The ACORD Forum Asia was recently held for the second consecutive year in Singapore, and delegates shared their willingness to embrace new technology and standards in pursuit of business efficiency and growth.
Social media and data analytics are set to transform current business models, and the insurer of tomorrow ultimately has to be built for change. It was one of the key messages which came out from the ACORD Forum Asia recently held in Singapore.
In his opening address, Mr Kent Chaplin, Managing Director of Lloyd’s Asia, painted a positive outlook for Asia, which also underpins Lloyd’s future vision of a greater presence in emerging markets.
He highlighted that Singapore is currently the second largest market for political risk and trade credit insurance globally, which bodes well for the city-state’s ambitions to be a global insurance marketplace by 2020.
In positioning Lloyd’s Asia to take advantage of the region’s growth, Mr Chaplin listed several strategic goals for this year, including pursuing growth in Southeast Asia and expanding insurance services for Lloyd’s Asia in areas such as claims and contract certainty.
CAT risk and exposure
While Asia abounds with opportunities, it is also a region fraught with catastrophe risks. Mr James Nash, Regional CEO, Asia-Pacific, Guy Carpenter said that between 2009 and 2013, Asia incurred US$427 billion in economic losses from natural catastrophes - with 21% of it insured. Within the insured figure, 41% of the losses were borne by reinsurers.
He added that interestingly, reinsurance limits for catastrophes in Asia-Pacific have not kept pace with economic growth since 2006. Further, XL limit has only moved in Japan and New Zealand and falls short in non-peak territories.
On a whole, reinsurance products have done well to mitigate CAT risks and the market is seeing a more rational pricing approach. Alternative capacity from the capital markets have also complemented the traditional reinsurance products, and these are all backed by increased analytics and use of technology unlike anything in the past, said Mr Nash.
He added as the region grows at a rapid rate, authorities have an important role to stimulate alternative ways to attract latent capital available to support risk across Asia.
Technology fit for purpose
Mr Guy Mills, President, Manulife-Sinochem Life Insurance spoke about how consumer needs, rather than distribution needs, are driving investments in insurance IT. Discussing today’s consumers, he said that customisation is something valued by buyers who also have high service expectations.
As far as buying preferences are concerned, he said there is a discernible shift away from the traditional insurance agent towards greater use of e-commerce. It proves that consumers are becoming more self-led, and that the traditional decision-making process for purchased would not hold for long. Given the expectations of present-day customers, providers would have to focus more on customer experience, the effect of word of mouth and affinity marketing, he added.
Looking at the preferences for younger customer segments, Mr Mills reminded the audience on the strong reliance on digital technology for this group, and that they value uniqueness in their purchase. Hence, the ability to customise their purchases can be a very powerful tool which businesses can utilise.
So what does this mean for insurers when deciding on their technological capabilities? He noted five things which include the capability to customise products; the need to have everything online and available via any interface; the capability to aggregate customer portfolio and bundle product features; having the tools needed to shape and monitor reputation on social media; and having customer analytics capabilities which is crucial for distribution
success.
Navigating coming changes in Asia
Looking at the insurance landscape in Asia, Mr Russel Lok, Partner, Advisory Services at EY, said regulations will continue to feature prominently for industry executives. In particular, there is an increasing level of consumer protection and sales regulatory control in Asian markets such as Singapore, Malaysia and China.
On top of that, there is also a “second wave” of risk and capital regulations in markets across the region. All this points to a clear trend towards a more risk-based approach to supervision and to prudential regulation, aimed at prevention rather than remediation.
All this bodes well for the region’s industry which will emerge stronger and more stable, and with less “irrational” competition. But he cautioned that ensuring compliance, which also means tackling capital scarcity and increased competition, will be challenging.
The 2nd edition of the ACORD Forum Asia was sponsored by Xchanging, Equinix, Capita, Ebix, Steadfast, Web Connectivity and Endava.