The greatest concerns of the C-suite

A survey conducted by The Institutes showed that cyber security, economic development, healthcare, regulation and digitising customer relationships are the issues of greatest concern to global insurance executives.

“We believe that insight always leads to opportunity,” said The Institutes president and CEO Pete Miller as he presented survey findings that served as the blueprint for the agenda of the Global Insurance Forum 2019.

The survey asked C-suite executives what were the biggest concerns in insurance around the world. The findings were then broken down into five categories: Economic, political and legal, operational, technological and social and environmental concerns.

Economic concerns

Economic development and low-investment yields were the top two economic concerns, with 52% and 41% of respondents respectively viewing them as great concerns. Recession and inflationary environment followed at 25% and 17% respectively.

Mr Miller said that there was regional variation with more APAC respondents than NA respondents concerned about economic development (63% vs 40%) and low investment yields (49% vs 32%).

He also pointed out that while The Institutes had expected economic development to be of relatively greater concern, it was “probably reflective of a long period of economic expansion”.

Meanwhile, the concerns of lowinvestment yield were linked to ongoing concerns surrounding the current state of interest rates.

Political and legal concerns

Regulation (53%) unsurprisingly remained the largest political and legal concern, weighing more on APAC (68%) than NA (39%). Political instability (46%) was also a greater concern in APAC (54%) than NA (34%).

Concerns about taxation (24%) were relatively low and were attributed to competition among tax authorities while low concerns about terrorism (19%) may have been due to increased successes against terrorist organisations around the world.

Operational business concerns

In terms of operational business, cyber security (72%) was at the top of the concerns list and was the one major concern that registered higher in NA than in APAC (77% vs 69%). This may have been due to developing APAC markets where digital penetration is still relatively low and cyber risks are not well understood.

Innovation (56%) was the second greatest operational business concern and Mr Miller said, “I think we all recognise the need to innovate and the various ways to do that. There’s a lot of discussion about innovation and how you go about doing it.”

Technology-related concerns

Digitising customer relationship (57%) and updating legacy systems (52%) stood head and shoulders above other tech-related concerns such as autonomous vehicles (20%), applying blockchain effectively (18%), cryptocurrency risk (15%) and applying drone technology.

“Executives are clearly concerned about digitisation of the customer relationship, I’m sure from a cost point of view, as well as service point of view,” said Mr Miller. “Not surprising perhaps, but I did not expect it to be as high as updating legacy systems.”

He said that this was possibly due to early adopters who have upgraded their systems and processes.

Social and environmental concerns

Healthcare (65%) was the greatest social and environmental concern and Mr Miller said that comments from the respondents hinted at a lack of confidence in government-led efforts to resolve these problems.

An important finding of the survey was that ageing and changing demographics (52%) were growing concerns among the respondents. The fact that natural disasters (44%) and climate change (44%) were not close to the greatest concern was rather surprising considering 2017 and 2018 registered the highest and fourth highest CAT losses on record.

Morrissey: How soon is now?

International Insurance Society (IIS) CEO Mike Morrissey opened the 55th Global Insurance Forum yesterday – the fourth time the event has been held in Singapore – with a strong message: “Asia is where growth and innovation are more robust than anywhere else on earth.”

Mr Morrissey went on to outline the major themes that would dominate the following days of the conference – driven in large part by the findings of a research project involving 2,200 senior insurance industry executives that IIS had carried out in conjunction with The Institutes.

The conference themes will touch on life, health and pensions as well as non-life and particularly P&C – but all with a significant backdrop of, “the dynamics of the new customer experience.”

“What does the new customer look like?” asked Mr Morrissey and suggested that insurers and reinsurers need to answer this question sooner rather than later - before they can begin to tackle the main growth opportunities facing their businesses.

Mr Morrissey ended by intimating that IIS and The Institutes aim to make this major research project an annual event that will inform future agendas of the Global Insurance Forum in the years ahead.

Cyber is much more tangible than a pandemic

L-R: Messrs Greig Woodring, Albert Benchimol, Alexander Moczarski and Franz Hahn.

'Transformation of the industry' was the grand theme for a substantial C-suite panel discussion during the first public day of GIF 2019.

