The silver tsunami

By Paul McNamara

LIMRA and LOMA regional managing director Asia Bosco Lau woke delegates up with a bump on the second day of the 29th Pacific Insurance Conference with a keynote presentation on the findings of a recent research study on retirement.

It’s a well-known fact that elderly populations are growing faster than other sectors but by 2050, Mr Lau said, Asia will have 1.3bn elderly people – equivalent to the entire population of Europe. Mr Lau referred to this as the silver tsunami.

To give more context to the shift about to happen, Mr Lau said that the demographic shift that took 80 years to happen in the US will take 15 years in Asia.

The main takeaways from the LIMRA/LOMA research include:

• More than half of all respondents to the survey acknowledged that it was their own responsibility to plan for retirement
• Half of the respondents said that they had not formalised a proper retirement plan
• Eighty per cent of respondents anticipate a gap in their retirement funds when they turn 60
• More than half of the respondents regret delaying their retirement planning
• Seventy per cent of respondents were willing to convert a portion of their assets into annuities

The research study covered over 9,000 consumers aged between 30 and 75 in the nine Asian markets of China, Singapore, Hong Kong, Japan, South Korea, India, Indonesia, Taiwan and Thailand.

Talent and diversity

By Paul McNamara

(L-R): Marianne Gilchrist, Matthew Whitman, Michael Chan, Candy Yuen, Sally Yim

The first plenary session of the second day of the PIC looked at the twin topics of talent and diversity and threw up a host of intriguing insights into how different institutions address such issues.

Moderated by Swiss Re Asia managing director and client executive Marianne Gilchrist, the panel included Taikang Life Insurance senior executive Candy Yuen, Bowtie Life Insurance co-founder and co-CEO Michael Chan, Darwin Rhodes head of Hong Kong Matthew Whitman and Moody's Investors Service associate managing director Sally Yim.

Ms Yim set the tone for the discussion when she said, “Institutions whose boards have higher levels of diversity also have higher credit ratings.” She went on to point out that while diversity was not a variable in the ratings process, the simple fact is that diversity leads to stronger corporate performance overall. “The way we value diversity is intellectual,” she said. “It’s about having people who think differently coming together.”

Ms Yim went on to sound a cautionary note: Of the 70 or so insurance entities rated by Moody’s in Asia, none has a female CEO. There is more work to be done.

Ms Yuen tackled the same issue from a different perspective when she said, “The only constant is change. Our industry is suffering a severe shortage of talent – and research shows that only 4% of millennials want to join our industry.”

There were plenty of women in the industry, she said, but few of them made it to the C-suite. “At the current rate of development it will take another two centuries before women achieve parity with men,” Ms Yuen said.

Addressing the talent gap, Mr Chan said that Bowtie had recruited 50% of its workforce from outside of the insurance industry in an attempt to achieve diversity. The average age of non-insurance professionals within Bowtie is 28, he revealed.

As a recruitment industry specialist Mr Whitman had a different take on the issue. “It is more important than ever to have the right talent-management programme in place,” he said. “People want to work for organisations whose values resonate with their own.”

On the upside, Mr Whitman felt that the insurance sector was ahead of other comparable sectors in embracing the need to adopt inclusivity – although Ms Yuen disagreed: “The sector has not been doing that well,” she said.

Understanding the priorities of millennials and Generation Z is of paramount importance, said Ms Yuen. They are most interested in travel, being wealthy, buying a house, making a positive impact in society and being part of a family – in that order. The net result of this, she said, is that, “We need to have a more holistic approach to salary packages,” she said.

Mr Chan revealed that Bowtie recruited people using the lure that the company was a FinTech – and then upselling them on the idea of insurance as being a means to promote social good. “It’s easy to explain that insurance has a strong social purpose,” he said.

But all panellists agreed on one point: There is little value in expounding the inclusive outlook of a company to the new generations of workers unless the institution actually lives those values every day in every way. “It’s important to live it and breathe it,” said Mr Whitman.

