Page 11 - AEC Digital Edition

to planting a company’s own brand into uncharted
territory.
The digital age that we now live in may render these
historical parallels of declining relevance. Increasingly,
more companies are developing capabilities in digitising
their value chains, allowing them to rapidly and effectively
establish a virtual presence in foreign markets upon
liberalisation of access.
Also, many AEC insurers now have the experience of
running bancassurance partnerships. This channel too
may offer “fast track” access to other AEC markets through
cross-border trade.
In general, insurers with superior marketing and
distribution capabilities are expected to be best placed to
capture the potential of cross-border expansion. However,
the costs of building customer awareness in new markets
are steep.
Seize opportunities for
collaboration in cross-border trade
Cross-border cargo insurance is already widely
liberalised across ASEAN. Additional liberalisation
combined with increased demand as a result of the free
flow of goods within ASEAN present further opportunities.
To fully capture these, forging bespoke partnerships in
underwriting, servicing and claims management is seen
as a feasible strategy.
Prepare for heightened
competition
It is inevitable that market liberalisation translates party research. The platform should pursue a clear outreach
into higher degrees of market competition. How can
domestic insurers respond to this prospect? In principle,
they could engage in price competition. However, this
is a strategy that should only be adopted if supported
by technology-enabled expense efficiency gains in
administration, distribution, product design and claims
settlement.
A more strategic alternative is product and services
differentiation. This is of particular relevance to smaller
domestic insurers who offer a simple and commoditised
product suite. This market segment is likely to see the
effect of liberalisation in the first stage of integration
and therefore, is the most likely to come under increasing
competitive pressure in the short run. For these insurers,
it makes sense to explore the possible scope for product
innovation and an enhanced (af ter-sales) ser v ices
proposition, alleviating the pressure of a commoditised
market.
Having said this, we will surely see a consolidation
trend as the ASEAN market hosts more than 500 insurers,
and is generally considered fragmented and over-crowded.
Explore a regional disaster pooling
scheme
On average, 2% of ASEAN’s combined GDP is wiped
out by natural disasters each year. Only a fraction of these
losses is insured. To counter this enormous insurance gap,
there is arguably a need for a regional disaster pooling
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system to provide member-states with more effective
protection and resilience against natural calamities.
There is, however, one major obstacle: the lack of
reliable data. To address it, AEC countries may want to
develop and promote a regional platform for collecting and
disseminating historical loss and current risk exposure
data. Industry-supported academic efforts towards
open-source modelling of disaster risk will prove useful
in this context. The experience of existing schemes with
parametric solutions should also be taken into account,
such as that of the Caribbean Catastrophe Risk Insurance
Facility (CCRIF), the Pacific Catastrophe Risk Insurance Pilot
(PCRIP) and the African Risk Capacity (ARC). With much
improved data quality and availability, a regional risk pool
for natural calamities will become more feasible.
Make your voice heard on a regional
level
The AEC presents the region’s insurance companies
with a new situation: Decision-making processes relevant
to the industry are increasingly moving from the national
to the supra-regional level. At the same time, as most
insurance-specific AEC rules are yet to be established, AEC
insurers need to have their collective voices heard. One way
of achieving this objective would be for insurers to set up a
think tank-style platform. This initiative would help to close
a gap as existing regional research efforts are primarily
driven by a few global (re)insurance and broker giants.
The think tank’s brief could be to design, commission,
coordinate, supervise and execute strategic research of
pan-AEC relevance. Based on its topical priorities, it could
also act as a catalyst or “light house” for unrelated third-
agenda, disseminating insurance information, data and
intelligence, as well as organising executive and expert
meetings hosted by its members. A global body to look at
in this context is The Geneva Association. The ultimate
aspiration would be to become the preferred industry port
of call for AEC governments, lawmakers and regulators,
based on research which is both authoritative and relevant
for society at large.
Conclusion
In the long run, AEC has the potential to reshape the region’s
insurance markets. Its leaders are well advised to respond to
these expected changes early on. The spectrum of responses
does not only include strategic measures at corporate level,
such as the pursuit of a regional expansion agenda or the
adoption of a product and services differentiation strategy.
Equally important are collective measures on industry
level as well as public-private partnerships as outlined in
this article.
Author:
Mr Hans-Peter Gerhardt
Group Chief Executive-designate
ACR Capital Holdings Pte. Ltd.
AEC – IMPACT ON INSURANCE • DECEMBER 2015 9