Chaired by RGA retired president and CEO Greig Woodring, the panel consisted of AXIS Capital president and CEO Albert Benchimol, Peak Re CEO Franz Hahn and MMC chairman, international Alexander Moczarski.

Transformation of the industry was the main focus for Mr Benchimol when he said, “The scope and pace of change in the industry is unprecedented.” But he urged caution over “growing uncertainty of global trade,” and “stubbornly low interest rates – which make it difficult for us to achieve our investment results.”

Emerging risks

The future, he said, would be characterised by “the proliferation of new risks – including cyber, climate change and the political environment” as well as “the growth in intangible assets.” Pricing new products in such a changeable environment would mean that “a lot of the new products will need to be joint ventures between the broker, the client and the customer.”

Mr Moczarski turned his focus to cyber risk. “This is a risk that is much more tangible than a pandemic,” he said. “Governments should buy cyber cover and try to generate demand for it.”

He also stressed the fact that cyber is not a short-term problem. “This is permanent,” he said. “Cyber is a war that is going to continue forever.”

Mr Hahn answered the question of what was so exciting about the Asian markets by pointing to the unparalleled growth of the economies in the region – and here he was alluding to the phenomenal growth of the middle class throughout Asia.

Growing middle classes

“Middle class societies are so much bigger,” he said. “The change in Asia is so rapid that every day we learn something new. The major economic drivers are what is triggering societies. GDP is one of the biggest triggers for growth.”

Mr Benchimol echoed this enthusiasm for Asia. “The opportunity in Asia is huge,” he said. “In terms of reinsurance we see opportunities in Japan and Australia,” while “India and China provide the greatest shortterm opportunities but also the greatest challenges.”

Climate change and Nat CAT also featured prominently in the panel discussion. Mr Hahn said, “We are supporting the livelihoods of communities and making sure that societies don’t fall back into poverty after an extreme weather event.” But still there is a lot more that needs to be done in terms of making people aware of why they need to buy protection.

“There is a lot more to be done to educate people about insurance. We need to go into schools and educate children about the place of insurance,” said Mr Hahn.

Pointers to the future

Each of the panellists was asked to point to the biggest feature of change that will dominate the next 10 years and Mr Moczarski pointed squarely at digital – but also stressed that, “Younger people are looking for more diversity,” and this held lessons for the future staffing of insurers and reinsurers as well as their commitment to CSR issues. “Younger people are looking for more diversity.”

Mr Hahn also pointed to digital – but highlighted the role that will be played by new entrants to the market. “Asia will turn heads in the global insurance industry,” he said.

Mr Benchimol said, “We need to be more efficient as an industry and we need to engage much more with customers. We have true social purpose. We need to sell that more.”

Asia has big role in closing protection gap

L-R: Messrs Yoshihiro Kawai, Hiroshi Ota, Subra Suresh, Mark Saunders, Sandeep Malik and Wilfred Blackburn

There is still a yawning insurance protection gap today, with the retirement gap standing at $70tn globally while the growing healthcare gap is at approximately $2tn today.

In a panel discussion which sought new ideas in closing the protection gap in Asia, panellists shared their organisations’ approaches to increasing insurance penetration.

AIA group chief strategy officer Mark Saunders spoke of how his organisation tries to align social and business objectives in order to make a more profound impact. From a life insurance perspective, the fact that more people are outliving their savings, while also generally being less healthy, are societal concerns which have a business implication as well.

Hence, AIA intends to drive the conversation around people living not only longer but also healthier lives.

Likewise from the life perspective, Prudential Singapore CEO Wilf Blackburn touched on the importance for insurers to help people accumulate adequate savings for their retirement. He cited statistics which project that two-thirds of the world’s middle class will be in Asia by 2050, and amid rapidly ageing societies, the region naturally presents a big opportunity for life insurers to ensure more people get protection.

Closing the protection gap requires a joint effort from both the private and public sector and in that regard, Singapore’s move to tie-up with the industry in launching the Global Asia Insurance Partnership (GAIP) is a positive move, said the panel.

