Corporate culture crucial to creating future workforces

L-R: Mr Duane Bollert, Ms Suzie Custerson, Messrs Lee Nallalingham and Jeff Kozan

The general consensus from a panel discussion on creating the insurance workforce of the future was that having a company culture that is aligned with both the future needs of the organisation and the ideals of the future professional would be critical.

Panel moderator and Mercer global industries leader Duane Bollert set the scene for the discussion by talking about some of the challenges that lie ahead and chief among them was the competition for tech talent.

“Tech talent or digital skills aren’t really industry specific,” he said. “So insurance and everybody else has to compete with a broad array of industries for that talent and that raises the question: How do you get people to join your insurance company instead of working for Alibaba, Amazon or Apple?”

Culture, mission and vision

Manulife global business effectiveness lead – talent management Suzie Custerson said that it was important to have a clearly defined strategy that everyone within the organisation could get on board with and articulate.

“But to be able to articulate the strategy and your strategic priorities you’ve got to link that back to mission,” she added. ”It’s got to be something that everybody buys into so there’s complete alignment across the organization, irrespective of which market you work in.”

This sentiment was shared by fellow panellist, Aviva talent acquisition lead Lee Nallalingham. “It all comes down to culture, mission and vision,” he said.

“A lot of what we’ve had to do is take a step back for a moment because even before we can decide what we need, we have to understand where we’re going.”

Experiences and opportunity

Sun Life Asia head of HR and communications Jeff Kozan said that the people in tech that companies are trying to attract and retain crave more than just a good remuneration package. “What they really want is the right culture and career opportunities,” he said. He added that these people need to feel empowered and have the tools and resources to make an impact.

Ms Custerson echoed his words. “It comes down to the quality of experiences you’re creating for them, she said.

“One of the most meaningful connections that you can create [for them] is actually showing how customers are really benefitting from the work that they participated in.”

Insurance is about more than just numbers

The latest generation of RGA Leaders of Tomorrow gathered to share their thoughts on the industry and one of the most profound messages they delivered was a reminder to take a step back and don’t focus solely on the numbers game in order to engage with and understand the customer better.

An actuary by training, Aviva Asia senior manager Haotian Wu talked about how he initially viewed the industry purely through spreadsheets and numbers and never really understood the discourse surrounding the needs of customers.

It was only through spending time in hospital with his sick father that he began to see things from a customer’s viewpoint.

“When I was there I started seeing the emotional side and the relationship side of the business that was unknown to me,” he said.

“In the hospital rooms, the term ‘protection gap’ and the term ‘cancer incidence’ is different. It’s not just numbers, it was life and death. The ability or inability to pay for medical bills, to pay for the procedures and medicine was much more emotional than just an insurance operation.”

Custodian & Allied Insurance business development head Ayodele Iyun drove home the message as he said that technical people within insurance need to move away from the numbers and technicalities to get a bird’s eye view of the industry as a whole.

• RGA Leaders of Tomorrow
• Lawrence Cheng – Peak Re
• Ayodele Iyun – Custodian & Allied Insurance
• Anuj Jaithalia – Generali
• Tina Pernie – CLM
• Mohit Rochlani – IndiaFirst Life Insurance
• Hui Yen Tai – Willis Re
• Carmony Wong – RGA
• Haotian Wu – Aviva Asia

Greasing the wheels of trade

L-R: Messrs Peter Manchester, Jeroen Buwalda, Pavlos Spyropoulos, Wayne Chai and Walter Poetscher

With the ongoing US-China trade tensions affecting business confidence and trade flows across the world, the role of insurance becomes even more important amid heightened uncertainty in global trade.

In discussing trade and the role of insurance yesterday, panellists looked at how insurance can be more effective in an era where trade will be highly digitalised.

EY partner Walter Poetscher noted that insurers should look to offer auxiliary services other than just insurance coverage in order to serve customers better. This may include risk intervention and mitigation that would assist businesses engaging in trade. Hence, it is important that insurers are agile and open to working with partners to deliver a better customer proposition.

Eastspring Investments COO Jeroen Buwalda, meanwhile, touched on the importance of integrating insurance into ecosystems, such as WeChat in China, in order to gain even more traction with consumers who are increasingly transacting online. He also talked about the use of gamification to get more people to buy insurance or increase their coverage, observing that ways to interact with customers are rapidly evolving.

