Insurance Asia (May 2020)

Issue No. 14

Display to 31 October 2020

IN RESPONSE TO A

Insurance Asia

PANDEMIC

ASIA’S INSURANCE INDUSTRY ON WORKING FROM HOME, BUSINESS LOCKDOWNS, AND THE FLOOD OF COVID-19 CLAIMS EXPECTED

TALENT SHORTAGES, TECHNOLOGY GAPS, AND ANALYTICS-LED GROWTH IN ASIA PACIFIC WHO SITS ATOP OF THE ANNUAL INSURER RANKINGS IN HONG KONG AND SINGAPORE? ALL EYES ON THE AUSTRALIAN MARKET AS CONSOLIDATION PRESSURES GROW

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

The coronavirus pandemic has been wreaking havoc left and right and the insurance industry has not been spared.

For this issue of Insurance Asia, we spoke to nine insurers across the region to know how they are coping. Turn to page 8 to learn more.

MANAGING EDITOR Paul Howell PRODUCTION TEAM Frances Gagua Alyssa Divina Giullian Navarra GRAPHIC ARTIST Tyrone De Los Santos Simon Engracial II ADVERTISING CONTACT Aileen Cruz aileen@chartonmediamail.com

The crisis may be on everybody’s minds, but it is yet to make an impact on the region’s biggest insurers. See who topped our annual Hong Kong and Singapore insurance rankings, and who have been making waves in the industry. Flip over to pages 16 and 18 for the full stories.

ADMINISTRATION ACCOUNTS DEPARTMENT accounts@charltonmediamail.com ADVERTISING advertising@charltonmediamail.com EDITORIAL ia@charltonmedia.com

What are the possible repercussions of COVID-19 on the wider sector? How must insurers react to prevent more losses and keep their financial profiles intact? A Deloitte report shows them what to do. Read more at page 30.

Enjoy the issue!

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CONTENTS

SURVEY

HALF OF APAC LOOK FOR NEW

14 INSURANCE AMIDST PANDEMIC

8

COVER STORY INSURANCE IN THE TIME OF CORONAVIRUS

MARKET REPORT

28

ACCOUNTING WOES WORSEN SOUTH KOREAN INSURERS’ OPERATING ENVIRONMENT

ANALYST INSIGHT

INSURANCE RANKINGS

INSURERS TAP INTO BIG DATA FOR NEW PRODUCTS 16 SINGAPORE KONG DIGITAL INSURERS CATCH UP TO TRADITIONAL FIRMS 18 HONG

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

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HOW ADVANCED ANALYTICS CAN BOOST AND SUSTAIN GROWTH FOR INSURERS IN ASIA

30

UNPRECEDENTED PANDEMIC JUST ONE OF THE CHALLENGES FACING INSURERS IN 2020

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

insuranceasia.com

CO-PUBLISHED CORPORATE PROFILE

Prudential Vietnam Launches Pulse by Prudential The life insurance company is rolling out a holistic approach for supporting the three stages in a person’s health journey – Prevent, Postpone, Protect.

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or over 20 years and since establishing operations in 1999, Prudential Vietnam has been committed to helping people progress in life. Apart from helping protect the financial future of millions of Vietnamese and their families, the company has remained committed to providing value-add offerings by leveraging digital technology and innovations.

Amongst the latest innovations to be launched by Prudential Vietnam is Pulse by Prudential. Following the regional launch in Malaysia in August 2019, Pulse is now available for Vietnamese users. Pulse is an all-inone digital app and the first-of-its-kind in Asia and Vietnam to offer holistic health management to consumers.

Using AI-powered self-help tools and real-time information, Pulse serves as a 24/7 smart health assistant to users, empowering them to take control of their personal health and wellbeing anytime, anywhere.

Pulse is part of Prudential’s regionwide strategy to provide affordable and accessible healthcare to everyone across the region, by leveraging cutting-edge digital technologies and best-in-class partnerships.

With a holistic approach in supporting the three stages in a person’s health journey – Prevent, Postpone, Protect – Pulse takes healthcare to a new level of engagement with consumers. The goal is to seamlessly integrate personal health checks and management into everyday life.

As a leading life insurer in the country, Prudential Vietnam is playing a larger role in helping people prevent and postpone adverse health events.

The launch of Pulse is in line with the company’s efforts to drive a step change in how people can proactively manage their health and wellbeing.

Pulse is yet another milestone in Prudential Vietnam’s long-term commitment to promote simplicity and convenience for customers, which is

aligned with the company’s “We DO” spirit.

Today, Vietnamese are facing the burden of rising healthcare costs and a growing incidence of non-communicable diseases, such as cardiovascular, cancer, hypertension, diabetes and chronic respiratory diseases, which account for 77% of total deaths nationwide. Noncommunicable diseases are also the top medical conditions driving up medical costs in Vietnam. Moreover, non-communicable diseases pose a threat to social and economic development in the 21st century.

Moreover, the world is also facing a crisis as it battles the ongoing COVID-19 pandemic. As people around the world, and in Vietnam, tackle this health challenge, there is a greater need for instant, reliable and relevant health information. With Pulse, users can manage their health from their own phones, anytime and anywhere, with the help of an AI-powered symptom checker, online consultations and health assessment. to deliver on its promises to customers.

The company reported total revenue of VND27,537 billion with revenue from “With Pulse, users can insurance operations generating VND21,952 manage their health billion, a year-on-year increase of 15.4%. from their own phones, Profit-before-tax also increased, rising to anytime and anywhere.”

VND2,688 billion thanks to Prudential’s ongoing digital transformation and During the launch phase in Vietnam, Pulse operational optimization. presented two key innovative features In 2019, Prudential continued to deliver – Symptom Checker and Healthcheck on its commitment to providing financial powered by Babylon. In addition, Body Mass protection for Vietnamese families, paying Index (BMI), Wrinkle Index, and Hospital & out VND6,257 billion in insurance benefits.

Clinic Finder are other added-value features The company remained highly solvent with a that provide interesting and solvency margin above 131.4%, underscoring helpful information for users. Other its ability to safeguard customers’ monies. features, including Online Consultation by Besides its core business, Prudential MyDoc, Personalised Wellness Services and Vietnam continued to give back to its My Policy for Prudential’s customers, will be community. In the period 2012-2019, the offered later in the year. company contributed VND191 billion through Pulse is being rolled out in 11 markets a wide range of community investment across the region. The app has exceeded projects under the three pillars of Healthy more than 4 million downloads across the Living, Education and Safety. region as at early May 2020. Pulse is an Last year also marked Prudential’s 20th evolving platform with new partners, tools year of operations in Vietnam and serving and value-added services to be added in the protection needs of its people. The phases to meet the growing healthcare company has continued to maintain its needs in the region. industry leadership and contribute to the In April, Prudential Vietnam announced socioeconomic development of the country its results for FY2019, reaffirming the with the commitment to take action for a insurer’s financial strength and ability healthier and wealthier Vietnam.

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FIRST TROUBLES AHEAD FOR KOREA LIFE INSURERS SOUTH KOREA

Negative spreads rose to 0.85%

Lower profits and heightened asset risk are on the horizon for South Korea’s life insurance industry in the next 12 months as the coronavirus further drags down their investment returns, according to a Moody’s Investors Service report.

Negative spreads are expected to widen as the COVID-19 pandemic disrupts Korea’s already weak economy. This will also keep interest rates low for the next 12-18 months.

These, in addition to the subdued regional and global economic outlook, will cause investment returns to decline, Moody’s analyst Young Kim said in the report.

Average negative spreads for life insurers widened to 0.85% in the first half of 2019, from only 0.69% the same period the prior year.

Meanwhile, average investment yields fell to a record low of 3.4% during the same period.

“The industry’s decreasing reliance on savings products will eventually improve underwriting gains, but a concurrent fall in premium volumes together with a weak economy will strain premium growth over the next 12-18 month,” added Kim. Competition is also likely to remain intense which could further strain insurers’ pricing power and underwriting profit.

Amidst this, profitability is expected to remain weak in 2020.

The low investment returns and high loss ratios on health and medical policies also add to the problems.

Further, the coronavirus pandemic will likely lead to an increase in claims and will also disrupt insurers’ operations, added Moody’s Kim. “The coronavirus outbreak has added downside risk not just in terms of a potential increase in claims, but also by disrupting insurers’ operations and through financial market fluctuations. Asset risk is also rising as the low interest rates are incentivizing insurers to invest in higher-risk assets,” Kim concluded in a note.

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Despite this, India’s low rate of insurance penetration should be viewed as a supportive long term factor, as it indicates that there is ample scope for insurers to continue their expansion, noted Moody’s.

Insurance penetration rate in India stood at 3.7% in 2018, which is low compared to the rate in the UK and US at 10.6% and 7.1%, respectively.

Demand for insurance amongst the country’s middle class should also expand as the industry continues to update its distribution channels and makes better use of technology, the report added.

In particular, the launch of Ayushman Bharat or the governmentfunded health insurance scheme should drive up health premiums.

In FY2019, health premiums rose by 21%, according to Moody’s.

The Insurance Regulatory and Development Authority (IRDA) A slowdown in GDP will make things worse. has recently put in place a series of measures that are supportive of the insurance industry which are expected to bolster the sector’s growth, the report noted.

The removal of limits on INDIA foreign ownership stakes in Indian Premiums grew ndia’s insurers will face sluggish insurance intermediaries, which 11.3% in FY2018, gives permission for 100% foreign insurance premium growth over slightly lower the next two to three years as equity investment, will also benefit than the 11.5% the country’s economic expansion is the insurance market as a whole by recorded in the projected to slow. strengthening distribution channels. previous year.

In a report, Moody’s Investors “India’s privately-owned insurers, Service noted that insurance premium where foreign shareholdings are growth is slowing down over the concentrated, have cut their exposure years. Insurance premiums grew to high risk assets and have been 11.3% in fiscal year 2018 ending early adopters of actuarial-led reserve March 2019, slightly lower than the management and risk-based capital 11.5% recorded in the previous year. management. This has helped private Meanwhile, general insurance insurers benefit from India’s economic slowed to a 12.5% expansion over growth,” the report concluded. the same period, more than five percentage points lower than the Life premiums will likely shrink this year 17.6% reported in FY2017.

Further weighing in is the expected slowdown in the country’s gross domestic product (GDP). India’s GDP is projected to record a slow growth of 4.9% YoY in FY2019 (ending March 2020) before partly recovering to 6.3% in the next fiscal year. The slowdown, which has increased financial pressure on rural households amidst weaker job creation, will add to the pressures that insurers face in terms of premium growth, the report said.

Source: GlobalData (2020)

Crisis drags Indian insurance premiums

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FIRST Potential financial market volatility will also have an effect on capital, analysts said.

HONG KONG PREMIUMS DOWN 5-10% HONG KONG

S&P sees total premiums dipping in 2020.

Policy sales will decline and investment income will fumble.

COVID-19 claims pile on Japan, South Korean insurers JAPAN AND SOUTH KOREA

J

apanese and South Korean insurers are likely to see weaker policy sales and investment gains as coronavirus-related claims pile up, according to a Moody’s report.

Rated Korean insurers are expected to see an increase in death claims accounting for an additional 1-7% of regulatory capital pretax, whilst Japanese insurers’ increased claims could comprise 3-11% of regulatory capital pretax.

Potential financial market volatility will also have an effect on capital, said Moody’s analysts Soichiro Makimoto, Young Kim, and Sally Yim. “Japanese and Korean insurers are also vulnerable to business disruptions and adverse financial market reactions resulting from the outbreak, which can have impacts that exceed those on claims. In particular, their policy sales will decline in the current period from reduced person-toperson communications and their investment income will also weaken as central banks push interest rates lower for a longer period,” the analysts said in the report For Korean insurers, the government and public health

systems will mitigate claims related to medical expenses. Indemnity payments will be low as there is no commercially available medicine yet for the virus, the analysts claimed.

Moreover, hospitalisation and rehabilitation treatments are usually subject to caps for medical insurance policies, they added.

In Japan, indemnity payment is uncommon and medical insurance is focused on fixed payments or fixed amounts per day of hospitalisation with caps on total amounts, the analysts noted.

Property & casualty (P&C) insurers will also face mitigated claims from business interruptions and event cancellations as such policies do not cover infectious diseases.

Although the Olympics cancellation is not expected to have any major material impact, new insurance sales will be disrupted because of low customer contact in the distribution channels.

