that we have set up is an important initiative that measures how happy a customer is with our interaction and service.

With a developed life insurance market whose life and health insurance premium to GDP ratio trails only behind Taiwan, what kind of improvements is Manulife Hong Kong introducing -- both tech-wise and operations-wise -- to grow its client base? In terms of technology, we are making great progress in digitising the customer experience on all fronts to make our services simpler, better and more convenient. Further to our eClaims solution, the new BuySimple.hk sales site is another case in point. Business-wise, one in every four people in Hong Kong is a Manulife customer and we have many opportunities to cross-sell and up-sell our offerings to fulfil their evolving insurance and investment needs. INSURANCE ASIA

The human touch still plays a huge role in the service culture as customers want to talk to people who can help settle their claims seamlessly.

Daniel Neo CEO Sompo Holdings Asia 14 INSURANCE ASIA

INTERVIEW

Beyond Japan: Sompo Holdings Asia’s journey towards a sturdy retail platform The insurer seeks to build and reinforce brand awareness for direct consumers in key Asia Pacific markets.

rmed with a 130-year strong Japanese history from its parent firm, Sompo Holdings Asia is determined to further cast its prominence throughout Asia Pacific through innovations that meet the changing demands in the insurance industry around the region. Its Japanese entity, Sompo Japan Nipponkoa, is the market leader in Japan’s non-life insurance segment where it pulls ahead of Tokio Marine & Nichido Fire Insurance and Mitsui Sumitomo Insurance with 25.87% of market share as of June 2018, data from S&P show. In an exclusive interview with Insurance Asia, Daniel Neo, who was appointed as regional CEO of Sompo Holdings Asia in April, bared his plans to establish brand awareness outside Japan and target direct consumers in Asia.

Asia as Sompo Asia Pacific. What would you say are the key growth areas for the firm? Do you have any targets or milestones you’re aiming to achieve this year? With a 130-year history of Japanese service excellence, the Sompo brand has built a strong community of customers, business partners, and employees through Asia Pacific. We continue to innovate to meet the changing demands in the insurance industry. Many of my colleagues from Sompo headquarters in Japan are an excellent source of knowledge. They are able to share the many excellent things that HQ has implemented. The regional team works very closely with our HQ colleagues to ensure alignment in upholding the same level of products and services.

After more than two decades in the industry, what key lessons have you learned and how do you plan to use this accumulated industry experience to unlock more growth opportunities for Sompo in the years to come? I joined the insurance industry more than 20 years ago and was given opportunities to take on different roles, including senior leadership, in seven countries. Then in 2015, I received an offer from Sompo, which I had to accept as I have always admired how Japanese companies maintained their high level of products and services. I believe in certain values and using these values to solve problems. Although each Asian country is different, insurance is the same fundamentally. It is about providing solutions for customers, distributors, partners, and colleagues. At Sompo Asia Pacific, I am driving a problem-solving culture strongly. As the new head of Sompo Holdings Asia, how do you plan to lead the company’s growth in Asia? What is your business philosophy for Sompo and what are your longterm goals? From April 2019, four East Asian markets – Hong Kong, China, Taiwan, Korea – joined Sompo Asia Pacific regional strength. With our presence across 14 markets now, we have the confidence that we understand the local nuances, good enough to grow our profits, even exceed the market premium growth. Whilst we continue strengthening our foothold in the markets, we will also focus on building a strong regional management team. Our core aspiration is to build a strong retail platform – to be number one in travel insurance, top five in motor insurance, and top five international insurance group within Asia in four years. We are also looking at increasing brand awareness and online visibility outside Japan. I believe we have made a number of strong appointments in the expanded Asia Pacific team, and we are continuing to look for talents, as well as retain talents. We want to form a regional identity of One Unit – One

What initiatives of Sompo do you plan to continue or enhance as CEO? For instance, Sompo Insurance Singapore tied up with CIMB to offer a pet insurance policy for dogs and cats. What other segments are you targeting for expansion? Regionally, we are focused on getting the basics right, whilst driving a strong performance culture. One of the ways is through having the right partnerships. Our partnership with CIMB is a perfect example that began in 2016 to distribute our non-life insurance solutions. This bancassurance partnership has been launched in Singapore, Malaysia and Indonesia, and the next phase will be Thailand next year. Singapore has a very competitive and mature insurance landscape.

We are the first to market certain innovative solutions such as telematics product in Indonesia.

Singapore has a very competitive insurance landscape. How is Sompo Holdings responding to the demand for increasingly digitised insurance experience? We focus on our customer strategy and leverage on digital technology to better equip our employees with the tools to improve their service. We are the first to market certain innovative solutions, such as a telematics product in Indonesia. Our digital tools and insurtech development are implemented across key markets only after careful research and studying, ensuring that our offerings are effective and beneficial to our stakeholders. The human touch still plays a huge role in the service culture as customers want to talk to people who can help settle their claims seamlessly. What’s next for Sompo? What are your future plans? We want to continue providing solutions according to our customers’ needs with our tools, knowledge, products, services, and expertise. We aim to be number 1 in travel insurance, top 5 in motor insurance, and top 5 international insurance group within Asia by 2023. In order to achieve this, we need to continue recruiting and retaining talents within Sompo Asia Pacific. INSURANCE ASIA

INSURANCE INDUSTRY SURVEY: SINGAPORE

SBR’s list of largest insurers in Singapore is led by The Great Eastern Life Assurance Company Limited with $49b in assets.

Check out Singapore’s largest insurers in 2018

Total assets of the 50 largest insurance providers in the city hit S$232b, up by 13.73% from the previous year’s $204b.

ingapore Business Review’s annual survey of the insurance sector revealed that total assets of the 50 largest insurance providers in the city hit $232b, up by 13.73% from the previous year’s $204b. The country’s five largest insurers are led by The Great Eastern Life Assurance Company Limited with $49b in assets, up from $32b in the previous year. Great Eastern replaced AIA Singapore Private Limited, which fell to second place with $44b in total assets. Meanwhile, Prudential Assurance Co. Singapore, fell down a notch to third place with $37b in total assets. NTUC Income Insurance Co-operative Limited retains its rank at fourth, with $34b in total assets, a $3b increase from last year. Manulife Singapore also maintained its rank at fifth, with a total of $9b in assets. IPs are in The Life Insurance Association, Singapore (LIA Singapore) reported that Singapore’s life insurance industry accumulated $3.17b in weighted new business premiums from January to September 2018, 16 INSURANCE ASIA

Positive trends in the industry mean a better outlook for the S$893b protection gap that needs to be bridged in Singapore.