Significance of China

Within the wider context of trade, the role and importance of China is obvious – not just as an importer and exporter of goods but also as a big market for consumption as well as innovation, said OneConnect Financial Techology head of trade and supply chain finance Wayne Chai. OneConnect is a subsidiary of China’s largest insurer – Ping An – which sells technology platforms to financial institutions.

Staying with the theme of China, the Belt and Road Initiative (BRI) is set to be a driver of global trade – accounting for 41% of world trade activity stretching across 80 countries. Lloyd’s head of market development Pavlos Spyropoulos said that BRI will create lots of opportunities for insurers, although he conceded that at least 80% of insurance premiums generated from BRI will go to Chinese insurers. In that regard, it is important that organisations such as Lloyd’s utilise their technical expertise and partner with Chinese insurers in order to benefit from the opportunity.

Digital ecosystems

Elaborating on the role of technology in bringing innovation to trade processes, Mr Chai cited the potential role of blockchain in providing the element of trust in trade. Last year, the world’s first blockchain platform for marine insurance was launched by EY, Guardtime and a host of industry partners. Called Insurwave, it will support more than half a million automated ledger transactions and help manage risk for more than 1,000 commercial vessels in the first year.

In a world that is already highly interconnected and where transactions are done digitally on a global basis – securing a network of trust will be important and panellists agreed that technology will be an important enabler.

The panel also agreed that with the proliferation of digital ecosystems, it was important that data standards are harmonised in order to ensure frictionless interaction. It would represent a gamechanger for trade once data can be shared seamlessly, in the same way that shipping containers transformed global trade many years ago.

It would represent a gamechanger for trade once data can be shared seamlessly, in the same way that shipping containers transformed global trade many years ago, said Mr Chai.

To build or to buy?

L-R: Mr Nick Martin, Ms Rosaline Koo, Mr Peter Ohnemus, Mr Mohsin Rashid and Ms Tan Ru Bin

Banks spend 7.2% of their annual budget on digitalisation and improving IT infrastructure, compared to the 2.7% to 3.6% that the insurance industry spends, according to dacadoo founder and CEO Peter Ohnemus, while moderating yesterday’s Insurance Innovation: InsurTech and Beyond panel. “It seems that the insurance industry has lost about 10 to 15 years’ worth of technology investment, when you compare them to the banking industry,” he said.

This was in response to the question of whether insurers should build or buy when it comes to their technology innovation efforts and to continue being competitive in a rapidly changing industry. “It is a combination of both,” he said. “When we look at the insurance partners we work with, it is a combination of capital, talent, our technology and their technology that allows them to move forward.”

At the same time, Cambridge Mobile Telematics director of corporate and strategic development Mohsin Rashid noted that 90% of a financial institution’s IT expenditure is devoted to maintaining and patching up legacy systems. Further, for an insurer to build its own solutions, platforms or ecosystems might require the type of talent that would be difficult for them to attract, given the reputational issues the industry has.

“We’ve seen with insurance partners that we work with, who have tried over five to seven years to build solutions in-house and really it’s got to a point where they are emotionally invested in trying to make it work, whereas realistically what they should do is scrap and start with a clean sheet of paper and go with someone who is an expert in the field,” he said.

The ‘race’ between incumbents and disruptors has also not been smooth. While certain tech companies such as Grab and WeChat might be building themselves towards becoming a ‘superapp’ that provides every service, they are also few and far between. The challenge, said CXA Group founder and CEO Rosaline Koo, is the capital and the regulatory concerns. “Insurance is all about distribution, and it takes a while to build up that distribution. The easiest thing to do is for FinTechs to partner with each other, because the capital requirements are really high.”

End-to-end digitalisation

OneConnect Financial Technology CEO Tan Bin Ru said that it is challenging for companies to decide, when upgrading their technology, to focus on the customer experience, their back-end, their compliance systems, or their core systems. “There is also no point in creating a fancy front-end that does not integrate with your back-end. It is a difficult choice, but I would take your most important processes and digitalise that fully,” she said.