Digital innovation in the age of disruption

By Paul McNamara

The morning sessions of PIC yesterday came to a close with a keynote presentation by Accenture managing director, North America insurance practice lead James Bramblet who addressed the issue of digital innovation in the age of disruption.

Mr Bramblet was quite clear that disruption will accelerate rather than slow down in the years ahead. "The forecast for intensifying disruption has been confirmed,” he said. “Today insurance is highly disrupted with more to come in the future. We are in a constant state of vulnerability – with a constant state of disruption.”

Play big

Pointing to likely winners in the disruption business, Mr Bramblet said, “A growing number of insurers are now in the game of scale,” and he pointed to Ping An, Axa, MS&AD amongst others.

The likely winners of the future are presently investing in areas like distribution and customer-centricity, predictive analytics and data science, cloud, new business models, IoT and cyber security.

Smart incumbents

Meanwhile innovations stemming from incumbents in the industry come in three different flavours: Innovation (from the likes of Metlife and Zurich Spain), core (from Plymouth Rock and Hartford Steam) and new company launches (like THREE from Berkshire Hathaway).

“Plugging into ecosystem partners must be part of your digital strategy,” he said and pointed to early successes like dacadoo and CCC Information Services.

The main areas where growth can be found lie in connected cars, connected homes, healthy living, the sharing economy, smart advisers, big data and analytics, blockchain and the gig economy. “The opportunity for insurers is immense,” Mr Bramblet said.

Customisation is key to grasp opportunities in Greater Bay Area

By Ridwan Abbas

(L-R): Laurent Pochat-Cottilloux, Yen Liu, Clarence Wong

Insurers looking to grasp the opportunities presented by the Greater Bay Area (GBA) initiative need to have a keen understanding of customer segmentation and preferences of consumers within that region.

The GBA, which covers four core cities, namely Hong Kong, Macau, Guangzhou and Shenzhen, and seven others in the southern China region, had a combined GDP of $1.6tn in 2018 and a population size of 71m. At the discussion yesterday on the GBA and prospects for medical insurance, panellists highlighted the opportunity for Chinese consumers to benefit from advanced medical care that Hong Kong offers, while residents of Hong Kong could also benefit from the affordability offered by medical facilities in China for selected treatments.

Swiss Re chief economist for Asia Clarence Wong said that private health insurance has a big role to play in China as it is not sustainable for the mainland government to finance healthcare on its own.

But a lot of work needs to be done for insurers to realise the opportunities in the GBA and that includes positioning themselves strategically to appeal to specific segments of the market.

“We did a survey of consumers in the GBA and about half of them prefer to buy insurance from mainland companies, while about one-third said they preferred to buy from Hong Kong insurers. The latter group tend to be young people as well as those who resided in Tier 3 cities.

He also added the perception that distribution in China favours digital is not accurate, as consumers still favour interacting with agents in order to understand products better.

Product affordability

Munich Re Hong Kong assistant general manager, business development Yen Liu highlighted the issue of keeping premiums affordable for customers. She cited the example of critical illness (CI) coverage in China where diagnosis of stage one cancer leads to a full payout, compared to only a 20% payout in markets like Hong Kong or Korea.

“So there are a lot of people in China who have been able to claim in full for conditions like thyroid cancer which is very curable, and there is certainly over-diagnosis in this area which impacts the overall cost,” she said.

She added that rules covering this would have to change, or it would impact the pricing of CI products and ultimately make them less affordable.

Ms Liu then cited the example of Munich Re’s work with a client to launch its first GBA health product, where cost is reasonable and quality of treatment is not compromised. For instance, the cost of a colonoscopy in a Chinese facility in the GBA is only one-tenth the cost of the same procedure in Hong Kong, thus pointing to the synergy that can be gained across various cities in that region.