a 15% increase from the same period last year. Of the new business premiums, 92% or $292.2m were traced to IP and IP rider premiums, whilst the remaining 8% or $26.5m was from other medical plans and riders. Compared to 2017, there are now 70,000 more Singaporeans and Permanent Residents covered by IPs, resulting in a total of 2.7 million individuals covered by IPs in Singapore. According to LIA, this is approximately 68% of all Singapore residents, a number far exceeding the MediShield Life component. Positive trends in the industry mean a better outlook for the $893b protection gap that needs to be bridged in Singapore, as reported by the Association Protection Gap Study in 2017. The protected gap was measured from a 40% mortality and critical illness divide amongst Singapore’s economically active individuals. “Even though we are experiencing some headwinds due to the trade wars, it is reassuring that more Singaporeans are taking active measures to have their protection

needs met. As an industry, we aim to develop more targeted public programmes so that we can continue to narrow the underinsurance gap and help Singaporeans adequately protect their quality of life for themselves and that of their loved ones. There is much more we can do for the betterment of society,” said Patrick Teow, president, LIA Singapore. Whilst enjoying the benefits brought about by improved life insurance packages, Singaporean residents can also rest in the fact that car insurance in the country is cheaper than those of its counterparts across the world. Whilst many bemoan the costs of owning a car in Singapore, insurance in the city is actually far cheaper at $862 compared to New York’s $4,097, London’s $2,321 and New South Wales’s $1,257. South Korea has lower car insurance than Singapore at $465. Meanwhile, the General Insurance Association of Singapore (GIA) also reported flat growth for 1H2018, with a marginal increase in total gross premiums that amounted to $2.07b. Meanwhile, underwriting profits declined in the same period by 94.5% to $3.14m, on the back of increased claims costs across key segments such as motor insurance and work injury compensation (WIC) insurance. “There is a need for greater collaboration between our sector and other stakeholders, focusing on areas such as improving efficiencies through digitalisation, as we continue to ensure effectiveness and accessibility of insurance products. This is in keeping with the Industry Transformation Programme, ensuring sustained growth and competitiveness of the economy by working closely with the government and private sectors to address issues within each sector; as well as realising our vision of becoming a global insurance marketplace,” said Karl Hamann, president, GIA. Despite the trends for motor and WIC insurance in the first half of the year, Singapore’s health insurance segment’s gross

INSURANCE INDUSTRY SURVEY: SINGAPORE Singapore’s health insurance segment’s gross premiums increased by 11% to a total of S$322.9m amidst persistent healthcare inflation in the country. Singapore’s life insurance industry accumulated $3.17b in new business premiums

premiums increased by 11% to a total of $322.9m amidst persistent healthcare inflation in the country. Underwriting losses for healthcare insurance improved by 9.3% to $12.7m. Other segments seem to be experiencing the same ups and downs that the entire industry is facing.

insurance products in a range of categories with fractionalised premiums to users directly through Grab’s mobile app. Set for launching in Singapore by H1 2019 before being rolled out to other markets, the platform will allow eligible driver-partners to access the insurance under ‘GrabBenefits’ in the Boost in workforce drivers’ app. In addition, the growing population “The tie-up will address the usual of insurance and digital savvy pain points of insurance discovery, consumers are also resulting in the unaffordable premiums and payment growth of financial advisory channels, options by allowing for insurance as bancassurance and traditional premium payments to be adjusted agents remain dominant in the and automatically deducted through distribution of life insurance policies. GrabPay or its affiliate payment The sector’s workforce expanded with partners,” the firms said in a joint a net increase of 330 employees and statement. 206 tied representatives in Q3 2018, a 4% and 2% respective increase from Looking forward the previous quarter. Despite being one of the last Greater demand for technologyindustries to fully embrace digital driven insurance services has also innovation, the insurance sector opened up new positions in data analytics, cybersecurity, and business operations, amongst others. Over a period of just twelve months, member companies employed an additional 954 employees to add to a total of 8,001 individuals at the end of the third quarter of 2018. New threats Despite the relatively healthy increase in assets, insurers in Singapore still need to prepare for a new battle as giant tech companies, such as Grab, enter the scene in its latest partnership with Chinese Internet-based insurer ZhongAn Technologies International Group (ZA International). Together, they will make a digital insurance marketplace offering innovative

has made great strides to help realise Singapore’s Smart Nation ambition. LIA Singapore expects more digital initiatives to be introduced by the industry players and boost productivity, enhance customer services, and ensure security of data and personal information. “The industry will not let up in its complementary efforts to ensure that the quality of life in Singapore improves, responding to rapid demographic shifts in Singapore, rising incidences of chronic illnesses and healthcare costs inflation,” Teow added. Across the region, demand for life insurance will remain stable according to Moody’s, who also reported that asset risk is on the rise due to increasing allocations to higheryielding non-traditional assets and widening currency mismatches. As a result, regulators are implementing changes to enhance both capital and internal risk management whilst also pushing for better capital standards. Moody’s added that the implementation of IFRS 17 will be a key focus for insurers, in an aim to promote transparency for insurance contracts. “Whilst the changes are expected to be gradual, insurers are stepping up their efforts to improve assetliability management and internal risk management, as well as embed capital analysis in their daily product offerings and asset allocation decisions,” Moody’s reported.

Tech companies are actively venturing into the insurance scene

INSURANCE ASIA

INSURANCE INDUSTRY SURVEY: SINGAPORE 2018 RANKINGS

INSURANCE COMPANY

CLASSIFICATION

2017 TOTAL ASSETS

2017 RANKINGS

2017 Total Assets

1 2

THE GREAT EASTERN LIFE ASSURANCE COMPANY LIMITED

Life

$49b

$32b

AIA SINGAPORE PRIVATE LIMITED

General/Life

$44b

$39b

PRUDENTIAL ASSURANCE CO. SINGAPORE (PTE) LTD

Life

$37b

$33b

NTUC INCOME INSURANCE CO-OPERATIVE LIMITED

General/Life

$34b

$31b

MANULIFE (SINGAPORE) PTE. LTD.

Life

$9b

$7b

AVIVA LTD

General/Life

$8b

$7b

TOKIO MARINE LIFE INSURANCE SINGAPORE LTD

Life

$7b

$6b

HSBC INSURANCE (SINGAPORE) PTE. LIMITED

Life

$6b

$5b

TRANSAMERICA LIFE (BERMUDA) LTD.

Life

$4b

MUENCHENER RUECKVERSICHERUNGS GESELLSCHAFT

General/Life

$3b

$2b

SWISS LIFE (SINGAPORE) PTE. LTD.

Life

$3b

$2b

AXA LIFE INSURANCE SINGAPORE PRIVATE LIMITED

Life

$3b

ALLIANZ SE, SINGAPORE BRANCH

General/Life

$2b

SWISS REINSURANCE COMPANY LIMITED

General/Life

$2b

OLD MUTUAL INTERNATIONAL ISLE OF MAN LIMITED SINGAPORE BRANCH

Life

$1b

MS FIRST CAPITAL INSURANCE LIMITED (formerly known as FIRST CAPITAL INSURANCE LTD)

General

$1b

ASIA CAPITAL REINSURANCE GROUP PTE LTD

General/Life

$1b

$2b

PARTNER REINSURANCE ASIA PTE. LTD.

General/Life

$1b

IAG RE SINGAPORE PTE LTD

General

$1b

RED SWITCH PTE LTD (formerly known as AXA Insurance Singapore PTE LTD)

General

$1b

EVEREST REINSURANCE COMPANY

General

$1b

$900m

FRIENDS PROVIDENT INTERNATIONAL LTD (S'PORE BRANCH)

Life

$900m

$800m

ZURICH INTERNATIONAL LIFE LIMITED (S'PORE BRANCH)

Life

$900m

SCOR GLOBAL LIFE SE SINGAPORE BRANCH

Life

$900m

$700m

AIG ASIA PACIFIC INSURANCE PTE. LTD.

General

$800m

$900m

INDIA INTERNATIONAL INSURANCE PTE LTD

General

$800m

ALLIANZ GLOBAL CORPORATE & SPECIALTY AG, S BRANCH

General

$800m

$700m

XL BERMUDA LTD (merged with XL Re Ltd last June 2016)

General

$600m

ODYSSEY REINSURANCE COMPANY

General

$600m

$900m

MSIG INSURANCE (SINGAPORE) PTE. LTD.