In South Korea, most premiums from life and non-life insurers come from financial consultants and bancassurance, the report noted.

Captive sales agents remain essential in distributing life insurance products in Japan.

A plunge in new-business volumes looms over Hong Kong life insurers despite new measures to prevent it as disruptions continue to plague growth prospects.

In a report, S&P Global Ratings expects total premiums to dip 5-10% YoY in 2020. This is assuming that new-business activity dwindles over 30% and that there is a stable renewal rate.

New business connected to mainland Chinese visitors is expected to nosedive 70% due to stricter border controls on the back of the pandemic. The city has already faced dwindling tourists from the mainland due to the protests that rocked Hong Kong during the second part of 2019, the report added.

Revenue and profits will also be bogged down by challenging operating conditions aggravated by the coronavirus pandemic, a flat yield curve and capital market volatility, S&P analyst Judy Chen said.

There is “heightened pressure” in the industry as illustrated by the Hong Kong Insurance Authority allowing products to be offered without face-to-face contact, she added. Large players with established digital platforms are expected to benefit more from this temporary rule, to the detriment of smaller competitors.

The sharp rout in investment markets and a global recession will likely hurt profitability, with return on assets estimated to halve to 0.7% this year. Life insurers are likely to bolster reserve provisions against flat yield curves which will tighten capital buffers.

“The regulator’s responsiveness to the changing market landscape in Hong Kong is proactive but is no panacea and won’t prevent a market dip for Hong Kong insurers in 2020,” Chen added. However, a prolonged pandemic could increase insurance awareness, and may even help the longer-term recovery of the sector, he noted.”

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FIRST Volatility pushes Japanese insurers towards hybrids JAPAN

Hybrids may increase debt burdens.

Consistently low interest rates and a possible economic value-based solvency regulation are encouraging Japanese insurers towards hybrid issuance.

In a report, Moody’s Investors Service senior analyst Soichiro Makimoto noted that whilst hybrids may lead to an increase of debt burdens, insurers can take in its negative impact through low financial leverage and strong earnings coverage.

“On the one hand the potential new regulations are increasingly emphasizing economic capitalisation, whilst on the other hand lower-for-longer interest rates are pressuring capitalisation.

These factors combined provide life insurers with incentives to issue hybrid bonds, given their partial capital treatment,” he explained.

The Bank of Japan’s prolonged period of ultra-low interest rates is weighing down on insurers’ economic capitalisation but is also making issuance less costly, both factors of which will spur insurers to issue hybrids.

“We see some divergence between life insurers and property and casualty (P&C) insurers, with issuance by the former group driven by their continuous appetite to strengthen capital, and for P&C insurers by specific needs, such as to support large acquisitions,” Makimoto added.

Regulators also allocate parts of the insurers’ outstanding hybrids as capital in order to reflect the insurers’ loss absorbing properties, the report stated.

Furthermore, hybrid securities also have a different investor base than kikin bonds and equity. They are also less costly than other capital securities, the report said.

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Insurers in Australia stay strong until 2023 AUSTRALIA

Australia’s insurance industry returns will be agile over the next three years but return on equity (ROE) will decline to low double digits over the same period, with the sector reaching a 15% ROE in the year ending 30 June 2020, S&P Global Ratings said in a report.

This is slightly lower than the 16% in 2019, mainly due to shifting demographics, affordability problems, stricter regulatory oversight, and inflation in medical claims.

As a result, industry consolidation is likely over the next five years, analysts Craig A. Bennett and Angela Zhou noted. Twenty-six out of 37 insurers under supervision by the Australian Prudential Regulation Authority (APRA) operate as mutual organisations that comprise about 38% market share by premium revenue. Mutual health insurers earned about 30% of the industry profit and gained a 7% weighted average ROE for the year ended 30 June 2019, the analysts noted.

In comparison, corporates held a 62% market share, realised about 70% of profits, and generated a 35% weighted average ROE for 2019.

ROE will decline to low double digits.

As a result, industry consolidation is likely over the next five years, analysts noted.

“Over the past five years, mutual insurers have achieved marginal market share growth from the corporate entities,” they noted.

“However, margins have compressed for the health insurance industry as a whole, with the ROE declining year-on-year since 2017.

While there are three mutual entities that have maintained double-digit ROE over the past three years, we expect consolidation of smaller players amid compressing margins in the current operating environment.”

Regulatory and operational oversights may further hinder new health insurance entrants, the report noted. The market is also saturated with incumbents that benefit from strong brand loyalty and economies of scale. There have been no new players or exits to and from the sector since 2017, the report said.

CHINA

Coronavirus to limitedly impact China’s insurance sector China’s insurance sector is seeing limited direct financial impact from the coronavirus outbreak.

Reinsurance and public insurance funds will provide coverage for insurers, Moody’s Investors Service noted in a report.

“Large claims would likely be limited by coverage from China’s public medical insurance funds, which the central government said will cover expenses for infected individuals and suspected cases,” Moody’s stated.

“Additionally, some rated insurers have also taken out reinsurance against pandemic risk, that should in most cases cover significant parts of their in-force book,” the firm added.

Further, the current outbreak could raise awareness for health insurance in the long term and raise insurance demand in China.

Moody’s Vice President and Senior Analyst Frank Yuen noted that the industry’s premium mix

Reinsurance and public insurance funds will provide coverage.

remains dominated by savings-type products, with health insurance accounting for 22.8% of total life premiums at the end of 2019.

“The more immediate and significant impact from the coronavirus outbreak on Chinese insurers will stem from the resulting disruption on their broader business, and from the negative impact on investment portfolios due to lingering concerns over a potential further slowdown in the economy,” added Yuen.

RECOGNISING

ASIA’S MOST OUTSTANDING INSURANCE COMPANIES

All the 2020 winners will be revealed in the next issue of Insurance Asia.

OUT IN NOVEMBER 2020

COVER STORY

Insurance in the time of coronavirus Insurers from Hong Kong, Malaysia and Singapore reveal how they are coping.

W

elcome to the new normal.

The coronavirus pandemic has upended every aspect of human life, from financial services to sporting events.

Governments have imposed lockdown measures in order to reduce movement, and people have foregone their plans and remained at home lest they catch the virus.

Massive losses in earnings have resulted in company closures left and right; whilst investments have been put aside to prioritise relief and stimulus measures.

Insurers across the planet are not immune to the detriments of the pandemic. According to a sector report by Moody’s Investor Service, the virus can directly affect the sector through a possible surge in claims, whilst an indirect effect manifests itself in market fluctuations and the unfavourable impact on business volumes. In 8 INSURANCE ASIA

particular, heightened mortality rates could trigger an increase in claims for life insurers. The exposure of P&C insurers may be limited although some subsectors may be affected, the report said.

As an example, the indirect effect on business volumes is already being predicted amongst life insurers in Hong Kong, S&P Global Ratings said in a separate report. Revenue and profits are in hot water due to a challenging operating environment made worse by the pandemic. The Hong Kong Insurance Authority’s decision to allow products to be distributed through methods that don’t involve face-to-face contact is a sign of an elevated pressure in the industry, the report added.

If anything, the pandemic has also brought about some key changes in the day-to-day operations of insurers. Lockdowns have forced some to switch to online platforms to maintain relationships

The virus can directly affect the sector through the surge in claims, whilst an indirect effect manifests itself in market fluctuations and the unfavourable impact on business volumes.

between agents and clients, which has also resulted to insurers prioritising the development of their digital tools. Some regulators have allowed products to be sold over the Internet, highlighting the need of the industry to evolve and adapt to changing environments and customer needs. Products themselves have also been upgraded to provide more coverage and benefits to clients who have been hospitalised, have died, or have experienced other misfortunes due to the virus.

To learn more on what’s happening on-ground, Insurance Asia spoke to numerous insurers across the Asia-Pacific region to see how they are holding up amidst the crisis. We asked them about the immediate effects to their business, the changes they have implemented to help their customers and employees and what their plans are once this crisis is over.

COVER STORY Allianz Malaysia

Zakri Khir CEO For general insurance, impact is certain in travel policies sold. We do anticipate a surge in claims, mostly travel and medical related. For our motor business, policyholders still need to renew their policies so we will not see an immediate impact to our balance sheets. This segment will also take a hit as manufacturers and supply chains are impacted and new business will be slow. The government has allowed some sectors to operate following the extended MCO, which includes certain segments of the automotive industry, but we will have to wait and see.

As for our life business, agents will find it difficult to do face-toface business due to mobility constraints. The pandemic will trigger more concerns over health, presenting insurers an opportunity to

boost healthcare policy sales and hopefully increase health insurance penetration amongst Malaysians.

We have made arrangements for as many of our staff to work from home, with about 94% of our staff already working from home into the second week of the MCO. To comply with government requirements for restricted movement, all of our branches have been closed from 22 March. Only the head office is open whilst our Allianz Care Solutions, Contact Centre and colleagues in critical functions continue to provide services to customers.

For the remaining staff who are providing essential services and would need to report to the office, measures have been taken to facilitate their work. A full sanitisation of our office premises has been carried out, and this will continue until the MCO is lifted. In addition, meal arrangements via the dahmakan app and Grab rides to and from the office have been arranged.

It is possible for our life agents to digitally and instantly add or remove riders, adjust premiums and manage customer policies without the need to be online, through our Imagine app on an agent’s iPad. This has significantly increased our turnaround time from days to minutes.

Insurance policies in Malaysia generally do not cover pandemics.

With COVID-19, Allianz Malaysia did not waive this clause but introduced some initiatives to provide some form of relief to our customers. There are no immediate plans to enhance our products to include pandemic cover.

Our BCP does include a plan that covers the wider tasks for the response team in the event of pandemics, safety and welfare of staff and certain resources and business processes that should be made available in order to continue business operation at an acceptable level.

have been put in place. The company has also implemented split operations, with teams working from different floors and locations, and put in place work from home (WFH) arrangements to ensure the safety and well-being of staff.

Effective 14 February 2020 until end of the year, Great Eastern customers and/or their immediate family members who are hospitalised due to COVID-19, will receive a cash benefit of S$200 per day of hospitalisation up to a maximum of 60 days. In the unfortunate event that death occurs, a S$20,000 lump sum will be paid out. In addition, we are extending a six-month grace period for life insurance premium payments of customers financially affected by the coronavirus pandemic to ensure that their insurance coverage continues uninterrupted.

In Malaysia, we launched a similar deferred premium payment programme for policyholders affected financially by COVID-19.

Exclusive statement from a spokesperson We have also pledged a MYR1m Financial Assistance Programme to support affected customers, whilst in Brunei, we have pledged a Since early February, temperature screening has been implemented B$50,000 support package for customers. in our offices and customer service centres. We have also stepped up Policyholders may log into our online E-Connect platform the cleaning of common areas as well as providing hand sanitisers conveniently with their GreatID or SingPass to view policy for all our offices and branches. Customer-facing staff are wearing information or perform selected transactions. For transactions masks, and our customer service counters are equipped with hand involving policy payouts, they may also opt to receive payments from sanitisers and face masks. Safe distancing measures have been put in us conveniently via PayNow or direct crediting to their bank account. place as well.

Policyholders with Integrated Shield Plans can use our Health Employees and financial representatives have been strongly urged Connect call-in service for their medical insurance needs, such as to exercise good personal hygiene practices, monitor their health pre-authorisation for bills and specialist appointments. Outpatient closely and to promptly seek medical attention if unwell. All largevideo medical consultations with Doctor Anywhere are also available scale gatherings and face-to-face meetings have been minimised at preferred rates, if they prefer to avoid visiting their general and safe distancing measures in our offices and meeting rooms practitioners’ clinics during this period.

Great Eastern Life Assurance

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COVER STORY with cover guaranteed for a year. Similarly, new customers who purchased our life insurance policies from 7 February to 30 June 2020 will also enjoy the same benefits for a year, starting from the date of issuance.

If an eligible client or family member is hospitalised in Singapore by a registered medical practitioner, a cash benefit of S$200/day will be paid for up to 45 days. If the patient unfortunately dies due to the virus, a lump sum payment of S$10,000 will be granted.

In addition, HSBC Life Singapore has also introduced an interest-free, premium defer payment scheme on 1 April 2020.

This is to ensure that individuals’ long-term protection needs remain unaffected during this challenging time. Qualified policyholders will be able to defer their premium payments Carlos Vazquez for up to six months, interest free, between 1 April and 30 CEO September 2020.