International Association of Insurance Supervisors (IAIS) former secretary-general Yoshihiro Kawai, who chaired the discussion, has played an important role in the formation of GAIP. He highlighted the importance of not only having a platform in Asia which brings together industry, government and academia to address issues of protection and resilience; but that it was important for Asia to start having a greater voice in global discussions around these matters.

Delivering for the customer

L-R: Mr Bernhard Kotanko, Ms Jayne Plunkett and Mr Terry Li

The tone needs to be set from the top for any organisation intent on delivering great customer experience, said Swiss Re CEO for Asia Jayne Plunkett at yesterday’s panel discussion on driving success through customer engagement.

She reminded the audience that it is easy for an organisation to be side-tracked by internal processes and metrics, thereby shifting the focus away from customers.

McKinsey senior partner Bernhard Kotanko, who chaired the discussion, had earlier set the scene when pointing out that public opinion of insurance is still not great despite the increased focus on customer-centricity amongst insurers. He also drew upon the mantra of Amazon CEO Jeff Bezos who described his obsessive compulsive focus on customers rather than the competition.

Another panellist, DBS Bank Hong Kong head of bancassurance Terry Li, meanwhile drew upon his bank’s catchphrase of ‘bank less’, which may seem counter-intuitive at first. However, it was not necessarily about increasing customer interactions, but rather about knowing the customer well enough to time the contact to suit the customer and to make it in the medium of choice for the customer.

Ms Plunkett also echoed the point of truly understanding customers and giving them what they want, rather than pushing products which the insurer thinks they might want. From the B2B angle of a reinsurer, it was important to understand the people making the decisions on the client side and what their risk appetite is, rather than just the risk appetite of the company.

Data and people

The use of data and analytics in informing an organisation’s corporate and customer strategy has become essential today. To leverage this fully, companies need to use the insights from its data as a decisionmaking and communication tool rather than a passive asset, said Mr Li.

He advocated the use of data to challenge traditional wisdom within organisations and embed a longer-term value for customers.

The importance of getting the right people into an organisation also cannot be overlooked, and it was beneficial to have people from various disciplines as they could bring a different perspective in understanding the customer, said Ms Plunkett.

On risk and leadership

L-R: Messrs Mike Morrissey and Brian Duperreault

When the perceived risk is greater than the real risk – that is when we do well, said AIG president and CEO Brian Duperreault, during a main session at GIF yesterday.

“While I’m not sure the perception of risk is currently higher than the actual risk, I think it is certainly growing,” he said. He referenced the many issues brought up in earlier panels and presentations, including political and trade tensions, pandemics, ageing populations and depressed interest rates.

One of the biggest risks facing the world currently is the trade tensions between US and China, two economic powerhouses. “Getting a resolution to this requires people actually sitting down at a table. I would really like to see these two parties sit down and discuss their issues and get back to basic principles and the basics of trade that we have established with the WTO over the past 40 years,” he said.

While this is essentially a discussion between two countries, the ramifications are global. “People have asked whether this is similar to the Cold War. The Cold War wasn’t very cold in some places, but this current tension touches every part of the world, so we all have a stake in this,” he said. “I think that getting back to a process where the entire world collectively deals with these things is better for all. A multilateral approach is probably the best way to go.”

A collective solution

Mr Duperreault is a big proponent of collaborative and collective efforts. IIS CEO Mike Morrissey, who hosted the session, brought up Mr Duperreault’s call to action in 2012, urging insurers to come together and close the protection gap, during the foundation phase of Blue Marble Microinsurance.

“I might have made the call to action, but the real heroes were the ones who got it going, not me,” he said. “Blue Marble is a great example of collaboration, of open platforms and an exchange of ideas that we talk a lot about but seldom see in action.”

He added that when he made that call to action, what he saw were different companies making an effort through charities and CSR movements, but little headway was being made. “I thought that if we got together, collectively, then we could make something happen. And I was right about that,” he said.

“However, what I was wrong about was the fact that the industry alone could make it happen. What we found was that we needed a larger group – a wider and more interesting ecosystem - than I first thought.”

What this means is that Blue Marble currently works with seed manufacturers from Zimbabwe, coffee distributors in Latin America, satellite technology suppliers and many others in order for them to achieve their ultimate aim of improving insurance penetration in developing nations.