General

$600m

ETIQA INSURANCE PTE. LTD.

General/Life

$600m

$300m

SCOR REINSURANCE ASIA-PACIFIC PTE LTD

General/Life

$500m

BERKSHIRE HATHAWAY SPECIALTY INSURANCE COMPANY

General

$500m

$400m

TOKIO MARINE INSURANCE SINGAPORE LTD

General

$500m

XL INSURANCE COMPANY PLC, SINGAPORE BRANCH

General

$500m

$400m

ALLIED WORLD ASSURANCE COMPANY, LTD, S'PORE BRANCH

General

$400m

$500m

CHUBB INSURANCE SINGAPORE LIMITED

General

$400m

SOMPO INSURANCE SINGAPORE PTE. LTD.

General

$400m

LIBERTY INSURANCE PTE LTD

General

$400m

QBE INSURANCE (SINGAPORE) PTE. LTD.

General

$400m

CHINA TAIPING INSURANCE (SINGAPORE) PTE. LTD.

General

$300m

SWISS RE INTERNATIONAL SE, SINGAPORE BRANCH

General

$300m

$400m

UNITED OVERSEAS INSURANCE LTD

General

$300m

SINGAPORE REINSURANCE CORPORATION LTD

General

$300m

ENDURANCE SPECIALTY INSURANCE LTD, SINGAPORE BRANCH

General

$300m

THE TOA REINSURANCE COMPANY LIMITED

General

$300m

$400m

AXA CORPORATE SOLUTIONS ASSURANCE SINGAPORE BRANCH

General

$300m

AXIS SPECIALTY LIMITED (SINGAPORE BRANCH)

General

$300m

SIRIUS INTERNATIONAL INSURANCE CORPORATION

General

$300m

GREAT EASTERN GENERAL INSURANCE LIMITED (formerly known as OVERSEAS ASSURANCE CORPORATION LIMITED)

General/Life

$200m

$7b

TOTAL: $232b *DATA COMPILED FROM THE MONETARY AUTHORITY OF SINGAPORE (MAS) WEBSITE

18 INSURANCE ASIA

TOTAL: $204b

INSURANCE INDUSTRY SURVEY: HONG KONG

Manulife launched an e-claims solution letting customers make a medical insurance claim anytime anywhere

Insurtech, hiring spree reshape Hong Kong’s insurance scene The rolll-out of the IFRS 17 calls for massive hiring of regulatory professionals.

rmed with a 30.30% increase in its net premiums as of end 2017 to HK$125.2b, AIA International stole the crown from Prudential HK Life in the annual Insurance Industry Survey. The former top placer succumbed to a second place finish as its premiums slipped 1.42% YoY to HK$99.22b as of end 2017. Rounding up the top five are China Life (HK$74.31b), HSBC Life (HK$67.1b), and Manulife International (HK$50.54b) which have all defended their third, fourth, and fifth spots, respectively. In total, the top 50 insurance firms operating in Hong Kong held on to a whopping HK$623b worth of net premiums back in 2017, up 1.47% from the HK$614b worth of net premiums they had back in 2016. Forging allies One of the key trends that shaped the insurance sector in 2018 that is expected to spill over to 2019 are the alliances forged between insurance companies and tech players. Early this year, insurers such as MetLife, AIA, Allianz, and Zurich announced some of 20 INSURANCE ASIA

In total, the top 50 insurance firms operating in Hong Kong held on to a whopping $623b worth of net premiums back in 2017, up 1.47% from the $614b worth of net premiums they had back in 2016.

their insurtech plans after the Hong Kong Insurance Authority rolled out a sandbox for insurers to flexibly partner with tech talent. Guy Mills, chief executive officer, Manulife Hong Kong, said that with insurtech, some products such as health insurance as well as mutual funds can actually be sold online. Don’t beat them, join them To play the digital game well, insurers in Hong Kong have learned to make insurtechs their allies in coming up with personalised and accessible insurance solutions. For instance, Manulife launched its ManulifeMOVE programme in Hong Kong, one of the first to integrate an innovative healthtracking programme with insurance solution that rewards customers who maintain active lifestyles with discounted premiums. In January 2018, Manulife launched claimsimple.hk, an e-claims solution that lets customers make a medical insurance claim online anytime, anywhere via their mobile device or PC in less than a minute. Meanwhile, Old Mutual

International rolled out Wealth Interactive, an online platform to keep track of investment performance no matter where consumers are, whenever they need it. Christal said that it is not only an online servicing platform, but a channel for distributors to provide better service to their customers. “Alongside greater customer access, it allows advisers to leverage technology and tools to manage customers’ portfolios whilst remaining close to them. Wealth Interactive also provides data to support client segmentation, so advisers can ensure a consistent and structured approach to servicing clients,” Christal added. Insurance of the future In terms of insurance education, MetLife Hong Kong’s MetLife Discovery allows a quick and easy access to information about insurance and the specific terms of insurance coverage that a certain demographic is considering. Information includes money that consumers should expect to spend and general price indicators for the cost of such a coverage. Mark Christal, head of region in Northeast Asia, and chief executive officer, Old Mutual International, Hong Kong, said that digitalisation has definitely helped streamline processes and give customers greater access to their finances amidst their increased expectations. He added that this has become a key part of the value proposition that insurance companies and advisers offer their customers, presenting a greater opportunity for them to develop deeper and longer relationships with customers. Christal said that digitalisation for insurance not only means roboservices, but also complex financial planning for evolving customer demographics. According to him, insurers are seeing more highly mobile individuals with different assets across countries and requiring professional advice on holistic wealth, tax, and legacy planning.

INSURANCE INDUSTRY SURVEY: HONG KONG the IFRS 17 implementation, HKIA flagship Sandbox programme drew several new players into the market and as a result, created a steady level of hiring needs,” the firm noted. According to Argyll Scott, salary increments of around 15-20% can be expected by those working in the insurance industry considering its amplified activities. “With IFRS 17’s deadline in 2021, we expect this to continue to be the most talked about subject and the hiring trigger for most insurers in Hong Kong, though it will be a challenge to identify talent, given not too many are familiar with the new regulations,” the firm said. Mark Christal, head of region in Northeast Asia, and chief executive officer, Old Mutual International, Hong Kong

Lee Wood, chief executive officer, MetLife Hong Kong said that four changes are likely to further transform the insurance market in the future: digital transformation, the importance of a trusted advisor, increasing health consciousness, and transparency and trustworthiness. According to him, insurance will be enormously different in the future, and data analysis will revolutionise how insurers meet their customers’ changing needs. He added that the ability to mine big data for deep insights has radically altered the dynamics of how one becomes “the trusted advisor”. Gearing up for IFRS implementation Industry players have also been keen on their preparation for the IFRS 17 implementation by 2021. “IFRS 17 will fundamentally change the accounting by all entities that issue insurance contracts and investment contracts with discretionary participation features,” PwC Hong Kong said. Its impending roll-out made Hong Kong insurers very busy for the first half of 2018, recruitment firm Argyll Scott said in a report. “Most insurance organisations focused on hiring regulatory professionals who could help with