To date, HSBC Life Singapore has honoured and paid out Helping our customers fulfil their promise to protect all valid COVID-19 complimentary special benefit claims. themselves and their loved ones is key to our business.

Similarly, HSBC Life Singapore has approved and processed all In view of the current circumstances, HSBC Life launched valid premium deferment requests. a COVID-19 Complimentary Special Benefits on 11 February HSBC Life Singapore remains open for business and we 2020 to our life insurance customers and their immediate are determined to support our customers’ needs as we do in family in Singapore. These customers and their family our normal day-to-day operations. In order to also do our members will receive additional benefits on diagnosis, part in further mitigating the outbreak of the coronavirus in hospitalisation and death-related to the COVID-19 at no Singapore, we have directed most of our people to work from additional cost. Existing HSBC Life customers as well as home, which has been done with minimal disruption to our their immediate family members will be entitled to the operations. Currently, less than 8% of our employees are in our complimentary special benefits starting from 7 February 2020, office premises at any given day.

HSBC Life Singapore

Manulife Singapore

Dr. Khoo Kah Siang CEO Since February, we started to implement enhanced precautionary measures such as safe distancing, upholding good sanitation in all areas, implementing temperature and health screenings to safeguard our employees and customers safety and well-being.

At the same time, we started to look into tools and solutions that ensure steadfast digital contact with our customers. For instance, we recently introduced a non-face-to-face advisory sales process to allow our advisors to speak to customers via video chat and sign-off on plans, all at the comfort of their homes.

To safeguard the wellbeing of our employees and representatives, we have implemented a slew of enhanced precautionary measures aligned 10 INSURANCE ASIA

with government guidance. Since February, we have introduced split team work arrangements for all employees, where teams worked on a rotation basis between their homes and the workplace. On 3 April, all our corporate staff have been fully working from home.

We also have a secure digital process in-place that allows representatives to submit paperwork online, in addition to our nonface-to-face advisory sales process. All of these measures serve to minimise physical workplace interactions. This protection coverage includes new diagnosis benefit and additional death benefits.

To help our customers further tide through this difficult period, we allowed a grace period extension for premium payment for up to six months in total. This allows our customers more time to make premium payments and still ensure that long-term protection remains unaffected during this time.

Additionally, we also committed to supporting those at the forefront of the fight by donating S$100,000 to The Courage Fund. As the situation remains uncertain and fluid, we are keeping a watchful eye on the evolving situation to ensure that all our customers are supported in this time of difficulty.

Protecting the health and well-being of our employees, customers and communities has and will always be a key priority for Manulife.

We have a full suite of products from protection, savings, retirement and investment needs and across the different customer segments from mass market to ultra-high net worth. Assessing the groups that are most vulnerable to COVID-19, people with pre-existing conditions have appeared to be the most susceptible. This further underscores the importance of having sufficient critical illness and mortality coverage, especially when one is still enjoying good health.

COVER STORY Prudential Singapore

Tan Ping Ping Head of corporate affairs Prudential Singapore has implemented several measures at the workplace as part of our COVID-19 response.

Our employees are divided into two teams, with one team working in the office and the other team working from home.

Members from both teams are not allowed to physically meet even after office hours. Team members in the office have been told to maintain a social distance of at least 1 metre. We are also conducting cleaning more frequently for all desks and common areas on a daily basis.

Our flexible working arrangements, implemented 3 years ago, mean that employees have the option of working from home. We

Avo Insurance

Winnie Wong CEO Owing to the alarming figures on the newly contracted COVID-19 figures and following the government’s further strengthened policies, we have adopted precautionary measures such as a split team arrangement, flexible working, and social distancing.

In addition, we have also provided complimentary coronavirus disease protection to all of Avo’s staff members. The coverage includes hospital cash of HK$500 per day (up to 30 days) and HK$50,000 death benefit from coronavirus, with a 45-day coverage period (including 14day waiting period).

Earlier in February, we launched the Coronavirus Disease Protection, helping everyone to stay protected from any unforeseen circumstances

are continuing this arrangement in conjunction with split team operations. This means that at any one time, our employees have the option of working from home.

Employees are also encouraged to hold meetings, training and internal events remotely via video- and/or tele-conferencing.

If there is an absolute need for physical meetings, the number of attendees should be limited and duration shortened, with attendees seated at least 1 metre apart in meeting rooms.

Employees who are feeling unwell need to declare their status online. Those issued a five-day medical certificate need to make a daily declaration on their health status by noon. Employees will also need to notify HR if they have been issued with a Quarantine Order or Stay-Home Notice.

In addition, employees who have travelled overseas to any country will need to work from home for 14 days from the date of arrival in Singapore. Employees who are living with household members who have returned from overseas travel from 14 March onwards will also have to work from home for 14 days, from the date of return of their household member.

Prudential has care kits for all our employees and financial consultants, which comprises a thermometer, hand sanitiser and face masks. It also includes a health advisory on good hygiene practices, tips on proper hand washing, how to sanitise your hands and how to wear a mask.

We have also encouraged our employees and Agency to download the TraceTogether app, which facilitates the contact tracing process and enables contact tracers to inform users who are close contacts of COVID-19 cases more quickly.

associated with the outbreak. Coronavirus Disease Protection is offered with a premium at HK$500. The policy includes hospital cash of HK$500 per day (up to 30 days) and death benefit of HK$50,000 within the 3-month protection period.

Following the launch, eligible hospital staff and customers who have purchased Avo’s Cancer Protection or Annual Travel Protection were eligible to sign up for a limited-time free offer of Coronavirus Disease Protection with a 45-day coverage period (including 14-day waiting period). This offer was a gesture of our sincere gratitude towards Hong Kong’s healthcare professionals for their dedication and tireless effort during this time, as well as our existing consumers.

To address customer’s uncertainties around travel bans and restrictions, our flexible Travel Protection allows policyholders to rearrange travel schedules. For those who are staying indoors, the eWallet Protection

by Avo Insurance can protect online shoppers from identity theft and unauthorised transactions.

In spite of the situation, Avo plans to launch new insurance plans every two to three months in order to accommodate the ever-changing needs of consumers. We have been working closely with different partners to offer a variety of multi-faceted insurance solutions that adapt to the daily needs of our customers.

We believe that the COVID-19 pandemic has influenced people to reconsider their individual medical insurance needs. With healthcare being one of the greatest concerns, we aim to offer more healthrelated insurance protection options, such as gender-specific Cancer Protection, in the future. The pandemic has sped up the industry’s digital transformation and technological innovation. It is also a catalyst to further educate the public on the need of virtual insurance in the future.

INSURANCE ASIA

11

COVER STORY Bowtie Insurance

Fred Ngan CEO Bowtie has implemented flexible working arrangements for more than 60 days since the Lunar Chinese New Year to allow employees to work from home. Our office remains open to those who have a need to return but we encourage social distancing.

Our core system is 100% cloud-based, and hence we were able to stay fully functional. Although customers will not be able to visit our customer service centre in person, our customer services hotline, live chat and email remain available.

We have launched three initiatives to help our customers. The first was additional protection to our Voluntary Health Insurance Scheme (VHIS) product, where in addition to increasing hospital

Ping An Insurance

James Garner Group chief capital markets officer Our life insurance arm is affected in the short term but will benefit from an increase in demand and awareness in the long term. As our agents are unable to provide services face-to-face with customers which is crucial for selling higher margin protection policies, our agent productivity, activity ratio and income may markedly decrease.

Our property & casualty insurance arm saw a mixed impact overall. In the short term, new car sales slowdown and airway traffic decline weigh on new auto insurance, airline accident insurance, and transportation insurance.

That said, as COVID-19 spurs demand for online auto 12 INSURANCE ASIA

cash allowance, we introduced the feature of fully reimbursing the cost of lung/chest CT scans and outpatient X-rays. These confirmatory diagnostic tests are not restricted to only cases related to the coronavirus outbreak. They also apply to anyone who requires these confirmatory diagnostic tests to exclude the possibility that they may be infected.

We also partnered with MIT Hong Kong Innovation node to manufacture DIY hand sanitizers and distributed them to our customers and underprivileged communities. Thirdly, we launched a hospital care plan where we offer free VHIS plans to hospital workers and their direct families.

In April, we reduced our certified medical insurance premiums after reviewing actual expenses and claim experience over the past year to thank our customers for their support and to live up to our value of providing “just fit” protection to customers with competitive pricing Bowtie is one of the very few insurers in the market that focuses on pure protection medical insurance products with no investment component, which means we are less prone to risks from market fluctuations and hence more capable of maintaining a stable revenue.

Our online business model has proven particularly in this time of crisis that it can bring unparalleled convenience to our customers as much as it does to our business operation. In fact, we have witnessed a rapid rise in our blog traffic and insurance sales that have almost tripled in the first quarter of the year.

We hope to continue launching products or enhancements that reflect our mission of bringing basic protection to Hong Kong. VHIS will continue to be our main offering, and we’ll launch products that complements this where customers can customise a pure protection medical insurance plan that is tailored to fit their actual needs.

service, the Ping An Auto Owner App, launched by Ping An P&C, has surpassed 100 million registered users, and has topped in China.

In 2013, we launched our internal instant messaging tool called Happy Ping An App. This platform has been fully applied in more than 30 subsidiaries with more than 1 million employees. Ping An Life is trying all out to utilise technology to empower Life SAT, remote activity management and AI recruitment, training and KPI appraisal, which we believe will “turn risk into opportunity”, promote digitalisation transformation of Ping An Life and strengthen its competitiveness.

We are providing online services to our P&C insurance clients, including the Ping An Auto Owner app, online insurance renewal, and AI-powered loss assessment and claim settlement. For our life insurance clients, we do provide online contract signing and online case claim settlements.

We optimised the existing product claim standard and process and expanded the insurance liability appropriately under the premise of controllable risks.

PA Life is affected in the short term, but will benefit from increase in insurance demands and awareness in the longterm. For Ping An P&C, in the short term, new car sales slowdown and airway traffic decline weigh on new auto insurance, airline accident insurance, and transportation insurance. We plan to use 2020 to accelerate the digitalisation of its operations and optimise its management models through technology.

COVER STORY China Taiping Insurance Singapore

Exclusive statement from a spokesperson We have temporarily closed all our Customer Service Counters at Level 15, 16 and 18 at Springleaf Tower since 20 February 2020. We have activated a business continuity plan with staggered working hours and social distancing for those working in the office. In addition, employees in the office are provided daily lunch boxes to minimise their risk exposure.

All employees are also highly encouraged to conduct virtual meetings and defer their travel plans.

We have implemented the cleaning and disinfection of our offices and have hand sanitisers available on every floor. Each employee has been provided with a personal hygiene and

protection care pack, and all employees are required to take temperature twice daily. We have also implemented a 14-days leave of absence if any employee or their family members have travelled overseas.

We have launched a new financial aid to help all our existing and new life insurance customers. This initiative provides financial aid upon diagnosis, hospitalisation and recovery.

Our COVID-19 Defer Premium Payment Program for life insurance policyholders will help eligible clients so that their insurance protection could remain intact whilst they defer their premium payment for six months. For general insurance, the six-month premium deferment is also applicable to corporate and individual policyholders with premium above S$2,000, excluding motor, bond & marine cargo insurance.

We have extended the usage of private hire motor policy to include GrabFood and GrabExpress delivery services till the end of the outbreak or if the respective policies reach expiry dates, whichever is earlier. We have also enhanced our Personal Accident Safe and we will grant a daily quarantine benefit of S$100 per day up to 14 days, as issued by the Ministry of Health. We will also grant a medical expenses benefit of up to S$500 per policy year. In the unfortunate event of death, a benefit of S$10,000 will be paid out.

We are closely monitoring the situation and will work to support MOH’s recommendations. During this challenging period, we will continue to strive to support all our customers in claims and customer services.

INSURANCE ASIA

13

SURVEY: PANDEMIC INSURANCE

In China alone, at least 75% said they have engaged their insurers since the pandemic began.

Half of APAC look for new insurance amidst pandemic Almost two-fifths of respondents have bought a new insurance policy.

A

lmost half or 46% have searched for new insurance policies in Asia Pacific, with almost twofifths (32%) already purchasing a new policy, according to Swiss reinsurer Swiss Re’s COVID-19 Consumer Survey.

The study, which involved 2,500 respondents from Australia, mainland China, Hong Kong and Singapore, revealed that 50% have said that their insurers have proactively reached out to them.