“It requires a consortium, and it might include different industries, maybe the government or maybe academia. These are big problems and we are going to need a lot of help if we are going to solve them,” he said.

Being a modern leader

When prompted about his widelyacknowledged leadership qualities, Mr Duperreault admitted that he did not know if he had any. “I just went in to work, figuring I would do my job,” he said. “I try to treat the people I work with appropriately and I try to put them first. To me, it’s about asking who’s more important – you, or the people you manage?”

“What I can say is that the idea of leadership has changed over the past few years. Back then, everyone was the same. They looked like you, they thought like you, they had the same opinions, so it was easy to get them to work together and to manage them,” he said. “But now, with the diverse workforce that exists in world, it is a lot more challenging to manage. But if you can master it – and you’d better – you would really have something because that group would have a greater chance of making something extraordinary.”

Next decade will be critical for insurers

As the insurance industry gets ready to step into the third decade of the 21st century, it is the right time to chalk out a bold strategy for the future. Asia Insurance Review spoke with the new chairman of International Insurance Society and Aviva Asia executive chairman & Aviva Digital global chairman Chris Wei to understand the transformation strategy.

By Anoop Khanna

Like other industries, insurance has to stay ahead of the technology curve and harness the wonders of modern technology to improve business efficiency and customer-centricity.

Commenting on this, IIS chairman Chris Wei said, “This is perhaps the right time to evaluate how our industry would transform in the new decade. I believe the next decade will be critical for insurers to drive their strategic agenda to stay relevant or get ahead of competition. Whoever can deliver what the customer wants and needs, in a flexible, transparent and convenient way, will win.

“The availability of an incredible range of data, coupled with the processing power to analyse such data, represents both incredible opportunity as well as threat for traditional insurers. Those that are able to develop data management and analytics capabilities to supplement traditional risk data with customer-level behavioural data will have a sustainable competitive advantage.

“This combined with digital tools that can address customer pain points in a frictionless way will translate to incredible opportunities for the insurance industry,” said Mr Wei.

Insurance needs to be simple and transparent to win the trust of customers

Speaking about how customers will view insurance in the future, Mr Wei said, “Customers fundamentally don’t trust the insurance industry because they see it as complicated, tedious, and lacking in transparency.

A big part of the digital transformation in the insurance industry is focused on simplifying products and delivering a frictionless customer experience. With increased automation and stronger analytical capabilities, what used to be six weeks of manual underwriting can now be done in three seconds with AI and NLP.”

Mr Wei said, “Through offering innovative products and services that address customers’ needs and providing a better experience on multiple channels, I believe customers’ perception of insurance will change. Our ultimate goal is to reframe how people think of insurance: we want insurance to be bought, not sold.”

Interpreting data is key

The technology industry has been focusing on building their products and services around customer utility and engagement for years. Customer-centricity is not just a slogan but is integral to the business model and strategy.

Mr Wei said, “The tech giants have grown due to their ability to gather feedback and learn from each interaction with the customers and they are now reaping the benefits of insights gleaned from years of accumulated data.

“Data is knowledge but analytics is the key to unlock that knowledge vault. Through building a strong data analytics capability, I believe insurers can learn from their customers and deliver the best products, services and experience to help them bridge their protection gap,” said Mr Wei.

Insurance and sustainability

Climate change is a major strategic issue for the insurance industry, as well as everyone living on this planet. Natural catastrophes, for example, are six times more frequent today than they were in 1950.

“This (rising frequency and increasing severity) makes more assets uninsurable and creates a protection gap for consumers. Insurers have a collective responsibility to collaborate to narrow the protection gap, and we have a role to play in modelling, understanding, communicating and working with others to mitigate and manage risk disaster recovery,” Mr Wei said.

“By investing in prevention, building societal resilience and actively managing risk, we will be able to narrow the protection gap. Bringing this a step further, the industry should also consider incorporating Environmental, Social & Governance (ESG) issues into investment analysis and decisionmaking.”