Greater waves from the GBA Apart from Hong Kong’s internal landscape that looks positive for insurers, the coming years appear bright for the industry with the push for the Greater Bay Area which aims to connect the economic resources of 11 major Chinese cities, including Zhuhai, Dongguan, Macau, and Hong Kong. With a total population of 69 million and a collective GDP of about US$1.5t which is comparable to the size of Korea, the Greater Bay Area is set to open a realm of opportunities for many industries in Hong Kong, including insurers. The Securities and Futures Commission (SFC) revealed that by Q3 2018, individual license applications have started to surge by 15% to 2,364. Meanwhile, applications by firms grew by 6% over the same period. SFC-licensed individuals reached 46,063 whilst firms hit 2,844, data from the agency suggested. “The development of the Greater Bay Area spurs the flow of production factors, consolidates Hong Kong’s advantages in the financial market and supports the growth of real economy in the region, giving a fresh impetus to our insurance sector,” chief executive Carrie Lam said in her 2018 Policy Address. Lam assured that her leadership will implement various measures, such as tax reliefs, to promote the development of marine insurance

Salary increments of around 15-20% can be expected by those working in the insurance industry considering its amplified activities.

and underwriting of specialty risks in Hong Kong to seal the SAR’s status as an international insurance hub. Lam said that Hong Kong will continue to push to expand market access for Hong Kong’s insurance sector in the Greater Bay Area. “As a first step, we’ve proposed allowing Hong Kong insurers to set up postsales service centres in the Bay Area,” Lam explained. “These would serve Mainland policyholders of Hong Kong insurance, as well as Hong Kong policyholders living or working in the Area.” Meanwhile, finance secretary Paul Chan revealed that the China Banking and Insurance Regulatory Commission announced an arrangement that when a Mainland insurer cedes business to a Hong Kong qualified professional reinsurer, the capital requirement of the Mainland insurer will be reduced.

Guy Mills, chief executive officer, Manulife Hong Kong

INSURANCE ASIA

INSURANCE INDUSTRY SURVEY: HONG KONG 2018

INSURANCE COMPANY

Classification

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18

AIA International Prudential (HK) Life China Life HSBC Life Manulife (Int'l) BOC LIFE AXA China (Bermuda) FWD Life Hang Seng Insurance Sun Life Hong Kong MassMutual Asia Transamerica Life (Bermuda) Ageas (formerly FTLife) TPLHK MetLife AXA China (HK) BEA Life Hong Kong Life

AXA General

Chubb Life (formerly Ace Life)

Bupa

CTPI(HK)

Zurich Insurance

LIFE OR LONG TERM BUSINESS LIFE OR LONG TERM BUSINESS LIFE OR LONG TERM BUSINESS LIFE OR LONG TERM BUSINESS LIFE OR LONG TERM BUSINESS LIFE OR LONG TERM BUSINESS LIFE OR LONG TERM BUSINESS LIFE OR LONG TERM BUSINESS LIFE OR LONG TERM BUSINESS LIFE OR LONG TERM BUSINESS LIFE OR LONG TERM BUSINESS LIFE OR LONG TERM BUSINESS LIFE OR LONG TERM BUSINESS LIFE OR LONG TERM BUSINESS LIFE OR LONG TERM BUSINESS LIFE OR LONG TERM BUSINESS LIFE OR LONG TERM BUSINESS LIFE OR LONG TERM BUSINESS GENERAL - DIRECT AND REINSURANCE INWARD BUSINESS LIFE OR LONG TERM BUSINESS GENERAL - DIRECT AND REINSURANCE INWARD BUSINESS GENERAL - DIRECT AND REINSURANCE INWARD BUSINESS GENERAL - DIRECT AND REINSURANCE INWARD BUSINESS LIFE OR LONG TERM BUSINESS GENERAL - DIRECT AND REINSURANCE INWARD BUSINESS LIFE OR LONG TERM BUSINESS GENERAL - DIRECT AND REINSURANCE INWARD BUSINESS GENERAL - DIRECT AND REINSURANCE INWARD BUSINESS LIFE OR LONG TERM BUSINESS GENERAL - DIRECT AND REINSURANCE INWARD BUSINESS GENERAL - DIRECT AND REINSURANCE INWARD BUSINESS LIFE OR LONG TERM BUSINESS LIFE OR LONG TERM BUSINESS GENERAL - DIRECT AND REINSURANCE INWARD BUSINESS GENERAL - DIRECT AND REINSURANCE INWARD BUSINESS GENERAL - DIRECT AND REINSURANCE INWARD BUSINESS LIFE OR LONG TERM BUSINESS GENERAL - DIRECT AND REINSURANCE INWARD BUSINESS LIFE OR LONG TERM BUSINESS GENERAL - DIRECT AND REINSURANCE INWARD BUSINESS LIFE OR LONG TERM BUSINESS GENERAL - DIRECT AND REINSURANCE INWARD BUSINESS GENERAL - DIRECT AND REINSURANCE INWARD BUSINESS LIFE OR LONG TERM BUSINESS GENERAL - DIRECT AND REINSURANCE INWARD BUSINESS GENERAL - DIRECT AND REINSURANCE INWARD BUSINESS LIFE OR LONG TERM BUSINESS LIFE OR LONG TERM BUSINESS LIFE OR LONG TERM BUSINESS GENERAL - DIRECT AND REINSURANCE INWARD BUSINESS TOTAL

Generali Worldwide

BOC Group Insurance

Zurich International

AIG Insurance HK

QBE HKSI

Friends Provident Int'l

Generali

Chubb Insurance

32 33

Fubon Life Hong Kong AIA (HK)

Asia Insurance

Blue Cross

AIA International

Old Mutual International

MSIG Insurance

Aviva

AXA China (HK)

Standard Life Asia

Allied World

Prudential (HK) General

CIGNA Worldwide Life

AGCS SE

Liberty Int'l

47 48 49

Principal AXA Wealth Mgt (HK) Generali "Dah Sing Insurance* "

2017 GROSS PREMIUM (HK$) $125b $99b $74b $67b $51b $32b $25b $21b $20b $10b $10b $8b $8b $6b $5b $5b $5b $4b

2017 RANKINGS 2 1 3 4 5 6 8 7 9 10 11 13 12 25 15 16 20 14

2016 GROSS PREMIUM (HK$) $97b $101b $93b $67b $35b $32b $25b $28b $18b $17b $10b $7b $9b $2b $5b $5b $4b $6b

$4b

$3b

$2b

$3b

$2b

$3b

$2b

$1b

$2b

$1b

$2b

$1b $1b

42 37

$1b $1b

$1b

$900m

$1b

$900m

$1b

$900m

$1b

$900m

$1b

$900m

$800m

$1b

$900m

$800m

$900m

$800m

$900m

$800m $700m $400m

38 50 17

$1b $700m $4b

$300m

$200m**

G20 - 2017

$4b

$2b

$1b

$300m

$623b

Data obtained from the Hong Kong Insurance Authority Gross premiums that hit billions were rounded off to the nearest billions whilst those that reached hundred millions were rounded off to the nearess hundred millions *(Dah Sing Life and Dah Sing Insurance have been acquired by Tahoe Group) **Figures are from Dah Sing Lifeâ&#x20AC;&#x2122;s 2016 statistics

22 INSURANCE ASIA

ANALYSIS: INSURTECH

Customers are showing increasing likeliness to purchase policies from BigTechs.