In China alone, at least 75% said they have recently engaged their insurer or inquired about new policies.

People who have been contacted by their insurers displayed a higher intention of buying insurance, the survey noted.

From the 75% of Chinese respondents who have engaged their insurers, 55% noticed new or additional benefits in their policies that they had been previously unaware of. It should be noted, nonetheless, that China

14 INSURANCE ASIA

Russell Higginbotham

has had a longer experience in dealing with the coronavirus, Swiss Re stated.

The reinsurer also reported that many have begun prioritising insurance as a “must-have”, with over a quarter (27%) of respondents feeling overwhelmed and anxious about their financial future; around two-fifths (40%) said they were “stretched but coping.”

However, the four markets displayed various priorities when seeking out new insurance policies. Australians, for example, were more willing to sacrifice their life insurance over home or car insurance, whilst very few respondents from mainland China and Hong Kong were eager to forgo their life insurance payments.

Moreover, only a quarter of Singaporeans and one in five in Hong Kong would renounce their home or car insurance even if their finances were giving way.

“From the survey, we can see that there is a priority to keep insurance policies in times of extreme stress

like COVID-19,” Swiss Re Asia CEO Russell Higginbotham said. “We have also learnt that consumers value service and access most highly. Chinese insurance companies seem to stand out as an example for the rest to follow, especially in how they engage their customers.”

The pandemic provides an opportunity for insurers to inject new or improved benefits to their riders, Swiss Re said. For example, almost three-fifths (58%) said they want access to immediate health services like virtual consultations with their respective general practice (GP) doctors, whilst almost 60% want priority access to healthcare products.

In China, a majority (85%) expect that insurance companies would pay out valid claims. On the other hand, only half or slightly more than half echoed the same sentiment in Australia (54%), Hong Kong (56%) and Singapore (59%). Chinese respondents topped the survey in terms of prioritising an insurer who can process their policies online (77%) and have also expressed happiness in terms of customer service.

Chinese, Hong Kong, and Singaporean respondents also want faster claims and more flexibility, but these two are not priorities for Australians, who instead want a pause with their premiums or a discount on future insurance purchases.

In addition, immediate financial aid was indicated as a main requirement by clients in Singapore (57%), Hong Kong (47%), and Australia (44%), whilst priority access to healthcare products such as face masks and medication is the primary need by respondents from Hong Kong (66%) and China (67%).

Looking into the future, 57% of all respondents look for a speedier claims process and payouts, and 58% look for additional health care providers granted in the cover, Swiss Re said.

INSURANCE RANKINGS: SINGAPORE car and motorcycle insurance and policy documents through the app within five minutes. This initiative was launched in January 2019.

Firms are collaborating with merchant apps and launching new programmes to keep up.

Singapore insurers tap into big data for new products

Total assets of the 49 largest insurers went down 6.47% to US$159b in 2019.

T

he Pan Island Expressway (PIE), particularly eastbound near Adam Road, is identified as the most dangerous spot for motorists in Singapore, according to a data tool developed by life insurer AXA Singapore. This consolidates claims to map out accident hotspots in the country, a part of a push to use more data to help insurers better connect with customers.

Singapore Business Review’s annual survey of the insurance sector for 2019 revealed the total assets of the 49 largest insurance providers in 2018 equalled US$159b ($217b), a 6.47% dip from last year’s S$232b.

The top five largest insurers went unchanged. Great Eastern Life Assurance maintained its hold on the top spot with US$37.5b (S$51b) in total assets. AIA Singapore ended up in second place with a 2.27% decrease in total assets to US$31.7b ($43b).

Prudential Assurance Co. Singapore placed third with US$27.5b (S$38b) in total assets. NTUC Income Insurance Co-operative Limited finished fourth with US$25.7b (S$35b), and Manulife Singapore rounded up the top five with US$7.7b (S$11b) in total assets for 2018, a 22% rise from $9b in 2017.

Despite the shrinking asset value, the big players continue to prioritise the digitalisation of their offerings.

16 INSURANCE ASIA

Colin Chan

Jeremy Ong

AXA chief customer and operations officer, Jeremy Ong says the insurer’s Give Data Back programme aims to help motorists better understand the risks they will face on the roads across Singapore by sharing data, such as the frequency of occurrence of a motor accident and the average cost of a motor accident claim.

According to its website, the programme displays quantitative data which includes body injury and vehicle damage for private individuals from 2015 to 2017. It also scales AXA’s location-specific accident data to match data from the Singapore Police Force.

The insurer is also offering training in Python basic programming and Tableau analytics, as well as mentoring their data and actuarial teams.

They have also partnered with other startups such as mobilityX, a startup backed by local transport operator SMRT and Toyota Tsusho, to provide insurance coverage for users through its all-in-one transport app Zipster. “The app allows commuters in Singapore to plan, book and pay for their journeys across a variety of transport modes including buses, trains, shared mobility devices, private hire vehicles and car sharing services,” Ong said.

The insurer also collaborated with merchant app Carousell to allow customers to purchase second-hand

Your life journey, in data But AXA Insurance is not the only insurer taking advantage of data to target and address the specific needs of their customers. Great Eastern Life is also using data to help its customers visualise their life journey, said managing director for group marketing Colin Chan. The GreatAdvice financial planning tool, which they rolled out in April 2019 to their 1.6 million-customer base, streamlines the onboarding of clients.

Using an iPad, an agent will scan a client’s National Registration Identity Card (NRIC). The process helps reduce application time by 20%.

Another initiative launched in May 2019 was GREAT Family Care, which Chan described as “the first in-market critical illness plan covering three generations in a family within a single policy” and gives senior citizens coverage without underwriting needed. For a premium of $103 per month, benefits include complimentary coverage for current and future children, up until the age of 18, of up to $100,000 against 53 critical illnesses and 25 juvenile conditions, including asthma and epilepsy.

Cyber insurance Whilst the majority of offerings still cater to the largest business segments, new products on cybersecurity and climate change are now in the nascent stage of their development cycles.

Ho Kai Weng, General Insurance Association of Singapore’s chief executive, noted that more insurers have committed to developing affirmative cyber programmes such as MSIG, AXA, Tokio Marine, and AIG. This is to make clear whether a policy covers cyber-related risks or not.

For instance, Tokio Marine’s TM Cyber 365 provides coverage for system and data restoration and protection against cyber threats, but not for broken hardware and physical power failures which compromise a group’s security. However, these products are still at a nascent stage in the development cycle, and awareness and take-up of these policies are still low in Singapore and globally, Ho said.

INSURANCE RANKINGS: SINGAPORE RANKINGS

INSURERS

CLASSIFICATION

TOTAL ASSETS IN 2018 (USD)

1

THE GREAT EASTERN LIFE ASSURANCE COMPANY

LIFE

$37.5b

2

AIA SINGAPORE PRIVATE LIMITED

GENERAL/LIFE

$31.7b

3

PRUDENTIAL ASSURANCE CO. SINGAPORE (PTE) LTD

LIFE

$27.5b

4

NTUC INCOME INSURANCE CO-OPERATIVE LIMITED

GENERAL/LIFE

$25.7b

5

MANULIFE (SINGAPORE) PTE. LTD.

LIFE

$7.7b

6

AVIVA LTD

GENERAL/LIFE

$6.4b

7

TOKIO MARINE LIFE INSURANCE SINGAPORE LTD

LIFE

$5.0b

8

HSBC INSURANCE (SINGAPORE) PTE. LTD

LIFE

$4.3b

9

AXA LIFE INSURANCE SINGAPORE PRIVATE LTD

LIFE

$2.5b

10

TRANSAMERICA LIFE (BERMUDA) LTD.

LIFE

$1.4b

11

OLD MUTUAL INTERNATIONAL ISLE OF MAN LTD SINGAPORE

LIFE

$1.0b

12

SWISS LIFE (SINGAPORE) PTE. LTD.

LIFE

$726m

13

ETIQA INSURANCE PTE. LTD.

GENERAL/LIFE

$630m

14

MS FIRST CAPITAL INSURANCE LIMITED

GENERAL

$627m

15

FRIENDS PROVIDENT INTERNATIONAL LTD SINGAPORE

LIFE

$610m

16

ZURICH INTERNATIONAL LIFE LTD SINGAPORE

LIFE

$548m

17

RED SWITCH PTE LTD

GENERAL

$504m

18

AIG ASIA PACIFIC INSURANCE PTE. LTD.

GENERAL

$489m

19

MSIG INSURANCE (SINGAPORE) PTE. LTD.

GENERAL

$408m

20

INDIA INTERNATIONAL INSURANCE PTE LTD

GENERAL

$386m

21

SWISS REINSURANCE COMPANY LIMITED

GENERAL/LIFE

$368m

22

MUENCHENER RUECKVERSICHERUNGS GESELLSCHAFT

GENERAL/LIFE

$318m

23

TOKIO MARINE INSURANCE SINGAPORE LTD

GENERAL

$310m

24

CHUBB INSURANCE SINGAPORE LIMITED

GENERAL

$282m

25

LIBERTY INSURANCE PTE LTD

GENERAL

$265m

26

CHINA TAIPING INSURANCE (SINGAPORE) PTE. LTD.

GENERAL

$231m

27

UNITED OVERSEAS INSURANCE LTD

GENERAL

$174m

28

QBE INSURANCE (SINGAPORE) PTE. LTD.

GENERAL

$149m

29

SOMPO INSURANCE SINGAPORE PTE. LTD.

GENERAL

$146m

30

SINGAPORE REINSURANCE CORPORATION LTD

GENERAL

$141m

31

GREAT EASTERN GENERAL INSURANCE LIMITED

GENERAL/LIFE

$128m

32

ALLIANZ GLOBAL CORPORATE & SPECIALTY AG SINGAPORE

GENERAL

$125m

33

ASIA CAPITAL REINSURANCE GROUP PTE LTD

GENERAL/LIFE

$113m

34

ALLIED WORLD ASSURANCE COMPANY LTD SINGAPORE

GENERAL

$112m

35

XL INSURANCE COMPANY PLC SINGAPORE

GENERAL

$106m

36

BERKSHIRE HATHAWAY SPECIALTY INSURANCE COMPANY

GENERAL

100m

37

SWISS RE INTERNATIONAL SE SINGAPORE

GENERAL

$53m

38

PARTNER REINSURANCE ASIA PTE. LTD.

GENERAL/LIFE

$52m

39

SCOR REINSURANCE ASIA-PACIFIC PTE LTD

GENERAL/LIFE

$34m

40

EVEREST REINSURANCE COMPANY

GENERAL

$32m

41

AXA CORPORATE SOLUTIONS ASSURANCE SINGAPORE

GENERAL

$29m

42

XL BERMUDA LTD

GENERAL

$27m

43

THE TOA REINSURANCE COMPANY LIMITED

GENERAL

$27m

44

AXIS SPECIALTY LIMITED SINGAPORE

GENERAL

$27m

45

ODYSSEY REINSURANCE COMPANY

GENERAL

$16m

46

SCOR GLOBAL LIFE SE SINGAPORE

LIFE

$13m

47

SIRIUS INTERNATIONAL INSURANCE CORPORATION

GENERAL

$12m

48

ALLIANZ SE SINGAPORE

GENERAL/LIFE

$11m

49

ENDURANCE SPECIALTY INSURANCE LTD SINGAPORE

GENERAL

$5m

TOTAL

$159b

*Data derived from Monetary Authority of Singapore’s Insurance Statistics 2018, released late 2019

INSURANCE ASIA

17

INSURANCE RANKINGS: HONG KONG their clients’ needs. Being a digital company is an edge over traditional insurers, Wong stated, since they have established themselves from the ground up and can offer a more affordable and personalised service to clients.

“We will continue to focus on enhancing our virtual insurance experience and engaging our customers through our value-added services such as an application, which is set to be launched next year.”

Avo Insurance offers customisable plans based on needs and ability to pay.

Hong Kong digital insurers catch up to traditional firms

Virtual insurers are getting out fresh products for underserved segments.

H

ong Kong Business’ annual review of the insurance sector revealed that the total assets of the city’s 50 largest insurers rose 3.54% to $643b in 2018 from $621b in 2017.

AIA International remains the top Hong Kong insurer with $139b in total assets, up from $125b in 2017.

Prudential Hong Kong Life retained second place at $107b from 2017’s $99b. HSBC Life went up two places to third with $63.9b, Manulife International placed fourth at $58b, and China Life fell to fifth place with $51.7b in total assets this year.