“Aviva believes it delivers better investment outcomes for our clients, society and the environment, and we hope to use our experience to drive sustainable market wide capital market reforms and influence the businesses we invest and engage with,” said Mr Wei.

One of the initiatives that Aviva is working on is a consultation with the UN Foundation, Business and Sustainable Development Commission and Index Initiative to produce free, publicly accessible Sustainable Development Goals (SDGs) league tables.

Asia’s ageing populations and the resultant health burden on societies

By Mark Saunders, group chief strategy and corporate development officer, AIA Group

Today in the world there are 7.7bn people of whom nearly 1bn are aged 60-plus. By 2050, the global population will increase by around 25% to 9.8bn but those aged 60-plus will double to 2bn... and Asia, which has the largest and fastest-growing senior segment in the world, will be home for 62% of them.

In the world’s largest economies, we currently spend towards $12tn annually to support people aged over 60. That’s $1trn per month, $33bn each and every day. What will that grow to in 2050? Medical-cost inflation exacerbates the issue from the rapidly ageing population. In my home of Hong Kong, medical costs in both public and private sectors have risen by more than 20% in real terms (inflation adjusted) in the past decade and these trends are currently expected to continue. Less than 60% of Hong Kong residents are currently covered by healthcare insurance and the healthcare system is already under enormous strain.

Ageing affects everything

This rapidly ageing population will impact all aspects of society, such as family support structure, social welfare, healthcare and retirement systems. Indeed there are a broad set of implications for the rapidly-expanding elderly population – for both individuals and society as a whole, including:

1. Financial burden on individuals and households;
2. Lack of stable income;
3. Public expenditure on benefits/social services;
4. Physical limitations impacting daily activities;
5. Social/psychological implications; and
6. Age-related ailments

To help illustrate the extent of the issue let’s consider the dread disease of cancer: The global annual death rate from cancer is around 125 per 100,000 of population (0.125%). In your mid-20s the rate is some 25 times lower than that. In your mid-40s, some 2.5 times lower, but by the time you reach your mid-60s is four times higher and by your mid-80s some 20 times higher. Put another way you are 500 times more likely to die from cancer in your mid-80s compared to your mid-20s.

The good news is, through impressive and rapid medical, healthcare, heathtech, infotech and biotech advancements, we have seen magnificent improvement over recent years in cancer prediction, prevention, diagnosis, treatment, and recovery meaning cancer no longer has to be the killer it has been.

Living longer but not better

The potent combination of ageing and ‘affluenza’ (although people are getting wealthier they are not getting healthier as they typically adopt poor lifestyle choices of less physical activity, eating processed and less nutritious foods, smoking and drinking too much alcohol which are key risk drivers of NCDs which account for some 80% of the global disease burden) is leading to a paradoxical situation of enormously increasing numbers of people of older ages and extended lifespans but living in poor health.

This issue is exacerbated by lower fertility rates giving rise to relatively fewer younger people to help support the older population and these older people living substantially longer in poor health and having to face rapidly increasing medical costs. Add to this, that with extended life in ill health for many years, another imminent risk is that of outliving one’s savings. All in all, leading to enormous numbers of elderly people in poor health for many years who have run out of money.

The role of insurers

Life and health insurers can play a vital role in helping to address this impending social problem. By developing a healthcare ecosystem consisting of myriad partners to help people be healthier for longer covering the health journey continuum of predict, prevent, diagnose, treat and recover, an insurer no longer is simply transactional waiting until illness strikes and then making a payment.

Instead the insurer can be service orientated and value-adding by providing access to a healthcare network and paying towards helping intervene on the potential path to ill-health so reducing the risk of that illness striking; thereby pro-actively minimising and managing the risk … but if illness does strike still paying but by also helping with correct diagnosis, treatment and recovery for a more efficient and better health outcome through provision of the right diagnosis and treatment at the right cost and supporting people to recover expeditiously and effectively further manages the risk.

Health benefits

In short, helping people be healthier for longer is good for them, their families, their employers, insurance business and society and economies at large.

It has to be stressed, although important, insurers can only play a part role in addressing this formidable impending social and economic issue. Aligned, collaborative and impactful PPP is required to make the most material difference. Let’s work together and do good.