“To bridge the gap between pricing and affordability, we need to encourage people to live healthier, and incentivise people to seek treatment in more affordable facilities where the quality of treatment is still good,” she said.

Life industry honours Mark Tucker

Mark Tucker (second from left) receiving the Lifetime Achievement Award from the PIC

Former AIA CEO Mark Tucker received the ‘Lifetime Achievement Award’ from the Pacific Insurance Conference last evening for his significant contributions to the development of life insurance in the region.

Mr Tucker, who is now group chairman of HSBC Holdings, helped build AIA into the world’s largest life insurance company. He also spearheaded its record-breaking IPO in Hong Kong in October 2010.

A futuristic blueprint

By Paul McNamara

For anyone who ever wondered what a modern digital insurer looks like, a visit to the headquarters of Hong Kong-based Blue could prove to be an eye-opener. Everything from its location in Kowloon Bay to the paperless reception area dominated by strategically-placed flat screens hint at a modern insurance business with its digital eye on the future.

The new Hong Kong-based digital insurer that is owned by Aviva, Hillhouse Capital and Tencent was set up with the intention ‘to shake up Hong Kong’s insurance market with zero commission, easy-to-use, digital insurance’.

The man at the helm of Blue is CEO Charles Hung, a veteran finance industry professional with a track record that takes in spells at a number of financial institutions.

The Blue difference

A lot has been said and written about how the insurance industry is ripe for disruption, so how does a start-up like Blue set about revolutionising the insurance industry, which has something of a reputation for being hidebound and slow?

“Insurance is always seen as a product that’s sold, not bought,” said Mr Hung. “That tells you something about the big recurring industry issue. We’re here to revolutionise the market and part of that is to change people’s perception.”

The business plan for Blue looks closely at three areas of disruption. “The first is proposition disruption,” said Mr Hung. “Our proposition ought to be simple and flexible. This means that we need to make sure our products are easy to understand. Interaction with consumer needs to be very straightforward and needs to be extremely flexible.”

A fresh look at marketing

“The second disruption that we’re looking at is marketing disruption,” said Mr Hung. Our marketing is very different. We use very local, authentic marketing strategies to engage our consumers. We also use nurturing and educational efforts. We don’t just immediately push the product to the consumer, we engage with them throughout the process. This engagement involves bringing their awareness, increasing their interest, and then arousing their desire to purchase.”

So the Blue approach is much more than getting a signature on a policy document and moving on to the next prospect. “It’s really a cycle of marketing activities that we go through,” Mr Hung said.

“The final bit is about user-experience disruption. You might have the best product. You might have the best marketing. But if you don’t have the best user experience, it won’t work. So the disruption that we bring to the table is also about bringing digital tools to give the best user experience to our consumer.”

Defining a digital life insurer

Establishing the parameters of what a modern digital life insurance company is and does is still a work in progress, but Mr Hung has some very firm ideas of where Blue sits.

“I think being a digital insurer means having innovation or digitalisation from front to back, starting from the customer facing to customer service and even coming back to re-engagement with the consumer. The whole lifecycle needs to be digital.”

And this is where the Blue offering has been designed from the ground up.

“Blue offers full straight-through processing, starting from getting the policy ‘bought not sold’, in the application process, including identifying yourself, facial recognition, OCR technology, AML technology. There’s a lot of stuff built-in. A normal traditional insurer will probably need to do face-to-face interactions, but we do it using straight-through processing. For me, that’s the main differentiator between a traditional player versus a digital player.”

Success in the digital realm

Being a pioneer sometimes means pushing against habits and traditions that no one has ever challenged before.

“I think the challenge remains with consumers’ education – consumers’ understanding, consumers’ adoption. It really is about changing behaviours. Traditionally people like to interact with a human. We want to empower people with digital tools and also be a lot more forward-looking.”