Even with the presence of these large firms, digital insurers are rising to gain a presence in Hong Kong, which still has one of the lower penetration rates amongst developed countries.

So far, two virtual insurance licenses have been issued to Bowtie in 2018 and Avo in 2019. One restriction for virtual insurers is that they are not allowed to accept any business from any channels other than their own proprietary system.

But digital insurers are undaunted.

“We are able to create new insurance products that have greater

18 INSURANCE ASIA

Winnie Wong

Fred Ngan

levels of customisation and can be more relevant to consumers, as well as introduce existing insurance products to new channels and underserved segments,” said Avo Insurance’s CEO Winnie Wong.

Since obtaining their virtual licence, Avo has been busy developing protection for uninsured risks and diversifying their coverage.

The firm offers an e-wallet, as well as cancer and travel protections, which can be customised based on a client’s preferences, needs and ability to pay. Protections start from $79 per person annually for e-wallet, $125 to $159 for cancer coverage, and $39 to $69 for travel protection. Further, Avo is building their own virtual system that will provide a quick underwriting process with simple risk assessment questions. The system will be supported by automation, and will speed up the insurance process for the customer-side. It will also lower internal operational costs. The firm utilises social media to connect with customers, particularly on Facebook and LinkedIn, and a core group of partners to help them craft easy-tounderstand insurance plans that fit

Potential in pure protection Another licensed digital insurer, Bowtie, has offerings geared towards life and health protection.

“Penetration for digital channels is below 1% for the life and health business. Only 2% of premiums amongst the market provide pure protection. Thus, we see a very large market for pure protection products in Hong Kong,” co-founder and coCEO Fred Ngan, told Hong Kong Business.

“As a visual insurer, we eliminate commissions and sales intermediaries by going direct.

Going direct allows us to keep our prices low without commissions, maximising the insurance value for customers and enables us to reinvest in the platform,” he expounded.

Bowtie introduced the first fully online medical underwriting engine in Hong Kong, which instantly provides health evaluations for its users and gives fairer and more transparent insurance pricing. They have also offered a full end-to-end digital Voluntary Health Insurance Scheme (VHIS) which can be done through smartphones, streamlining operations and eliminating the need for paperwork. “With the automatic claim process, medical examinations or paper forms are no longer required, and application process is shortened from at least three days to as fast as ten minutes.”

Just like Avo, Bowtie is reaching out to the younger generation looking for a hassle-free experience.

“It reflected that most of our customers received smooth selfserved experience, which 85% of applications and more than 70% claims submitted online didn’t involve assistance from our dedicated support team,” Ngan said.

INSURANCE RANKINGS: HONG KONG RANKINGS

INSURERS

CLASSIFICATION

TOTAL ASSETS IN 2018 (USD)

1

AIA International

LIFE OR LONG TERM BUSINESS

$17.8b

2

Prudential (HK) Life

LIFE OR LONG TERM BUSINESS

$13.7b

3

HSBC Life

LIFE OR LONG TERM BUSINESS

$8.2b

4

Manulife (Int'l)

LIFE OR LONG TERM BUSINESS

$7.4b

5

China Life

LIFE OR LONG TERM BUSINESS

$6.6b

6

BOC LIFE

LIFE OR LONG TERM BUSINESS

$3.9b

7

AXA China (Bermuda)

LIFE OR LONG TERM BUSINESS

$3.5b

8

Hang Seng Insurance

LIFE OR LONG TERM BUSINESS

$3.0b

9

FWD Life

LIFE OR LONG TERM BUSINESS

$2.8b

10

Sun Life Hong Kong

LIFE OR LONG TERM BUSINESS

$1.6b

11

TPLHK

LIFE OR LONG TERM BUSINESS

$1.3b

12

FTLife

LIFE OR LONG TERM BUSINESS

$1.3b

13

YF Life

LIFE OR LONG TERM BUSINESS

$1.3b

14

Transamerica Life (Bermuda)

LIFE OR LONG TERM BUSINESS

$683m

15

BEA Life

LIFE OR LONG TERM BUSINESS

$675m

16

MetLife

LIFE OR LONG TERM BUSINESS

$635m

17

AXA China (HK)

LIFE OR LONG TERM BUSINESS

$566m

18

Chubb Life

LIFE OR LONG TERM BUSINESS

$505m

19

AXA General

GENERAL - DIRECT AND REINSURANCE INWARD BUSINESS

$502m

20

Bupa

GENERAL - DIRECT AND REINSURANCE INWARD BUSINESS

$450m

21

GENERAL - DIRECT AND REINSURANCE INWARD BUSINESS

$408m

LIFE OR LONG TERM BUSINESS

$309m

23

CTPI (HK) "Generali Worldwide/ Generali Life (HK)" Zurich Insurance

GENERAL - DIRECT AND REINSURANCE INWARD BUSINESS

$300m

24

Fubon Life Hong Kong

LIFE OR LONG TERM BUSINESS

$275m

25

Hong Kong Life

LIFE OR LONG TERM BUSINESS

$244m

26

BOC Group Insurance

GENERAL - DIRECT AND REINSURANCE INWARD BUSINESS

$240m

27

Zurich International

LIFE OR LONG TERM BUSINESS

$237m

28

Friends Provident Int'l

LIFE OR LONG TERM BUSINESS

$229m

29

AIG Insurance HK

GENERAL - DIRECT AND REINSURANCE INWARD BUSINESS

$226m

30

Generali

GENERAL - DIRECT AND REINSURANCE INWARD BUSINESS

$205m

31

Chubb Insurance

GENERAL - DIRECT AND REINSURANCE INWARD BUSINESS

$187m

32

QBE HKSI

GENERAL - DIRECT AND REINSURANCE INWARD BUSINESS

$185m

33

Asia Insurance

GENERAL - DIRECT AND REINSURANCE INWARD BUSINESS

$184m

34

AIA International

GENERAL - DIRECT AND REINSURANCE INWARD BUSINESS

$181m

35

Blue Cross

GENERAL - DIRECT AND REINSURANCE INWARD BUSINESS

$172m

36

Old Mutual International

LIFE OR LONG TERM BUSINESS

$147m

37

AIA (HK)

LIFE OR LONG TERM BUSINESS

$147m

38

AXA China (HK)

GENERAL - DIRECT AND REINSURANCE INWARD BUSINESS

$145m

39

MSIG Insurance

GENERAL - DIRECT AND REINSURANCE INWARD BUSINESS

$136m

40

Prudential (HK) General

GENERAL - DIRECT AND REINSURANCE INWARD BUSINESS

$129m

41

Allied World

GENERAL - DIRECT AND REINSURANCE INWARD BUSINESS

$128m

42

Aviva

LIFE OR LONG TERM BUSINESS

$128m

43

CIGNA Worldwide Life

LIFE OR LONG TERM BUSINESS

$128m

44

Liberty Int'l

GENERAL - DIRECT AND REINSURANCE INWARD BUSINESS

$124m

45

AGCS SE

GENERAL - DIRECT AND REINSURANCE INWARD BUSINESS

$118m

46

Standard Life Asia

LIFE OR LONG TERM BUSINESS

$101m

47

Principal

LIFE OR LONG TERM BUSINESS

$99m

48

AXA Wealth Mgt (HK) "Dah Sing Insurance** (acquired by Tahoe Group)" Generali

LIFE OR LONG TERM BUSINESS

$79m

GENERAL - DIRECT AND REINSURANCE INWARD BUSINESS

$55m

22

49 50

LIFE OR LONG TERM BUSINESS

$27m

TOTAL

$81.8b

*Data derived from the Hong Kong Insurance Authority

INSURANCE ASIA

19

MARKET REPORT: ASIA PACIFIC

The high expectations personalized digital experiences inspire a great deal of innovation.

Cost efficiency, talent shortage and tech on APAC insurers’ horizons for 2020 Insurers must innovate as consumers seek seamless and personalised digital experiences, says EY.

F

or insurers across the diverse markets of the AsiaPacific region, it’s a time of considerable opportunity, though it varies in scope.

Even as the industry’s fundamentals look sound, a range of challenges—such as intensifying regulations, economic uncertainty and local issues in individual countries—have emerged to cloud the outlook for the next few years.

In many ways, the Asia-Pacific region holds the key to the insurance industry’s future. It is home to nearly one-third of the world’s population, a few of the fastestgrowing economies and multiple countries with rapidly expanding middle-class populations. Furthermore, China has rapidly become the second largest economy in the world and is on track to become the largest by 2030.

The extremely high expectations of consumers in the region for seamless and personalised digital experiences inspire a great deal of innovation. Firms in mainland China and other markets are experimenting widely—and delivering impressive results—with new products, new distribution models and new technology.

The top performers are both capitalising on near-term opportunities and establishing a strong foundation for long-term success.

But several challenges cloud the horizon for AsiaPacific insurers, some unique to the region and others they have in common with their peers around the world. The local details differ, but regulators in multiple 20 INSURANCE ASIA

Regulators in multiple jurisdictions are increasingly focused on capital standards, consumer protection and financial reporting.

jurisdictions are increasingly focused on capital standards, consumer protection and financial reporting. In addition, some new requirements are being shaped by emerging global standards.

Still, rising economic uncertainty, largely due to trade tensions, is already slowing growth in several countries, including those that experienced the strongest recent growth, whilst creating new winners in global trade.

Low interest rates are a major issue, particularly in the advanced markets, though developing ones are increasingly impacted, too. Weakening domestic demand and ageing populations temper prospects for growth in mature markets, such as Japan, South Korea and Australia, and to a lesser extent even in major developing markets, such as mainland China and Thailand.

In response, insurers have taken up a range of new investments and initiatives. The top priorities include cost reduction, especially in light of rising compliance costs and increased regulatory focus, digitisation of the sales force and more effective use of technology generally.

Technology is critical to success on both the bottom and top lines; that is, automating processes can help reduce expenses, whilst better customer experiences and more productive agents can lead to more revenue.

But technology alone is not enough. New skills and expertise are also high on the strategic agenda, for life and non-life insurers alike. The combination of the right talent and powerful technology will enable Asia-Pacific insurers

MARKET REPORT: ASIA PACIFIC In contrast, the emerging middle class and millennials in younger Asia-Pacific countries are ahead of their peers in other global regions in metrics as diverse as digital adoption and home ownership. However, they face the risk of growing old before they grow rich.

Insurers must choose the demographics on which they want to focus, whilst keeping a close eye on the rapidly changing market dynamics. These include, for example, relatively fast population ageing in China and accelerated middle class growth in Vietnam.

Insurance penetration rate, per sector

Source: EY’s Asia-Pacific Insurance Outlook 2020

to seize the huge growth opportunities on the horizon and successfully navigate the new and existing risks.

A complex environment with strong fundamentals and emerging challenges The Asia-Pacific insurance industry is still riding a strong growth spurt, driven by China but also buoyed by positive performance in South Korea. Both premiums and penetration have risen. However, some mature markets have struggled as their populations age and consumer expectations shift.

Setting the global standard for customer expectations Customer expectations in the region, especially around digital interactions and experiences, are very advanced.

China leads the way; from mobile payment apps to digital media platforms, Chinese consumers are wholeheartedly embracing innovation at astonishing speed. Chinese insurers—unencumbered by legacy systems—are creating new offers and experiences to engage them. The sheer size of China, its physical proximity to other countries in the region and the ability to leapfrog on the most advanced technology drive both the inexorable rise in expectations and the push toward innovation across the region.

Consumer preference for interactions and relationships with insurers skews strongly toward digital. That’s true even for life insurers, particularly in mainland China, Thailand and Australia, where consumers prefer digital channels over traditional agencies by significant margins. In Singapore and Malaysia, however, consumers prefer agents.

Asia-Pacific insurers have committed to innovations across the business. There’s little doubt that they will continue to raise the bar in developing new products and engaging customers in new ways. Whilst insurers in other regions envision the customer of the future and model their needs and expectations, the future is happening now in the AsiaPacific region.

The most successful companies will be those that can localise experiences on an international scale by efficiently and effectively serving customers in some of the fastest growing markets in the world. In the meantime, insurers around the world can learn a great deal from their peers in the Asia-Pacific region, and in mainland China particularly.

Shifting demographics Population-related challenges vary across Asia-Pacific insurance markets. Japanese and South Korean insurers face significant threats on existing portfolios as the population grows older and low birthrates persist.