Insurers up digital game as BigTechs capitalise on underserved markets Unlike customers in North America which have the highest positive experience, insurance customers in APAC report lacklustre positive experience which could be due to rising per-capita income and underpenetration.

hen compared with other industries on average-based, cross-industry customer experience scores, insurance only ranked third. With a score of 72.3, the insurance industry trailed retail (consumer products) and banking, which garnered ratings of 75.7 and 74.5, respectively although it ranked ahead of automobile, healthcare, telecom and utilities. When analysing the percentage of those who reported a positive experience, the difference between the insurance and banking industries was significant. Customers across all demographic segments reported a lower positive experience with their insurer than with their bank, with the steepest difference amongst Gen Y customers. Whilst 32.6% of Gen Y customers said they had a positive experience with their bank, only 25.7% of Gen Y customers reported a positive experience with their insurer. The implication is that whilst the insurance industry offers customers a good experience on average, there remains opportunity to improve and to earn excellent customer experience scores. Banksâ&#x20AC;&#x2122; relatively higher positive experience scores likely suggest they are ahead of insurers in implementing emerging technologies that have the potential to drive better customer experience. 24 INSURANCE ASIA

Banksâ&#x20AC;&#x2122; relatively higher positive experience scores than insurers likely suggest they are ahead of the latter in implementing emerging technologies that have the potential to drive better customer experience.

Banks typically have frequent and many more customer touchpoints than insurers, and the quest to meaningfully enhance these touchpoints has spurred technology adoption. It is now clear, that insurers must accelerate their own adoption of technology to simplify transactions, to keep customers regularly updated, and to develop new avenues for significant engagement. Insurance customer satisfaction is also noticeably lower than banking for service essentials such as ease of use as well as features on mobile app. Although more than a third (36.1%) of customers polled said they were highly satisfied with the ease of use of transactions in insurance, their vote of confidence paled when compared to banking, where 47.2% of customers claimed to be highly satisfied with transactional ease of use. Moreover, when it came to both personalisation and the availability of mobile app features, insurance customers were not particularly pleased. Only 21% of the polled customers were highly satisfied with the features available on insurance mobile apps. However, further analysis showed that whilst 28.3% of tech-savvy customers said they were highly satisfied with the array of features and services available on their mobile insurance app, only 16.3% of non-tech-savvy users were

ANALYSIS: INSURTECH Customers reporting positive experience with their insurance firms

Source: Capgemini

similarly satisfied. The implication is that though some features are available on the mobile app, they may not be intuitive enough for non- tech-savvy customers. Insurers may be able to beef up customer satisfaction by tapping into technologies that bolster ease of use, faster service, and personalisation. Customer satisfaction across the regions Insurance customers in North America reported the highest positive experience globally, across all demographics. However, North American and European customers cited distinct experiences across different demographics. A relatively low percentage of tech- savvy and Gen Y customers said they are happy with their insurance experience when compared with others insured in their region. This could possibly be because older-generation customers may prefer expert insurance guidance and are satisfied with traditional advisory channels. Furthermore, large U.S. and European insurers may be bogged down by legacy and siloed systems, which are hindering deployment of seamless, digital customer experiences. In Asia Pacific and Latin America, however, customers across demographics report lackluster positive experience. This phenomenon may be the result of rising per-capita income and under-penetrated insurance markets in emerging-markets of APAC and Latin America, which have afforded insurers ample organic growth opportunities. Because business is robust, insurers may be less focused on customer experience. Unfettered by legacy restraints, insurers must tap into new technologies to efficiently safeguard positive experiences across all customer segments. Digital to break traditional interaction limits Customers across all segments now accept digital communication channels, and the playing field with traditional channels is leveling. In fact, self-service through the internet/website is on a par with customer care/phone and is now cited by customers as one of the most important channels. More than half of surveyed customers placed high importance on the

In Asia Pacific and Latin America, customers across demographic report lackluster positive experience.

internet/website for conducting insurance transactions. Additionally, more than 40% of insurance customers said a mobile app is an important channel. As the mobile channel is strongly positioned to provide convenience, agility, and personalisation which is demanded by customers and as customers increasingly use this channel in other aspects of their lives, mobile apps are finding greater popularity amongst both insurers and customers. For instance, FWD Insurance Singapore and DBS Bank partnered earlier this year to launch an electronic claims payments system that cuts pay-out time from five days to one day upon approval of the claim. U.S.based MetLife Auto & Home deployed Guidewireâ&#x20AC;&#x2122;s core insurance suite in the cloud for customers using its MyDirect portal, which enables the insurer to offer a fully digital experience for all policy services across all customer lifecycle stages. Additionally, U.S.-based payper-mile insurer Metromile recently launched Direct Repair, Car Rental, and Claim Payments programmes that leverage its artificial intelligence AI- based claims system so that time-strapped customers can easily identify, manage, and pay auto repair and car rental providers within Metromileâ&#x20AC;&#x2122;s preferred network. Proactive and personalised Although customers appear willing to consider proactive insurance offers, firms may not be meeting their full expectations. Are insurers leaving money on the table? Customers said they were willing to receive proactive, personalized insurance offerings, with 45.7% of tech- savvy customers and 38% of Gen Y customers open to such proposals. Whilst the numbers suggest that insurers are providing some personalised services, gaps remain, particularly when it comes to nontech-savvy and non-Gen Y customers. Among these segments, there appears to be misalignment between the willingness of customers and the proactiveness of insurers, which implies that insurers may not be leveraging all channels to uncover prospective customer needs. The result? Potentially untapped business. A firmâ&#x20AC;&#x2122;s proactive outreach with personalised services is important as it correlates directly with positive customer experience. Customers who believe their

Investment into insurtech startups across the world (2011-2016)

Source: CB Insights

INSURANCE ASIA

ANALYSIS: INSURTECH primary insurers are actively reaching out with life-stage event-based offerings report significantly higher positive experiences. It is interesting to note that although non-tech-savvy and non-Gen Y customers reported relatively low willingness to receive proactive, personalised offerings, around half of these customers said they have a positive experience with their insurers when their insurers reachout with proactive offers. Customers who considered their insurers to be highly proactive reported a 17 PP higher positive experience as compared to those who did not, in the case of nonGen Y customers. The difference expanded to 17.6 PP for non-tech-savvy customers. Tech-savvy customers exhibited the widest gap, 18.4 PP, indicating lower positive experiences among those who did not perceive their insurers to be highly proactive. Clearly, when it comes to attracting and retaining upcoming Gen Y and tech-savvy segments, proactive value-added services will be a critical addition to incumbent product portfolios not only for improving customer experience but also because value-added services are being targeted by new entrants. Big challengers BigTechs such as Google, Amazon, Facebook, Apple, and Alibaba have been eyeing the financial services sector for years and are taking slow, deliberate steps toward establishing their presence. They are testing insurance waters and building capabilities in related areas such as healthcare and IoT. For example, Amazon Protect made its debut in the UK in 2016 to offer protection against accidental damage, breakdown, and theft of Amazon purchases ranging from washing machines and mobile phones to kitchen appliances and tablets. Now, Amazon is exploring the healthcare segment by collaborating with Berkshire Hathaway and JPMorgan to create a healthcare company to serve its employees in the United States. Whilst exploring multiple opportunities, Apple is making progress in digital health through a collaboration that provides Apple watches to Aetna customers. Apple is also partnering with Cisco, Aon, and Allianz on a cyber-risk management solution to protect

Indonesian insurtech PasarPolis counts Go-Jek amongst its big-time backers. Source: McKinsey & Company