Part of what Mr Hung is referring to is the untapped potential from millennials. “In the future, these are the people that would like to be in control of their own insurance needs and so therefore there has to be an alternative for them. You have to empower these people to be in control of their own insurance.”

“That’s why we call ourselves Blue. Creating your own blueprint. Allowing our consumers to be in control of their own blueprint.”

The role of agency amid a digital future

Earlier this year, Asia Advisors Network, a sister publication of Asia Insurance Review held a roundtable discussion in Hong Kong with several leaders in the life industry on the role of agents amid changes in technology and consumer needs. The following is an excerpt of the discussions as to whether agents would continue to thrive or be made irrelevant.

By Ahmad Zaki

(L-R): Messrs Mark Saunders, Ben Tan, Michael Gerber, Koh Hong Kwan, Benjamin Ang, Ms Charity Au, Ms Clarie Kwa, Messrs Alpha Ho, Andrew Tsang, James Liu, Royce Lee and Paul McNamara.

Digital vs human touch

AIA group chief strategy and corporate development officer Mark Saunders believes that life insurance is a product that is bought out of love, and the empathetic connection an insurance agent can make with the customer is what allows the product to be sold.

“For most people, if you talk about death, ‘no’ they think, ‘that is a long time away’. If you talk about critical illness, about cancer or heart disease, some start to worry but they tend to feel that it won’t happen to them, not soon any way. Agents are very influential, very good at convincing people that these events can occur at any time and they should prepare by way of financial protection through life insurance. They do it in different ways and by connecting with the customer on an emotional, rational and professional basis,” he said.

However, consumer demands are changing and the general sentiment from members of the roundtable is that customers are more frequently asking for shorter-term products or even single-premium products.

360F CEO Michael Gerber said that consumers are getting more used to flexible and short-term contracts, due to the popularity of subscription services such as Spotify, Netflix and Amazon Prime.

“These days, the younger generation is brought up with a mindset which I call the Spotify mindset; you subscribe and unsubscribe. They want the freedom to enjoy a product for a month and then let it go in the next month,” he said.

The myth of digital distribution

While the digital ‘quick-and-simple’ approach is valuable to the customer, it must also be balanced with ensuring that the human touch and advice, and the emotional aspect of insurance – especially life insurance – come into play.

 As Hong Kong Federation of Insurers Life Insurance Council chairman Charity Au said, “A few years ago, when the aggregator first entered the market in Hong Kong, we thought it would change things. But nothing happened because the products were still too complex.”

However, she expects that with less complex and unbundled products, the aggregator might have a bigger role to play in helping the customer make an informed choice.

While for some, the idea of insurers catering to the ‘Spotify mindset’ might mean an emphasis on digital distribution and less emphasis on the agency force, Insurance and Financial Practitioners Association of Taiwan president James Liu believes this should not be the case.

“There is a myth about the agency solution being an expensive one. But we are gradually learning that digital distribution is expensive too, especially with the rising prices of digital advertising,” he said.

He also pointed out that InsurTechs such as US-based Lemonade might advertise themselves as not having agents, but they still charge their customers a 20% expense-loading.

The ‘future ready’ adviser

AIA director of premier agency strategy, group agency distribution Andrew Tsang said, “Quality is key for the industry, and that starts with quality recruitment. At the same time, insurers need to do a better job at packaging and infusing modern ideas.

On their part, insurers are increasingly stepping up to the next evolution of CRM tools, including those that will alert agents of trigger points in the customer’s lives.

However, an update to the regulations surrounding agents and the purchasing of life insurance products would be necessary in order to better reflect the role of technology in today’s distribution landscape.

“For most places, Singapore included, regulations mandate that purchasing a policy requires physical interaction with the customer. But we question why we can’t use technologies like FaceTime to make this process more efficient?” said Great Eastern managing director Ben Tan. “We are lobbying for it, but current rules surrounding data privacy and technology risk management is slowing down the advance of the omnichannel and ecosystem concept.”