Taking the risk

Mr Ohnemus reflected on a comment made by AIG CEO Brian Duperreault during his fireside chat session on Tuesday. “I thought he was very understated when he said ‘I’m in the business of taking risk. And it’s controlled risk’. When I look at big insurance companies today, they seem to have forgotten that they became big insurance companies because they took risk when other people feared that risk.”

He suggested that insurers look for areas where they will see growth and profit margins and ‘bet the farm’ on it, as it would attract investors to follow that growth stream. Secondly, he said that having taken that step, they would need to approach it from a mobile-first perspective, move upstream and get closer to the client.

Polar Capital fund manager Nick Martin, who moderated the panel, said that underwriters today are encouraged to avoid risk. “To take a step where you would be almost knowingly burning money – although it is a learning opportunity – might be a mind-set shift that is too far for some.”

Being an insurance company in an age of digital transformation

By Dipak Sahoo, regional head of IT for Generali Asia

Customer experience can and should drive the insurance industry’s digital transformation. In tech, companies like Tencent have built their apps to fulfil their users desire to ‘live’ on their social networks. That a WeChat user can, for example, chat, shop, game, bank and learn from a single platform is an example of customer experience driving the application of digital capabilities. Insurance, being inherently customer-centric, is well suited to achieving this same unity of purpose across its services.

Growing digital wings

What does the adoption of digital technology for customer experience look like?

First, the attitude toward digital technology, especially when seeking to replace legacy systems and processes, should be holistic. Companies will find that focusing on one area of digital application, say data consolidation, will inevitably require focusing on other areas, such as customer relationship management tools and reporting and analytics automations. In other words, a digital transformation must really be a transformation.

Second, it should be informed by culture. When entire organisations embrace a customer-centric ideal, the implementation of digital technology will only be used to enhance it. For example, corporate underwriting is a good use case for how digitalisation is improving everything from pricing and risk assessment to portfolio management and performance tracking. But real progress is when such capabilities are applied for the good of the customer.

Third, digital transformations should be future-ready, and should anticipate the adoption of emerging technology when it becomes relevant to do so. AI and advanced data analytics are promising to enhance customer intelligence and market research heuristics in unprecedented ways, giving insurers the ability to deliver real-time insights for customers to manage risk effectively.

Know your customer

What it means to be an insurance company in today’s technological milieu is largely being determined by the kind of customers being served. And their expectations are largely being informed by their experience with digital applications.

Facilitating API access

This enables insurers to engage with customers in the ways most appropriate to their circumstances. Does your organisation have a mobile application? Can claims be processed without a client calling an agent? How easy is it for clients to receive market updates that might affect their policies? With a robust API infrastructure, insurance companies can anticipate the needs of their customers, giving that sense of partnership so essential to customer experience strategy.

Internet of things incentives

The internet of things has brought about new horizons for service-oriented insurance companies. One area of application is in claims management through the use of sensors and drones. Another is the use of sensors to incentivise good behaviour. We are seeing insurers providing their customers with everything from smart toothbrushes, Fitbits, and car sensors to smoke alarms, digital doorbells, and wearables, to provide more accurate pricing for the corresponding kind of insurance and ultimately to save customers money.

Insurers have more real-time data about their customers through these devices enabling them to engage and assess risks immediately after the information has been collected. This can provide better proactive management and even prevention of the risk occurring in the first place, creating a win-win situation for both the insurer and the insured.

Digital nativity is the rule, not the exception

Digital transformations in business are happening simultaneous to the adoption of digital technology in society. And the two trends are reinforcing each other.

For those in insurance, assuming the penetration of digital technology in society will only increase is a good pretext for developing effective digital solutions. For example, a recent, Asia-based InsurTech start-up is delivering life insurance policies in mere minutes, using facial recognition technology to identify, electronically underwrite, approve, and digitally ‘sign’ policy contracts.

Insurance is an industry that has always embraced new ways of delivering value. Pursuing holistic digital transformations and embracing a customer-centric culture are becoming increasingly important. The next five to 10 years will determine who has excelled at both.

What lessons can Asian insurers draw from western MNCs in the pursuit of overseas growth?