26 INSURANCE ASIA

Customers are increasingly willing to buy products from BigTechs

Source: Capgemini

Customers in developing regions are generally more willing to purchase insurance products from technology firms.

middle market and other enterprises from malware and ransomware. Alphabet, Googleâ&#x20AC;&#x2122;s holding firm, has already staked its position in the insurance technology space by investing in or partnering with InsurTech firms such as Collective Health, Oscar, and Lemonade. Alphabet may also enter the health insurance market via its subsidiary Verily, a research organisation devoted to the study of life sciences. Whilst enormous regional variations exist, the report findings suggest that customers in developing regions are generally more willing to purchase insurance products from technology firms. The percentage of such customers is 49.4% in Latin America and 40.1% in APAC (excluding Japan). A relatively lower bar in customer experience in these regions may be at the root of this trend. Japan cited the smallest percentage of customers willing to make the switch to technology firms possibly the result of an ageing population that highly regards long-term relationships and loyalty. Notably, within the past three years, BigTech firms have significantly increased their customer mindshare in all regions except Latin America. As prominent BigTech firms gradually expand their portfolios of offerings, customers are becoming comfortable with the idea of purchasing nontraditional services from them. Also, despite concerns about privacy, customers are willing to share their data with BigTech firms for personalised services and enhanced experience. If BigTech firms fully enter the insurance industry, Gen Y and tech-savvy customer segments are particularly primed to switch loyalties because they cite lower positive experiences, say they are more likely to change their insurance provider within 12 months and are more open to purchasing insurance products from tech firms. This article was originally published by Capgemini in â&#x20AC;&#x153;World Insurance Report 2018â&#x20AC;?

ANALYSIS: INSURANCE

Riding the digital wave: Can insurers plug $58t underprotection gap in Asia-Pacific? Insurance penetration rates in India, Indonesia, China and Malaysia are less than 5% which is far below the rates in Hong Kong, Singapore and South Korea, signifying a fragmented regional landscape to conquer.

pportunities abound for insurers doing business in Asia-Pacific. In China, India and parts of Southeast Asia, households are accumulating wealth, and the middle class is expanding rapidly. Total household wealth in the region is on pace to outstrip North America’s by 2023, according to projections by Credit Suisse. In the same time frame, the number of middle-class households will reach 109 million in mainland China and 83 million in India, according to Euromonitor. As people become wealthier, they spend more— both on necessities, such as food and shelter, and on discretionary items, such as motorcycles and cars. As households accumulate more possessions, they tend to buy more insurance, particularly for homes and vehicles. In mainland China, for example, premium income from general insurance rose at an average annual rate of 13% from 2013 to 2017, and could double between 2020 and 2029, according to a forecast by Swiss Re. As living standards improve, so does access to medical care, spurring demand for health insurance. In many parts of Asia-Pacific, people are living longer and the population is aging, fueling the need for life insurance and related products that can help protect family living standards for

Multinational insurers can cash in from growing deregulation in the region.

28 INSURANCE ASIA

Households in Asia-Pacific have only set aside slightly more than half of the savings they will need for retirement

the next generation. In the Chinese life insurance market, income from gross written premiums grew by about 25% annually from 2013 to 2017. Whilst these socio-demographic shifts are driving up insurance needs, coverage remains low. Consumers in Asia-Pacific’s developing markets are significantly underinsured. When it comes to life insurance, coverage often falls far short of the amount needed to replace household income in the event of the policyholder’s death. Collectively, 11 of the largest economies in Asia-Pacific were underprotected by around $58 trillion as of 2014, according to Swiss Re. Asians also aren’t saving enough for retirement, which means there is likely pent-up demand for the savings products sold by life insurers. Asia-Pacific households have set aside slightly more than half of the savings they will need for retirement, according to calculations by HSBC. One measure of insurance penetration, gross written premiums as a percentage of per-capita GDP, signals a significant amount of unmet demand in Asia-Pacific’s developing markets. Penetration is less than 5% in India, Indonesia, mainland China and Malaysia, far below the rates in Hong Kong, Singapore and South Korea. Data from other developing markets shows that insurance

ANALYSIS: INSURANCE Asiaâ&#x20AC;&#x2122;s massive mortality protection gap (in trillions)

Source: Bain

purchases can increase dramatically as per-capita GDP rises. Along with these promising demographic and macroeconomic trends, multinational insurers eager to expand in Asia-Pacific can also benefit from deregulationâ&#x20AC;&#x201D;particularly the easing of restrictions on foreign ownership of local insurers in mainland China, India and other markets. Fragmented landscape Broadly speaking, Asia-Pacific life insurance and general insurance markets fall into four categories: booming giants (mainland China and India), dynamic developing markets (notably in Southeast Asia), mature markets (including Japan, South Korea and Australia), and hybrid markets (Hong Kong and Singapore). In the rapidly growing Chinese market, large insurers such as Ping An, China Life, China Pacific and the Peopleâ&#x20AC;&#x2122;s Insurance Company of China (PICC) hold commanding positions, which presents challenges for overseas insurers trying to make inroads. These domestic giants have focused on pursuing rapid top-line growth to gain market share, often at the expense of profit margins in the near term. The three major players in general insurance (PICC, Ping An and China Pacific) collectively have a 65% market share in automotive insurance, which accounts for 70% of all general insurance policies written in mainland China, mainly for individual customers. In life insurance, local players hold more than 90% of the market. Large domestic insurers such as China Life, Ping An and China Pacific are losing share to midsize domestic players. In April 2018, China announced the gradual lifting of restrictions on foreign insurers, allowing companies that are 100% foreign-owned to operate in the country. Within seven months, Allianz received permission to set up a wholly owned insurance holding company in Shanghai. Soon after, AXA agreed to acquire the remaining 50% stake it did not already own in AXA Tianping Property & Casualty Insurance. India is another large, rapidly growing market dominated by a handful of big companies. From 2013 to 2017, gross written premiums for general insurance grew

Multinational insurers eager to expand in Asia-Pacific can also benefit from deregulation - particularly the easing of restrictions on foreign ownership of local insurers in mainland China and India.

at an annual rate of 15%, and direct written premiums for life insurance grew at a rate of 13%. Fast growth is likely to continue, due to rising incomes, increased consumer awareness of the value of insurance, high levels of urbanisation, strong construction activity and frequent natural disasters. The market is relatively consolidated, with the top five players (New India, United India, National, ICICI Lombard and Oriental) accounting for 53% of the general insurance market and governmentowned LIC controlling about 70% of the life market. Reforms launched in India in 2015 have lifted the ceiling on foreign ownership of domestic insurers from 26% to 49%. In addition, the government has actively supported the microinsurance industry and has increased protections for consumers, by, for example, barring life insurers from unilaterally discontinuing coverage for customers who have held their policies for at least three years. In the major developing markets of Southeast Asia, urbanisation and population increases are driving strong demand for insurance. In Indonesia, gross written life insurance premiums grew at 11% annually from 2013 to 2017, but consumer awareness of the value of insurance remains low. The life insurance penetration rate (gross written premiums as a percentage of per-capita GDP) is about 2%. The general insurance market is highly fragmented, with the top five players accounting for just 35% of direct written premiums. Regulatory constraints limit foreign ownership to 80% of paid-in capital. In the mature markets of Asia-Pacific, insurers must contend with slow growth or no growth. In Japan, net written life insurance premiums fell 1% per year from 2013 to 2017. Insurers are beset by an ageing population, sluggish economic growth and near-zero bond yields. As the insured population becomes older and sicker, the underwriting risks increase, forcing Japanese insurers to look for profits from asset management and noninsurance investments. Japanese insurers spent about $18 billion in mergers and acquisitions in 2018. In Australia, major banks have been offloading their insurance and wealth management businesses over the past two years due to lower-than-expected returns and changing regulations. The Royal Commission into Misconduct in the Banking, Superannuation and