Insurers must choose the demographics on which they want to focus, whilst keeping a close eye on the rapidly changing market dynamics.

Slowing growth and rising uncertainty Compared to the rest of the world, the Asia-Pacific region faces both similar macroeconomic challenges and unique threats. Low interest rates and failing yields on treasury bonds are common challenges. Several Asia-Pacific central banks have recently cut rates. Further cuts are expected in the future. But central banks in most AsiaPacific countries have more room to manoeuvre than those in other regions. Thus, the impact of falling interest rates is relatively less severe.

Other common challenges are slowing productivity growth and ageing populations. The unique threats include the increasing trade tensions between multiple countries inside and outside the region. The slowing momentum in China and increased financial market volatility compound these challenges.

Fortunately, economic growth rates have been higher than in other markets. Savings propensity is fairly high and the region is very much at the forefront of digitisation. This combination of forces is driving insurers to develop new value propositions, such as those related to financial wellbeing, and facilitating a shift toward feebased products.

Whilst insurance executives in Europe and the Americas actively prepare for potential recession, the economic environment in the Asia-Pacific region— especially in the less advanced markets—is not quite as stark. Still, global trade tensions threaten the booming growth cycle that has been running for years in many markets. China’s healthy growth rate has slowed noticeably and both Japan and Singapore are on the verge of falling into recession. A slowdown in other global regions would inevitably hurt the Asia-Pacific insurance industry. The economic impact of political uncertainty is another consideration, both in the region and around the globe.

Scarce talent Cultural and people issues bear mention. In the fastest growing markets insurers have not been able to find the right homegrown talent fast enough to keep up. It’s an

Millennials intending to buy a home in the next five years

Source: EY’s Asia-Pacific Insurance Outlook 2020

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MARKET REPORT: ASIA PACIFIC Percentage of population over 65 years of age in key Asian markets

Source: EY Asia Pacific Insurance Outlook 2020

unprecedented challenge in the global insurance industry.

Hiring expatriate talent in key areas, such as data science, will be prohibitively expensive. So the focus will continue to be on training and up-skilling existing staff. The talent war will intensify as more foreign insurers enter the market as deregulation continues.

As both life and non-life insurers become more digital in their operations, they will need technical talent to design and support specific disruptive technologies, like AI and blockchain. Analytics and experience design are other high priority skillsets. The ability of the largest Chinese insurer to rebrand itself as a technology firm has helped it attract top talent in these areas, not only from the insurance industry but also from other tech firms.

Some companies also need knowledge and experience in underwriting and other traditional insurance functions.

This is especially true relative to new product development, whether protection-oriented life products or on-demand P&C products.

Increasing regulatory scrutiny also places a premium on finance and risk management skills. Forward-looking executives recognise that the right talent and skills are necessary to realise the full value of transformation investments and to successfully navigate markets that shift quickly and evolve continuously.

How insurers can move forward For years, insurers across the Asia-Pacific region have understandably focused on seizing the growth opportunities that have been presented by healthy economies and a growing middle class. In some markets, the focus on driving growth has left key parts of the value chain—such as underwriting, claims and other internal processes—lagging best-in-class standards. At the same time, digital capabilities have often been built on top of existing operations and without end-to-end digitisation plans.

Some insurers have tackled these challenges head on and have created pockets of excellence and innovation. Insurers should identify leading examples they can emulate and decide which niches are most appropriate for them.

Opportunities, strategies and priorities will vary. Many insurers will need to focus on underwriting, the shift to fee-based, unit-linked products and stringent capital requirements. They will also need to revamp their strategies to put digital at the heart of their offerings and operations, focusing on customer needs and embracing ecosystems.

All insurers will want to examine the repeatability of their business models, especially if they want to expand 22 INSURANCE ASIA

Adding more fee-based products, along with a higher share of market-linked products, is a step in the right direction.

into other markets and regions or scale up for growth.

Partnerships and mergers and acquisitions (M&A) decisions will be critical in accelerating this journey.

As interest rates fall and savings growth tapers, insurers will also have to find ways to de-risk their balance sheets, downplaying products that offer higher returns in favour of those that can reliably perform in the current landscape.

Adding more fee-based products, along with a higher share of market-linked products, is a step in the right direction.

Finally, insurers will have to be careful about their capital management. On the one hand, they have to manage the increasingly stringent solvency norms; on the other, they need to ensure that they are investing enough to stay future-ready. These investments should be informed more by the most pressing business needs than by the latest technological trends.

In evaluating, selecting and deploying new tech, insurers must take a holistic approach. Even the most powerful tools won’t solve problems by themselves.

That’s why they shouldn’t be deployed for their own sake.

Instead, they must be used to solve specific and welldefined business problems (like automating processes to reduce costs) and meet specific objectives (like direct engagement with consumers). Indeed, technology is just one variable in the equation for successful long-term change.

Non-life In the Asia-Pacific region, growth in non-life lines has outpaced life insurance. However, growth has slowed in recent years. That trend looks likely to continue, given increasing macroeconomic and regulatory concerns in the region. P&C premiums in Asia Pacific grew at a compound annual growth rate (CAGR) of 7.5% from 2013 to 2018. Life health premiums grew only 4.0% during the same period.

Increased foreign ownership in some key markets— particularly China—should support long-term growth.

Foreign players will drive increasing penetration in markets where local players have traditionally dominated.

For example, Myanmar announced in January 2019 that foreign insurers could enter into the country’s largely untapped insurance market as part of an ongoing liberalisation effort. Vietnam has also taken steps to increase foreign ownership limits for listed companies in insurance and other sectors.

The insurance companies that win the future will be those that can develop the right offerings for a dynamic risk landscape, comprehensively address new customer expectations and use new technology to enhance efficiency, reduce costs and scale up across the region.

They must also leverage emerging digital platforms to anticipate and meet evolving market needs.

Imperatives for non-life/P&C insurers Embed digital in everything. Start with core business problems and identify the technologies that will best solve them; develop an agile approach, test new tech and quickly scale up winning experiments; adapt offerings and experiences to consumer preferences in individual markets.

Assess regulatory impacts and transform accordingly.

Identify innovation and performance improvement opportunities relative to compliance initiatives,

MARKET REPORT: ASIA PACIFIC such as those around financial reporting and capital requirements, as well as minimise effort and investment in other areas.

Asia-Pacific one-year Treasury bond yields

Set specific and measurable cost efficiency targets across the business. Compare and contrast the costs and benefits of different efficiency options such as robotic process automation (RPA), core system transformation and regional service centers; diligently measure progress with holistic metrics.

Re-orient the distribution strategy toward omni-channel.

Consider which products and offerings are best suited to digital channels, experiment with them and decide where to scale; embed digitised experiences to offer genuinely omni-channel propositions.

For 2020, the strategic focus is on optimising existing operations and seizing the most compelling growth opportunities. That means using digital channels and products to address customer needs in different markets, deploying technology for automation and ensuring that omni-channel distribution is well suited to individual consumer segments and product lines. In such a dynamic market, it’s no surprise that priorities are shifting.

Key trends and imperatives: life insurance Life insurers in most markets sector at a glance in the Asia-Pacific region have experienced slowing growth.

Developed markets have seen the greatest pressures on growth. Interest rates have dropped precipitously and rapidly—leading to major ramifications for life insurance companies. Many liabilities will become extremely expensive to honor and existing reserves will be severely strained if rates continue to drop, which they look extremely likely to do in 2020.

To navigate these challenges, Asia-Pacific life insurers are shifting toward protection-based products, with a greater focus on health and accident policies, rather than fee-based products. The trend is particularly pronounced in ASEAN markets, as well as Hong Kong. In Japan, where local interest rates have made insurance unattractive, products denominated in foreign currency have seen explosive growth recently. They will continue to play an important role, though greater regulatory scrutiny of aggressive marketing tactics will inevitably dampen demand across the region.

Whilst a number of common challenges—such as global economic uncertainty—confront life insurers across the region, local conditions differentiate individual The Asia-Pacific non-life sector at a glance

Source: EY’s Asia-Pacific Insurance Outlook 2020

Source: EY’s Asia-Pacific Insurance Outlook 2020

Asia-Pacific life insurers are shifting toward protection products, with a greater focus on health and accident policies.

markets. In Australia, more stringent regulation is the main challenge. In Hong Kong, unprecedented social unrest is making this market less attractive for customers from mainland China, a key target for insurers historically.

Japan is stuck in a low-growth environment, with subzero interest rates. Ageing populations are a top concern for insurers in Japan, South Korea and Thailand, among others.

Imperatives for life insurers Assess the impact of global regulatory convergence.

Streamline processes to prepare for new and existing requirements (e.g., IFRS 17 and RBC standards) and evaluate the knock-on impact on sourcing strategies, including M&A and partnerships.

Identify talent gaps to devise a workforce strategy. Determine where internal talent must be developed and where external talent is necessary; consider rebranding and communications tactics to attract important talent.

Set specific and measurable cost efficiency targets across the business. Compare and contrast the costs and benefits of different efficiency options—such as RPA, core system transformation and regional service centers; diligently measure progress with holistic metrics.

Review distribution options and experiment with channel mix. Assess options based on new value propositions and identify a limited number of initiatives for each channel; measure progress to determine which can be scaled for maximum impact.

Last year’s EY Insurance Outlook encouraged life insurers to prepare for regulatory change by aligning implementation plans and investments with business transformation initiatives. That is still a good idea looking ahead to 2020 and beyond, with executives needing to keep a close eye on international regulatory developments.

Cost efficiency remains as important—perhaps even more so—this year as it was last year. In distribution, life insurers are still seeking the right mix of human touch and digital efficiency. As they press forward on the journey to growth, regulatory, cost efficiency and distribution issues remain important signposts. From EY’s 2020 Asia-Pacific Insurance Outlook.

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ANALYSIS: DATA ANALYTICS

Insurers must reinvent and build new businesses to sustain growth.

How advanced analytics can boost and sustain growth for insurers in Asia They must ramp up tech and advanced analytics to expand their market reach, says McKinsey & Co.

A

sian insurers have achieved remarkable growth in recent years, but disruptions are threatening to spoil the fun. These insurers must now enhance their digital and advanced analytics capabilities to maintain momentum.

For the past decade, insurers have grown faster in Asia than anywhere in the world. From 2012 to 2017, Asia Pacific contributed 50% of gross written premiums globally, with most insurance lines benefitting from this upswing. And there is still room for growth: emerging markets, for example, are relatively underpenetrated, even after experiencing a significant increase in gross written premiums. However, there are forces at play in the Asia–Pacific market that could hinder insurers from achieving sustainable advances.

Insurtech attackers are disrupting emerging and developed markets in the region by tempting consumers with customised—and frequently less expensive— products. These savvy attackers employ digital tools and advanced analytics to slice off profitable parts of the industry value chain. To remain competitive and sustain continued growth and market share, incumbent insurers must build their own digital and advanced analytics capabilities. Solid premium rates to date may account for executives’ reluctance to make bold changes to how they do business, but remaining complacent is not an option, especially with digital attackers expanding their footprint in this region. Further 24 INSURANCE ASIA

Current public healthcare systems don’t cover the overall costs for many individuals, providing an opportunity for other insurers to offer competitive health insurance rates.

McKinsey’s research shows that digital leaders increase revenue at five times the rate of other companies and total shareholder returns by two times.

Digital and advanced analytics capabilities, a core component of digital transformations, are critical in helping carriers operate more efficiently, reduce time to market for new products, and gain more insight into customer needs—benefits that will help insurers build scale. Players that act now may give themselves a durable competitive advantage in the region and avoid missing out on future growth opportunities.

The opportunity in Asia Insurance lines in emerging and developed markets have experienced steady growth in recent years in response to evolving customer and needs. For example, there is a heavy appetite for health insurance in China as the population rapidly ages. Current public healthcare systems don’t cover the total costs of healthcare for many individuals, providing an opportunity for other insurers to come in and offer competitive health insurance rates and coverage. Consider that total gross written premiums for health insurance have increased significantly in just over a decade. Digital distribution of insurance products in China is also trending upward; online sales of property insurance premiums increased nearly 40% in the first half of 2018, expanding their market share. Other emerging markets show promising

ANALYSIS: DATA ANALYTICS Reinvent the core businesses Carriers should comprehensively review existing operations to see where digital tools and advanced analytics can solve customer and operational challenges.