By Dr Gordon Perchthold, Associate Professor of Strategic Management (Practice) at Singapore Management University

Western multinational insurers (Western MNCs) began their second wave of internationalisation into Asia during the mid-1980s. Detailed academic research has uncovered a pattern over these three decades in which western MNCs make commitments to one or more countries in Asia, only subsequently (typically with the appointment of a new group CEO) to redirect their focus; reduce their investment level; or even divest all or part of their operations in the region.

Some of this is understandably the result of market conditions and business priorities changing over time. However, for many MNCs, with the next change of group CEO, because the sizeable opportunity of Asia remains, commitment levels return. Only about 20% of western MNCs have demonstrated sustained commitment to Asia across multiple decades. In the life sector, Prudential and New York Life represent the two extreme ends of the commitment spectrum.

So, can Asian-based insurers embarking on their own internationalisation learn from the experiences of their western counterparts? And can western MNCs learn from their actions as well?

Stay close to home

Firstly, research shows that MNCs are most successful when expanding into countries within their own region. Whether measured by revenue, assets, or employees, with only a few exceptions, MNCs remain extensively ‘home region-centric’ rather than global. The challenge of ‘distance’ between countries, not just geographic, but also, differences in cognitive and cultural tendencies, orientation of the nation-state, institutions, business systems, intermediaries, type of market economies, and maturity of those economies, are a Rubik’s Cube of factors to adjust for when adapting a firm’s home country business model.

Distance should not be underestimated as a factor for Asian firms internationalising within Asia where countries are more diverse than in the west. Such distance is a conundrum for western MNCs, for given the greater population and GDP per capita growth rates in Asia, western MNCs will naturally decline relatively unless they figure out how to overcome ‘distance’.

Patient capital

It took many years, even decades, to build a strong business in your home country. Why would it not take as long or longer to build equally strong businesses across foreign countries whose environments are less familiar? Certainly, it is likely to be longer than the five or so years of a western group CEO’s tenure or the timeframe that most western investors are willing to wait.

It is critical to have governance structures in place that take account of the time and financial commitment necessary when venturing outside the home country. Particularly for longer-tailed insurance businesses, capital must be patient, wellinformed, and appreciate the volatility of diverse countries.

Enhance headquarters’ absorption of foreign knowledge

Home country stakeholders can only become well-informed if headquarters absorbs the knowledge emanating from Asia. Personnel in headquarters must be motivated to seek, accept, and absorb what is often non-conforming, potentially confronting, knowledge of operations in distant, occasionally volatile, countries.

This requires the development of trusted relationships, the use of rich interactive communication channels, regular exposure so knowledge continually builds on itself, and sufficient diversity in headquarters in order to recognise the value of disruptive knowledge rather than succumbing to group think. These are the same requirements for firms seeking to become dynamic innovators.

Configuring international structures of an MNC to facilitate knowledge flows

The components that make up the MNC’s international structure not only accomplish task objectives but also influence the ease of knowledge flow towards headquarters. MNC structures are heterogeneous and so much research data and analysis has been necessary to isolate the various components and their influence on knowledge transfer.

Common structures are a matrix, geographic (e.g. Asia regional HQ), or international division. Matrix structures are best at facilitating knowledge absorption by headquarters. Other components with different permutations include the source of appointed leadership, incentives to promote international experience among the top management team; approach to leadership development; how the MNC’s business practices are codified and disseminated; methods and direction of internal communications; and approach to decision-making across the MNC.

Asian-based insurers can learn from the successes and mistakes of their western counterparts. Arguably, western MNCs have even more to gain from a self-reflection of their internationalisation practices over the past three decades.

Asia – Braving the crossfire

The future holds much that is uncertain, but certain global trends are becoming clearer. These will weigh on Asia’s economic growth, even as it braves the crossfire. Continuum Economics’ Jeff Ng provides some timely commentary

The first trend we have seen is that global growth is likely to slow as it becomes more uneven. In the US we expect below-trend growth in 2020, dragged by investment and confidence. Meanwhile, Germany is seeing a drag from manufacturing. Italy has just ended a technical recession without any growth momentum. Japan is also bracing for a sales tax hike that will weigh on private consumption.

The second trend we see more nationalism that may increase competition rather than cooperation. This could increase the number of standards to be met. For instance, consumers may have to contend with different mobile ‘phone operating systems as Huawei develops its own.