Net investment yield of Chinese insurance players

Source: DBS

INSURANCE ASIA

ANALYSIS: INSURANCE Global insurance M&A by region (2003-2012)

Source: PwC

Financial Services Industry has recommended rules that will prohibit “hawking,” that is, the unsolicited selling of insurance products. The commission has also proposed restrictions on the incentives financial services companies can provide to employees for cross-selling products, which has prompted banks to pull back significantly on sales of insurance policies through their branch networks. Two insurance markets in Asia-Pacific, Singapore and Hong Kong, are mature in some respects but still developing in others. Both markets are competitive and highly fragmented. In both markets, general insurance growth has been slow and steady, expanding about 1% per year from 2013 to 2017. By contrast, demand for life insurance, especially from the affluent segment, has been strong, with gross written premiums growing at 13% per year in Singapore and 15% in Hong Kong. Digital first Throughout Asia-Pacific, incumbent insurers looking to expand must contend with a distribution landscape that is being upended by advances in technology and the rise of digital-first competitors. In fast-growing markets such as mainland China, India and Indonesia, insurtechs and other new entrants—including technology firms, retailers and other companies from outside the industry— can leapfrog incumbents and gain market share. Digital marketplaces, which allow customers to easily compare and select policies from competing carriers, threaten to take a significant share of the insurance profit pool. In major markets around the world, a majority of retail insurance customers—especially young, digitally active ones—are open to switching to another provider, including companies from outside the industry, such as retailers, automakers or tech firms, according to Bain & Company’s fourth global survey of more than 174,000 customers in 18 countries. Asia-Pacific insurance consumers are exceedingly receptive to new ideas and new players. In Thailand, Indonesia, mainland China and Malaysia, for example, more than 85% are open to buying from new entrants, according to our survey. Digital disruption is getting a push from regulators. In Singapore, Hong Kong and, more recently, Indonesia, 30 INSURANCE ASIA

Digital marketplaces, which allow customers to easily compare and select policies from competing carriers, threaten to take a significant share of the insurance profit pool.

authorities are actively promoting digital innovation and have established government-funded incubators, known locally as sandboxes, to encourage insurers to experiment with new technologies. Singapore and Hong Kong are emerging as hubs for telematics and insurtechs, and consumer use of digital channels is growing rapidly. Venture capitalists have also recognised the potential profits to be made from digitally disrupting insurance. In the past five years, VCs have invested about $3.8 billion in Asia-Pacific insurtechs, including online sites that sell directly to the public, online brokers and advisers, and aggregators o digital marketplaces. As the distribution landscape changes, some insurers are trying to gain an edge by bringing digital techniques such as advanced analytics and machine learning to bancassurance arrangements, whereby an insurer markets its products directly to a bank’s customers. Insurers and banks formed about 50 bancassurance agreements in Asia-Pacific in 2017 and 2018, in Nepal, India, Vietnam, Pakistan and other markets. Developing a repeatable formula for success The insurers that succeed in the region candidly assess their core capabilities and then invest in the markets that play to their strengths—whilst avoiding those that don’t. The key is to develop a repeatable formula that works across select markets. Part of this process involves deciding which markets to avoid. Mainland China and India, whilst rich in potential growth, may be too large and too complex for some multinationals. On the other end of the spectrum, mature markets such as Japan, Australia and South Korea may make sense only for multinationals with finely targeted expertise in a specialised area of insurance. One key aspect of developing a repeatable formula is deciding which capabilities can be consolidated at regional headquarters and which should be cultivated in local markets. Embracing ecosystems Across Asia-Pacific, insurers are embracing ecosystems, reimagining the value they deliver in auto, home, health and life insurance. The concept resonates with customers. About 90% of consumers surveyed by Bain & Company in the region are open to the idea of an ecosystem of services, and in many countries, a majority would like insurers to provide those services. Chinese insurers have taken the lead in developing ecosystems. Ping An, for example, operates Good Doctor, a one-stop healthcare ecosystem with over 50 million active users per month. Good Doctor’s services include treatment by family physicians, advice on healthy living and personal health management tools. The company aims to provide every member with a family doctor, an e-health profile and a healthcare management plan. Ping An has also developed OneConnect, an ecosystem for small and midsize financial companies, including other insurers. OneConnect offers a cloud-based platform that uses artificial intelligence, blockchain and facial- and voice-recognition technologies. Insurers can use this platform to digitise core functions such as pricing and

ANALYSIS: INSURANCE claims settlement. Many insurers that don’t have their own ecosystems in Asia-Pacific are forming partnerships with those that do. In 2017 and 2018, more than 20 such agreements were struck in mainland China and Hong Kong. In some of these partnerships, established insurers joined with relatively young insurtechs. For example, AIA forged an agreement with WeDoctor, China’s leading technology-enabled healthcare platform, that will give AIA customers access to WeDoctor’s online appointment and advice services, as well as the ability to get treatment from WeDoctor’s network of 2,700 hospitals, 220,000 doctors and 15,000 pharmacies in 30 Chinese provinces. Prioritising the customer experience The dynamic nature of Asia-Pacific’s diverse insurance markets also creates opportunities for mergers and acquisitions, particularly in countries where growth has slowed and regulations have changed. Many of the recent large Asia-Pacific insurance transactions have involved the purchase of Australian life insurers by acquirers who want to expand into a major market. In another slow-growth market, Japan, domestic insurers have adjusted to negative core underwriting margins by focusing on investment income. Many Japanese insurers are actively looking for returns by investing in other industries and by considering targets beyond Japan and the US, traditionally their two largest spheres of geographic interest. Any insurer hoping to thrive in Asia-Pacific, whether by direct investment, ecosystem, partnership or M&A, must recognize the need to prioritise the customer experience. For several years now, insurers worldwide have been making efforts to become more customer-centric. Two trends are accentuating this phenomenon. The first, digital expectations, is particularly significant in the developing markets of Asia-Pacific, where young, digitally active consumers make up a growing segment of the population. Customers now want to buy, manage and use their insurance in the same “simple and digital” ways that they use other financial products, such as credit cards and bank accounts. Whilst customers still use a variety of online and offline channels, they are becoming increasingly comfortable with digital platforms— both unassisted and assisted, with the option to seek advice. The other trend

Allianz received permission to set up a wholly-owned unit in Shanghai.