Insurers that choose this pathway can become future ready, modernise their operations to improve customer experience, and uncover innovative ways to use advanced analytics to more effectively serve customers.

Make traditional channels “future ready.” Enhanced digital capabilities can help carriers increase adviser productivity, improve customer experience, and remove extraneous costs associated with outdated processes.

This “agency of the future” approach demands that insurers have a customer-first mindset when redefining their current distribution model and developing new digital capabilities.

Asian insurers in both developed and emerging global Source: China Banking and Insurance Regulatory Commission markets could follow the lead of their counterparts in developed markets outside of Asia Pacific. A global By 2030, growth across business lines. In Thailand, carriers life carrier, for example, built a captive distribution increased gross written premiums by approximately 7% about 46% of model that employs a sizable salesforce of independent from 2017 to the third quarter of 2018, for example. And households in contractors working on behalf of general agents. in Vietnam, new products such as trade credit insurance China will be However, this model made it difficult for the insurer’s helped boost gross written premiums by 22% over the middle class home office to improve the overall customer experience same period. or affluent, and have line of sight into the adviser sales process.

Developed markets also offer pockets of potential providing a rich To modernise this system, the carrier began building growth. Japan’s rapidly ageing population provides customer base an “agency of the future” model. The insurer tested opportunities for life insurers to offer retirement plans for life insurers tools supported by digital capabilities, such as online and products that address longevity. Whilst Hong Kong’s scheduling for client meetings and messaging functions and advisers. insurance market is already saturated with life and health to improve agent and customer service feedback during insurers, it still holds the promise of growth thanks to rapid a pilot period. And the carrier built a platform to expansion of the middle class. It’s estimated that by 2030, match customers and agents based on demographics about 46% of households in China will be middle class or and behavioural data derived from advanced analytics affluent, providing a rich customer base for life insurers insights. Thanks to these combined efforts, the carrier and advisers as well as the opportunity to customise experienced a consistent and sustained increase in sales. product offerings. Indeed, as customers’ assets grow, they Insurers often roll out new products or services look for the security insurance can offer. Two-thirds of the using legacy systems and solutions, leading to slow global middle class will live in Asia by 2030. time to market and an unstable operating model However, these opportunities could remain unfulfilled based on outdated technology. Digital tools and if insurers fail to ramp up their digital tools and advanced advanced analytics and a buy-versus-build approach analytics capabilities to compete with digital attackers. can both support improved back-end operations and help insurers scale and innovate beyond traditional The pathways to sustained growth insurance offerings.

How do digital leaders stand out amongst other One Asian insurer had a legacy policy administration companies? They first secure top-down commitment, system that hindered its time to market for product ensuring stakeholders at each level of the organisation launches because of data inconsistencies and technology are ready to implement changes. And instead of trying obsolescence. The leadership team knew it needed to to do everything at once, digital leaders think of a modernise the core and develop a service-oriented digital transformation from a minimum viable product architecture that aligned with the carrier’s overall perspective. Finally, they take time to build supporting business goals, such as improving operation efficiency digital and advanced analytics capabilities, such as an and customer experience. advanced analytics platform. Such platforms allow them to employ advanced analytics when making important decisions regarding growth, cost, and customer experience.

Building digital and advanced analytics capabilities is just one part of a broader digital transformation, but it’s an essential area for insurers to get right.

To develop digital and advanced analytics capabilities, insurers should explore two pathways: reinventing core businesses and building new digital business. Which path they pursue (or if they pursue both) depends in part upon their starting point—that is, their current technology capabilities and their available capital. And whether insurers decide to build a new business depends on many other factors, including how well the new business set up works within the existing business, current branding, and There is a healthy appetite for health insurance in China. the customer value proposition.

Emerging Asia has experienced high growth in recent years but is still mostly underpenetrated.

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ANALYSIS: DATA ANALYTICS Leaders recommended modernizing the core policy administration system by building a new system. An updated system with reliable support meant product fixes could move more quickly. The insurer also developed a new workflow and document management system aimed at improving operational efficiency, customer service, and response time. As a result, the organisation became more operations-focused, reducing overall operating costs and cutting time to market for new products from three to four months to less than one month.

Develop innovative products and services. Insurers can test new products and service offerings by enhancing existing capabilities and technologies, such as updating IT systems, rather than starting from scratch.

One international life insurer aimed to improve its underwriting approach, making it more consistent, by using machine-learning technology. The carrier had high variability in its decision processes and long wait times, resulting in high dropout rates in applications. Using existing IT infrastructure and systems, the insurer built an artificial intelligence–powered learning model and initiated testing using historical underwriting decisions and claims experience.

As a result of these efforts, the carrier saw increased sales through better pricing and faster turnaround times in addition to a significantly reduced underwriting cost per application.

Build new businesses Insurers that already have a solid digital foundation and the required capital can attempt to build new digital businesses in two ways. The first involves creating a digital-native attacker business for insurers to construct a new value proposition, which in turn they can use to penetrate new customer segments. The second approach focuses on expanding into new ecosystems, requiring insurers to think about how they can use new information to offer different services to customers.

Create a digital-native attacker business. Successful digital attackers identify unfulfilled customer needs and offer unique solutions to meet them. Attackers also use the data collected through their digital channels to provide better services and products to customers.

Incumbent insurers can follow the lead of banks and other financial services institutions.

One Asian bank launched the first digital banking platform in Indonesia. The bank aimed to improve its customer experience and expand its existing customer base by targeting new customer groups. To do so, the institution created a cross-functional team charged with developing a mobile banking app. The team made decisions about how the digital banking platform would operate, employing agile prototyping and testing of different features and offerings.

Developing the new business required a robust implementation phase, including building out the required IT infrastructure, fostering new internal processes (such as developing customer journey maps), and hiring and training a dedicated sales staff. Upon completion of the implementation phase, the bank launched a pilot mobile app and web portals, testing and iterating over several months. After gathering customer feedback and data, the bank eventually enhanced its products further, such as with customised user accounts and fingerprint authentication.

Expand into new ecosystems and channels. Insurers 26 INSURANCE ASIA

China’s Ping An has transformed into an integrated financial services provider.

One Asian insurer had a legacy policy administration system that hindered it from marketing product launches because of data inconsistencies.

that are ready to scale their services and offerings can adopt an ecosystem mind-set.

In that setting, a customer interested in buying a home, for example, might be directed to a platform to purchase homeowner’s insurance without having to deliberately search for that product. The interconnectivity of ecosystems could also help insurers integrate their data, allowing them to make better decisions about products and other offerings.

China’s Ping An has transformed itself from a pure insurer to an integrated financial and retail services provider. The carrier formed partnerships with other companies, helping it garner the resources and support needed to expand its physical and digital footprints. For example, in 2013, the company formed a joint venture with internet companies Alibaba and Tencent, thus developing the online insurer Zhong An. In 2014, Ping An launched its Good Doctor platform, which offers online healthcare services, such as doctor consultation and wellness advice to patients. Ping An then developed a single platform on which to house multiple accounts—from insurance to banking to health to housing. This platform serves as an ecosystem through which customers can access a suite of services.

The insurance giant also set up a low barrier for customers to move between platforms and products, resulting in consistent traffic and a large user base. A customer searching for health advice via Good Doctor, for example, can be directed toward a health insurance offering or service package through other Ping An subsidiaries or external providers. Broadening its suite of services and offerings through the ecosystem approach has permitted Ping An to acquire customers that it might not otherwise have reached and to funnel them into its core insurance business.

Insurers in the Asia-Pacific region could content themselves with the growth they have achieved in recent years. But resting on their laurels may cost them as digital attackers begin to make inroads into the market. In response, Asian insurers should aggressively ramp up their digital and advanced analytics capabilities. The long-term market leaders in Asia insurance will be those that can apply these capabilities to reinvent their core and build new businesses.

By Violet Chung, Partner, McKinsey Hong Kong; Dino Ho, senior expert, McKinsey Hong Kong; Brad Mendelson, senior partner, McKinsey Hong Kong; and Joe Zachariah, associate partner, McKinsey Melbourne.

Under the initiative of:

Administered by:

MARKET REPORT: SOUTH KOREA

New accounting regulations are causing concerns across corporate Seoul.

Accounting woes spell more trouble for embattled South Korean insurers

A series of accounting scandals has led to tighter audits, with insurers absorbing the most impact, reports EY.

D

espite being the seventh-largest market globally, South Korea has continued to grow at a rate healthier than what most other developed markets have seen in recent years. At the same time, thanks to heightened regulatory focus, industry capitalisation is expected to further improve.

However, slowing economic growth and sustained low interest rates are likely to affect the sector’s growth in the coming years. On the other hand, a rapidly ageing population is putting considerable pressure on the welfare system and is emerging as a major opportunity for insurers.

South Korean insurers face challenging market conditions, ranging from trade tensions and a stagnant economy to the prospect of new regulations and the threat of technology-driven disruption. As a result, insurers must make strategic choices about markets, customers, products and channels, as well as be prepared to make changes to their business and operating models.

They must also accelerate their investments in digital transformation. Nearly all insurers are keen to adopt new technologies (e.g., blockchain and artificial intelligence) and create new services via collaborations with insurtechs. However, most initiatives remain in initial or pilot phases. Expanding these efforts is critical, given the likelihood of increased competition 28 INSURANCE ASIA

Approximately 660 companies are subject to mandatory auditor designations.

from internet-only insurers and banks.

A series of accounting scandals has led to drastic, government-driven audit reforms that are designed to fundamentally enhance accounting transparency throughout South Korea. For the coming three years, approximately 660 companies are subject to mandatory auditor designations, with the biggest impact felt by top-tier life and non-life insurers and insurance affiliates of major financial groups.

Life premiums Life premiums totalled US$104b in 2018, with a market penetration of 7.4% and per-capita premiums of US$2,050. The domestic life business is very concentrated, with the top player having a 23% market share. Life insurers seek to adjust their product portfolios and growth strategies whilst navigating competitive and regulatory challenges.

Recovering share from foreign insurers South Korea’s life insurance market has expanded through endowment, which foreign insurers did not cover. Therefore, foreign insurers’ market share has been limited at around 15%. However, due to increased demand for term insurance, foreign insurers gained market share from 2015 to 2017, improving from 17.5% to 19.7%.

MARKET REPORT: SOUTH KOREA Compound annual growth rate, gross written premium, SK 2013-2018

insurance market in South Korea.

The proposals include a relaxation of reporting requirements for new insurance products. The regulator also plans to lower the barriers to entry for internationally-based reinsurers.

Improvements in operational efficiency The South Korean non-life sector saw an improvement in operational efficiency as cost-savings strategies— including technology investments, job cuts and expense management initiatives—began to the deliver the desired results.

Source: EY’s South Korea Insurance Outlook 2020

Protection products driving growth Savings policy sales have traditionally made up half of total new sales volume. However, life insurers are now likely to shift their focus to protection products.

For example, new dental products and cheaper health insurance policies are being launched to reduce interest risk exposure.

Low or negative growth As product-mix strategies evolve ahead of the introduction of IFRS 17, life insurers are expected to record lower or negative new business growth in 2018.

The need for capital soundness South Korean life insurers are increasingly challenged to maintain capital soundness as they struggle with regulatory capital reforms, as well as IFRS 17 implementation. Several companies have turned to issuing debt, whilst others are exploring M&A options to broaden their capital base.

Non-life premiums Non-life premiums totalled US$66.7b in 2018, with a market penetration of 4.7% and per-capita premiums of US$1,312. The domestic non-life insurance business is very concentrated, with the top player having a 24% market share.

Slowing growth from an economic slowdown Slowing economic growth and subpar automotive underwriting results are challenging insurers. On a more positive note, proposed deregulation measures and improved operational efficiency may boost future performance in non-life lines.

Premium growth has weakened for several years, from 4.9% in 2015 to 3.7% in 2016 to 2.6% in 2017. The drop is primarily brought about by the slowdown in overall economic activity.

Digitisation is no longer a strategic option for insurers, but rather an imperative.

Imperatives for insurers Adapt to changes. The short-term focus is on the delivery of strategy and transformation plans to meet financial and operational targets. For the long term, insurers must strive for broader transformation, largely through digitisation of core processes and functions, to position for future success The short-term focus is on the delivery of strategy and transformation plans to meet financial and operational targets. For the long term, insurers must strive for broader transformation, largely through digitization of core processes and functions, to position for future success.