China’s biggest concerns are at home

China’s own slowdown will pull the entire Asia GDP growth figure down, both directly and indirectly, since China is a part of Asia Pacific, with extensive links with neighbourhood economies.

We view that the weakness from external drivers to be substantial but not the most critical weakness. Weak export demand may be partially alleviated by some currency weakness. Besides, China’s exports to Europe and Asia should remain resilient even as direct exports to the US fall.

At the same time, we estimate that the US-China trade tensions will subtract 0.25ppt from 2019 GDP growth and 0.40ppt from 2020 growth.

The biggest concern for China is domestic. Unemployment rates for urban areas are rising. Growth in online retail sales is also slowing down. Coupled with a contracting manufacturing sector, this could weigh on the economy.

Even so, official support may support China’s growth at 6% and above for the next two years. China has set a growth target of 6-6.5% in 2019, meaning that the country will keep policies accommodative. China’s services sectors are less affected by the current downturn than manufacturing.

Asia needs domestic lethargy to wear off

In Asia’s case, we see the region as an anchor for global growth. Asia will account for around half of global GDP growth in 2019. Of this, China contributes two-thirds of the pie while the rest of Asia takes up the last one-third.

Growth is likely to be divided in Asia. Export growth has been weak across the region. Only Vietnam and India have seen positive monthly export prints. The region has to deal with China’s slowdown, exacerbated by US/China protectionism. This is particularly concerning for trade-open economies like South Korea, Singapore, Malaysia and Thailand.

Still, private consumption has continued to support Asia’s economic growth even as external weakness kicks in. Investment growth may start to improve as various government policies become clearer postelections.

We see scope for Asia’s central banks to loosen up monetary policies to support the economic slowdown. They may be helped by the Fed, which is at the end of its tightening cycle and also tilting towards dovishness. Monetary conditions are generally tight in Asia, meaning high real interest rates, and strong currencies relative to trade baskets.

Given that the election season is now over in Asia, there is scope for newly-formed governments to undergo further reforms. One major swing factor for Asia’s economic development will be labour market reform.

Asia will need to address various issues before the region can be a bastion of global consumption and growth. Labour market fundamentals remain weaker than GDP growth, dampened by lower-than-optimal investment in human capital. Addressing bottlenecks will involve working on demographic issues as well as improving the quality of employment.

Overall, Asia will take some damage from the crossfire between the US and China. However, the region is becoming stronger in shaping its own destiny compared to a decade ago. Policy-makers and central banks will still need to support the region’s development for a brighter future.

In recognition of excellence

Founder’s Award

Insurance Hall of Fame Laureate

Distinguished Service Award

Shin Research Excellence Awards

Leaders of Tomorrow Mentees

Leaders of Tomorrow Award

The 2019 IIS Awards winners were recognised last night for their excellence and achievements within the field of insurance. In commemoration of IIS founder John S Bickley, the prestigious award is given to those who have made a significant and lasting contribution to insurance thought, product, practice or education. The awards and the winners for this year are:

Karen & Co president and CEO Karen Clark – this year’s John S Bickley Founder’s Award laureate

AXIS Capital Holdings chairman Michael Butt – this year’s Insurance Hall of Fame laureate.
(Albert Benchimol, CEO of Axis Capital, accepted the Insurance Hall of Fame award on behalf of Michael Butt)

Retired president and CEO of Reinsurance Group of America Greig Woodring – honoured with a Distinguished Service Award.

Following the Founder’s Award, the 2019 Shin Research Excellence Awards were announced. The three recipients were University of St Gallen adjunct professor of risk management Axel Braun, University of St Gallen assistant professor of finance Sebastian Utz and Swiss Federal Institute of Technology in Lausanne postdoctoral researcher Xu Jiahua.

The Shin Research Awards is a research scholarship programme designed to stimulate original, theoretical research on practical industry issues. The winning research paper tackled the topic of ‘Are insurance balance sheets carbon-neutral? Harnessing asset pricing for climate-change policy’.

Meanwhile, the 10 candidates for the RGA Leaders of Tomorrow 2019 programme were chosen for their potential as rising stars within the industry.

This year’s winners are Mr Lawrence Cheng from Peak Re, Mr Ayodele Iyun from Custodian & Allied Insurance and Ms Carmony Wong from RGA.