Number of bancassurance partnerships in Asia Pacific

Source: Bain

Insurers that prosper in Asia will take a “today forward, future back” approach that understands customer expectations and global trends.

impelling the need for a sharper focus on the customer experience is the spread of regulations that grant new customer protections —as is evident in the antihawking recommendations of Australia’s Royal Commission. In order to meet rising consumer expectations and increased regulatory scrutiny, forward-thinking insurers doing business in Asia-Pacific are taking a simple and digital approach to product design and the customer experience. That means creating simple propositions that offer value to customers and are easy to buy, especially via digital channels. It also means focusing on customers at the episode level, first by identifying pain points, such as complex products, burdensome processes, long wait times, lack of personalised service and advice, and limited transparency on the progress of orders, claims and requests for assistance. Insurers that prosper in Asia will take a “today forward, future back” approach. Today forward means understanding customer expectations and global trends, and using state-of-the-art digital technology to make business better, cheaper and faster right now. Insurers typically focus on three to five well-defined initiatives that can get the company on a firm path to the future in each market where it does business. If today forward is made up of thoughtful doers, future back belongs to artful dreamers. They envision the future of insurance from the perspective of a technology-driven evolution of products and services. They imagine what insurance will look like 10 or 20 years from now, then work on steps today to prepare to compete in that world tomorrow. In a time of disruption and in a region as dynamic and diverse as Asia-Pacific, winning insurers will develop a repeatable formula that is broad enough to play to their core strengths and specific enough to work in selected markets. They’ll consistently deliver quality at competitive prices and delight their customers in each and every episode, using a variety of channels, with a growing emphasis on digital. They’ll expand and intensify their connections by positioning themselves at the centre of an ecosystem of services that meets their policyholders’ evolving needs. This article was originally published by Bain & Company in its report: “Making the Most of Asia-Pacific’s Insurance Boom” INSURANCE ASIA

OPINION LORI STETZ, STELLA GEORGE, MITESH PATEL

Keeping up with healthcare: How Singapore can remain an attractive expat destination

n 2018, Singapore emerged as the best place for expats to live and work in for the fourth year in a row - no mean feat considering it is also one of the world’s most expensive cities to reside in. A 2018 survey conducted by ECA International also found the city-state to be the most liveable city for Asian expats for the 14th year in a row. Healthcare is a key determinant of quality of life and we look at some expat healthcare trends that will shape this in 2019: 1. Increasing awareness of the importance of workplace mental health Employers and governments are becoming increasingly aware of how anxiety and depression affects an individual’s well-being. Dr. Stetz explains that, “with mental health being taken more seriously in the workplace, many corporations, government bodies and policy makers are taking meaningful steps towards providing a more holistic wellness approach.” One good case study is Xero and the changes they made to their global wellbeing leave policy: employees are entitled to 14 days paid leave in addition to annual leave for personal wellbeing. Come 2024, the APAC region can expect a corporate wellness market worth US$7.4b. Separately, studies have shown that companies across Singapore, Malaysia, Indonesia, and the Philippines that neglect corporate wellness had productivity losses totalling US$44.6b within a fiscal year. Corporate well-being is increasingly entrenched in workplace cultures and strategies. A happier and healthier workforce enables higher productivity, job satisfaction and helps to attract and retain talent. “Quite often, employees on assignment face intense pressures of a work promotion on top of managing their family life and health in an overseas context. Unfortunately, when it comes to prioritising these challenges, health and family usually take back seat,” says Dr. George. Other factors like frequent travel, always being available and ‘’switched-on’’ via technology; stressors of living abroad and absence of social support structures also have an impact. 2. Growing influence of social health determinants It is crucial that employers take into consideration factors that have a 90% influence on people’s health: the conditions in which they live and work, including their behaviours and socio-economic 32 INSURANCE ASIA

circumstances. Known as the social determinants of health, these factors also include economic stability, education, community and family. Expat assignments fail for many reasons, but most often it’s when the expectations of their new life doesn’t quite match up to the reality. For individuals, moving internationally can be relatively straightforward. But when expats are relocating with family, considerations expand to include spouses leaving their homes, children moving schools, leaving behind family and friends, language barriers and culture shock on arrival – and it becomes easy to see why it may not work out for everyone. Companies with low rates of failure in relocating staff put in place comprehensive support, before, during, and after their employees’ assignments. They recognise that for employees moving with families, they want the peace of mind IPMI affords them by ensuring their families have access to the best possible care - wherever they are in the world. 3. The 4P health care model: personalisation, prevention, prediction and participation Individuals increasingly consider themselves active participants in their health, rather than passive patients. Technology has transformed shopping and banking to become highly tailored experiences, and consumers expect a similar experience from their health care services. They are demanding greater personalisation and are increasingly willing to share data about themselves to support that outcome. Healthcare companies can use this influx of information to tailor treatment plans for their patients, help them to better manage health conditions and encourage healthy behaviours. “The evolution of data storage and use will also mean advancements in electronic health records that accompany the expatriate from their home country, enabling consistent and personalised treatment plans wherever in the world they go,” adds Dr. Patel. Singapore constantly tops the rankings as one of the most liveable cities in the world for expats, with the provision of first-class healthcare being one of the factors for this distinction. Even then, we expect to see employers and healthcare providers partnering more with their globally mobile employees in the coming years - to offer all-round support for their health and wellbeing.

LORI STETZ Senior Medical Director Aetna International

MITESH PATEL Medical Director Aetna International

STELLA GEORGE Senior Medical Director Aetna International

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AI IS TAKING THE TEDIUM OUT OF RECRUITMENT BONDS: PANDA’S BOOM IS THE DIM SUM’S BANE WILL ALIBABA STEAL HONG KONG’S LUXURY LUSTRE? WHY BANKERS ARE ON THE MOVE TO DIGGING COINS

• Where can you find the best property buys? • Commercial versus residential • Housing prices: Singapore versus Hong Kong

MICA(P) 244/07/2011 KDM No: PPS1645/3/2008

Issue No. 89

THE

DISPLAY TO 31 DECEMBER 2017

AWARDS ISSUE Asian Banking & Finance

UNIONBANK’S KYC BY SELFIE FEATURE FINTECHS VS BANKS: WHO’S WINNING IN FOREX? CASE STUDY: DBS’ DIGIBANK IN INDIA, INDONESIA CLOSING IN ON OPEN BANKING ISLAMIC BANKS SEEK SYNERGIES

ASIA’S LEADING

Issue No. 83

BUSINESS TO BUSINESS

ISSUE 83 | DISPLAY TO 31 OCTOBER 2017 | www.asian-power.com | A Charlton Media Group publication

US$360P.A.

Asian Power

THE MAN BEHIND SINGAPORE’S FIRST LNG PLANT PACIFICLIGHT’S CEO YU TAT MING SHARES HOW HIS COMPANY MAINTAINS SINGAPORE’S FIRST LNG-FIRED POWER PLANT AND HOW BEING FIRST CHALLENGES HIM

MAKE WAY FOR CHINA’S MEGA MERGERS INDONESIA TIGHTENS NOOSE ON IPPs MASSIVE BLACKOUT IN TAIWAN CASTS DOUBT ON ITS NUKE-FREE VOW OUTDATED POLICIES HOLD BACK MALAYSIA’S NUCLEAR AMBITION

MEDIA

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ISSUE NO. 10

The magazine for healthcare administrators and policy makers

| www.healthcareasiamagazine.com

RACE TO REFORM

Display to 31 October 2017

CHINA AND OTHER ASIAN COUNTRIES ARE SMASHING REGULATORY ROADBLOCKS TO ATTRACT HEALTHCARE INVESTMENTS

Healthcare Asia

DATO’ DR ADZUAN RAHMAN CEO, GLENEAGLES HOSPITAL KUALA LUMPUR p14

PHUA TIEN BENG, CEO MOUNT ELIZABETH HOSPITAL p16

HEALTHCARE DISSATISFACTION GUARANTEED A ROBOT A DAY KEEPS THE DOCTOR AWAY THAILAND IS PRESSURED TO REVAMP HEALTHCARE SINGAPORE TURNS TO AI FOR THE AGED

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