Embrace IFRS 17. Top-tier insurers are working toward IFRS 17 implementation by upgrading their financial reporting, actuarial and risk infrastructure.

The core objectives include stabilising the system and developing managerial insights from IFRS 17 financial outputs. To deliver against new regulations, insurers will need to secure new talent and resources focused on business management, risk transformation and K-ICS (Korean Insurance Capital Standard) competencies.

Drive digital transformation. Digitisation is no longer a strategic option for insurers, but rather an imperative.

Insurers must prepare for the emergence of new markets for fintechs, now that regulators have lowered barriers to entry. In addition, insurers must embrace blockchain, cloud and other advanced technologies in the face of rising competition from internet-oriented insurers and internet-only banks that are expanding into insurance.

From EY’s South Korea 2020 Insurance Outlook

Life premiums in South Korea

Deteriorating underwriting results Non-life insurers have posted consecutive underwriting losses since 2008. In the first quarter of 2018, key non-life insurers reported a net decline in profitability. In the first half of 2019, profitability remained under pressure. This was likely due to a softening of the underwriting cycle; to tackle this challenge and secure profitability, insurers are planning to expand their long-term business.

Planned deregulation to stimulate growth The Financial Services Commission (FSC) is considering new deregulation measures to stimulate the stagnant

Source: EY’s South Korea Insurance Outlook 2020

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ANALYSIS: MARKET TRENDS

The coronavirus pandemic is re-shaping the industry’s operations and financials.

Unprecedented pandemic just one of the challenges facing insurers in 2020 The COVID-19 pandemic is raising alarms for insurers’ financial operations, says Deloitte’s Clive Buesnel.

C

OVID-19 is impacting the insurance industry in multiple ways—from employee and business continuity issues to client service considerations to the financial outlook. Insurers are responding to the widening COVID-19 outbreak on multiple fronts—as claims payers, employers, and capital managers. Each has its own distinct challenges, not just for the insurance industry, but for the economy and society at large.

However, the most immediate concern for insurers is protecting the health and safety of employees and their distribution partners in the agent/broker community as they strive to maintain business continuity. Like the commercial policyholders they serve, insurers are being challenged to review and update their crisis management plans and take steps to continue operations with a minimum of disruption to clients.

If they haven’t already done so, insurers should consider establishing cross-functional, emergency decision-making teams to coordinate the organisation’s response, set new safety protocols, and assure quicker action as conditions continue to evolve. A comprehensive communications system should also be in place to keep employees, distributors, and clients fully informed about the status of business continuity plans and instructions on how to remain personally safe.

One of the biggest challenges could be enabling 30 INSURANCE ASIA

Insurers are being challenged to review and update their crisis management plans and take steps to continue operations with a minimum of disruption to clients.

alternative work arrangements for insurance company employees if needed to protect staff and adapt to possible office access restrictions, all whilst ensuring business continuity and maintaining client relations.

Emphasis on efforts to contain the spread of COVID-19 may mean enabling insurance company staff—from actuaries to underwriters to claims managers—to work offsite, most likely from home. Insurers should ascertain whether employees can access necessary files and conduct business from remote locations. In addition, chief information security officers (CISOs) may need to establish new cybersecurity protocols to permit the safe exchange of confidential information amongst employees connecting from outside the office.

Many organisations are setting policies around remote access to support social distancing. As companies move toward remote protocols, chief information officers, chief technology officers, and chief security officers should ensure that offsite workers have access to the following technological capabilities: 1. A laptop or desktop computer, preferably equipment issued by the company 2. A virtual private network to securely and remotely connect to critical business applications 3. Collaboration tools to help with audio, video, and

ANALYSIS: MARKET TRENDS they were able to respond. They should also determine any additional steps that may need to be taken to adapt their organisations and make them more resilient if faced with future pandemic events.

Work Lorem from home is the new normal.

screen-sharing 4. An adequately equipped and staffed IT support team to answer employees’ questions and help them continue to do their jobs remotely Insurers may have additional circumstances to consider to accommodate claims adjusters, who often need to travel to perform their jobs—both locally and to more distant locations. That could be problematic with the COVID-19 outbreak. What if an adjuster needs to go onsite to examine a claim for commercial or personal property damage, or one of the policyholder’s family members or an employee who interacts with the adjuster is infected with COVID-19?

To avoid such circumstances, insurers may have to take additional safety steps such as setting new protocols for inperson interactions with claimants or requiring claims to be investigated from the office or an alternative remote location where possible—even those that normally require site visits.

Agent/broker considerations COVID-19 could also disrupt an insurer’s client service, starting with its distributors. Agents, brokers, and financial advisors will likely face many of the same risk management and logistical challenges as those being addressed by their carriers, especially since many may also have to work from home. Meanwhile, face-to-face meetings with both prospects and clients may have to be completely avoided until the risk of exposure has finally passed.

Under these circumstances, insurers that have invested in advancing their digital capabilities will likely be better positioned in the short term to maintain a connection to their distribution partners, who, in turn, should be able to offer faster and more comprehensive services to their clients.

Insurers could also enhance planning and training in anticipation of a potentially longer-term period of social distancing that could shift how intermediaries stay in contact with their clients, how they prospect for referrals, and how they serve clients who may be experiencing financial strain. With good digital tools, this can be a period of productive planning, training, and outreach across company, intermediary, and client stakeholder groups. In times of uncertainty and financial stress, it seems increasingly important for the insurance sector and broader financial services industry to maintain connections and be wellpositioned to serve.

Once this outbreak has passed, each insurer’s risk management team should assess how quickly and effectively

Insurers that have invested in advancing their digital capabilities will likely be better positioned in the short term.

Impact on insurers’ financial outlook Insurers are also carefully considering the potential impact of COVID-19 on their short-term and long-term financial outlooks. Claims costs will likely be specific to the classes of business an insurer writes and their policy wordings.

However, the bigger-picture concern is how the outbreak might affect the economic environment—specifically, prospects for growth and profitability in insurers’ underwriting and investment portfolios.

The Insurance Information Institute, in its first quarter “Global macro outlook,” reported that “COVID-19’s impact on global growth and the insurance industry is likely deeper and wider than the current consensus and could last well into the third quarter and beyond.” The report added that, as a result of the effects of the virus outbreak, “global GDP growth in 2020 could slow down by as much as 1%, from 3.3% to 2.3%, making a 2021 recovery unlikely.”

The Organization for Economic Cooperation and Development (OECD), in its report “Coronavirus: The world economy at risk,” said that a longer-lasting and more intensive outbreak could reduce global growth to just 1.5% in 2020. Insurers across the board would likely be impacted by a sharp slowdown in economic activity, which would undermine growth and perhaps even contract insurable exposures.

At the same time, interest rate declines will weigh heavily on the entire insurance industry, but will most especially affect operations in the life insurance and annuity sectors. The Federal Reserve, in its first emergency move since the recession in 2008, on March 3 cut the federal funds rate by 50 basis points, then cut it again to near zero on March 15. This will likely have a major impact on life and annuity insurers, given their ratesensitive products and investments. Many life and annuity insurers have already been recalibrating to address exposure to historically low interest rates. Some have modified products, often by lowering guaranteed rates.

Additional adjustments of this sort may be required.

Financially, insurers will also likely need to adjust both of their budgets and implementation plans, cash flow expectations, and investment portfolios in light of recent economic developments.

Potential tax implications should also be evaluated for the contingencies discussed above. With recent tax law changes in both the United States and in jurisdictions around the world, previous tax planning may need to be evaluated during the current economic unrest. Some of the tax items to be cognizant of include, but are not limited to, US domestic and international regime changes as well as other global tax-related developments.

As this situation evolves, insurers are expected to continue to serve as shock absorbers for the economy and society. Financially, the industry prepares for large loss events such as COVID-19 and should be well-capitalised for any onrush of claims. Insurers are also helped, in large part, by reinsuring large parts of their books of business, which is one of the ways the industry is able to spread risk.

INSURANCE ASIA

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OPINION

AJIT ROCHLANI AND ANGAT SANDHU

Bancassurance on the rise in Asia

B

ancassurance has increased in strategic importance for both banks and insurers in Asia. For banks grappling with a sustained period of low interest rates, it provides a source to strengthen earnings as well as an opportunity to deepen customer relationships. For insurers, it has become a material, and in many markets the largest, channel.

The insurers’ interest in doubling down on bancassurance is epitomised by the large sums of money paid for exclusive distribution partnerships: Since 2013, there have been over 50 deals in Asia. Of these, 15 deals have disclosed figures and reported approximately US$6b in up-front fees paid alone.

Whilst some partnerships have flourished, many have not delivered on their promise. With time, the euphoria associated with doing more deals has been replaced by questions from shareholders and senior management on justifying the multiples paid and delivering on the promised plans. The scrutiny has intensified off late as it has become clear that there are large gaps in the performance of these partnerships and the initiatives to improve productivity are not delivering per expectations.

Our analysis reveals that the productivity gaps range from approximately 2x to 10x and persist across multiple markets.

Whilst a number of uncontrollable factors (size, brand, franchise etc) and deal specific factors may influence this, the fact that the difference is in multiples, rather than percentage points, demonstrates that there is huge opportunity for improvement.

Even when comparing the median players with the leaders, the productivity gaps range from an estimated 1.5x to 4x.

Our experience in supporting multiple banks and insurers in driving material performance uplifts suggests that it ultimately comes down to six factors that help differentiate the leaders from the laggards.

1. Joint partner alignment: Alignment of the vision, culture and priorities is always clear up-front but tends to reduce over time, typically due to a change in priorities for one of the parties, change in management and/or frustration at lack of progress.

Establishing strong governance at the outset, with clear success metrics and roles and responsibilities is critical. This needs to be supplemented by a periodic honest assessment of how the partnership is progressing, what is working well and what needs to change.

2. Seamless customer journeys: Bancassurance customer journeys are often complex, largely due to systems not being integrated and lack of process harmony between the two parties.

Ensuring the journeys are seamless isn’t straightforward for most insurers given their limited focus on this in the rest of their business and technology challenges, but ignoring this is no longer an option. Optimising the customer journeys not only helps with better experience for customers and employees but also has a significant impact on top-line due to a reduction in leakage and an increase in retention.

32 INSURANCE ASIA

ANGAT SANDHU AJIT ROCHLANI Partner, Oliver Wyman Senior engagement Financial Services Practice manager, Oliver Wyman

3. Deploying targeted analytics: Data-sharing agreements are often one of the most critical and undervalued component of any bancassurance agreement. Insurers that have managed to negotiate these have rarely optimised value from them, largely because of competing priorities and privacy concerns. We see significant potential for insurers to work with banks to better understand customer needs, more efficiently target them, develop propositions that are more relevant and importantly engage with them in a more meaningful and privacy compliant manner. This remains the area of greatest untapped potential for insurers, and those that will win will need to create the right capabilities and processes to unlock value.

4. Expanding customer segments: Many insurers have typically focused on optimising leads in branches and bundling insurance with loans and largely for retail customers. We see significant potential for insurers and banks by optimising non-branch channels (call centre, digital, others) and extending the products to other segments of the bank (HNW, SMEs, and corporates etc). Executing on this requires this being viewed as a priority for the bank and for the insurer to be able to develop bespoke product propositions and optimally service these segments whilst delivering the bank’s desired experience.

5. Embedding effective sales practices: Financial incentives are typically a less effective mechanism as insurance sales contribute a very low percentage of KPIs for bank sales staff, and banks in many markets are concerned about conduct risk. Due to this, insurers need to pay more attention to sales force effectiveness, take a disciplined approach with a focus on continuous improvement. We see leading players pay particular attention to having an expanding suite of non-financial rewards and using recognition as a key motivator. Additionally, granularly mapping the roles and responsibilities across both parties and scaling the resourcing and support to the bank staff are also seen to be critical drivers of value.

6. Digital sales and ecosystems: Driven by changing customer behaviours, banks are increasingly engaging with customers through digital and mobile channels. Many insurers are not even integrated into the bank’s digital journeys, let alone optimising their performance through them. Further integration here also provides insurers the opportunity to deepen their engagement through participation in the bank’s ecosystems and partnership network and generate more leads. Finally, given digital bancassurance is expected to drive a major part of the value of bancassurance deals in the future, insurers need to accelerate their capability build here.

We believe there is a strong future for bancassurance in Asia. By effectively executing the suggested practices, banks and insurers can continue to accelerate value creation for themselves and continue serving the end customers in more meaningful ways.

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