Going digital during the COVID-19 era: What does it mean for Southeast Asian Insurers?

This year, Southeast Asia was one of many regions that bore the brunt of a vicious new wave caused by the delta variant of COVID-19.

It was also a year, however, that showed the resilience, adaptability and creativity inherent in human nature.

Southeast Asia sits on the cusp of an inflection point in its digitalisation and recovery journey.

Digital sales in Asia amounted to US$1.8 trillion in 2019 with China accounting for nearly seven-tenths of the total – the ASEAN market, in contrast, accounted for less than 5%[1], indicating substantial room for growth.

According to Statista[2], the proportion of individuals with access to the internet in Southeast Asia stood at 62% in 2019, higher than the global average (56.7%) although it varies considerably across countries. Post-COVID, it increased to 68.8%.

It’s clear that enforced social distancing measures across countries have changed internet consumption patterns for good.

Transformed mindsets

The COVID-19 crisis accelerated changes across industries and regions – enforced social distancing and increased use of digital technology by customers meant every process needed to be re-defined across workspaces.

According to a McKinsey Global Survey[3] of nearly 900 executives last year, the crisis forced companies to accelerate the digitisation of their customer and supply-chain interactions as well as internal operations by three to four years.

The share of digital or digitally enabled products in portfolios, they said, had also accelerated by seven years.

Most crucially, the crisis has crystallised the strategic importance of technology as a critical component of the business and not just a source of cost efficiency.

In Southeast Asia, lockdowns pushed shoppers towards e-commerce platforms to access a broad array of goods and services, including insurance. Unlike other goods and services, insurance is a commitment customers do not enter lightly as they prefer to engage with brands they trust and know. A people-centric industry, the insurance sector had to quickly strike the right balance between online and offline distribution and service.

Whereas it was difficult to gain the trust of consumers to purchase financial products online, even older consumers joined young and tech-savvy consumers and were keen to sign up for digital financial services.

A year on since the onset of the COVID-19 pandemic, a playbook is emerging for developing and developed markets alike with partnerships between digital companies and experienced insurers driving a market transformation that Boston Consulting Group estimates could unlock up to US$10 billion in insurance premiums over the course of the next few years[4].

Are Southeast Asian insurers going digital quickly enough?

Of course, digitalisation is a key business consideration for insurers in the region but many likely anticipated it would be a gradual process. COVID-19 caught many of them by surprise due to the exponential nature of epidemiological spread as all segments of society embraced digital adoption at the same time.

Not only did insurers in the region face an urgent need to digitalise insurance products, the entire customer journey needed to be re-evaluated when sales agents could no longer have face-to-face meetings.

Insurers needed to rethink and re-strategise business models adopting a carefully calibrated omni-channel client-centric approach. It did not necessarily mean that everything needed to be done online – the option to access insurance digitally became important.

Going forward, they will need to make the right investments in operations, technology, talent and finance.

Does it entail restructuring? Not necessarily.

The best insurance firms globally are resetting priorities, reducing nonessential expenses, and postponing less critical investments to free up capital for areas that are needed for business units to recover and thrive.

Spending priorities will differ by region and type of technology, according to Deloitte’s 2021 Insurance Outlook, with the focus in Asia Pacific on launching and expanding usage-based insurance via real-time monitoring[5].

Peak Re has swum with the tide and developed data science-led solutions that enable  dynamic pricing and underwriting. Not only are they more accurate and improve the customer journey (reducing churn), they are ensuring risk assessment moves away from a reliance on historical data.

For underwriting, many insurers in Southeast Asia are already in the early stages of transformation projects that go beyond automating routine, labour-intensive data gathering and processing work.

By better leveraging artificial intelligence (AI), alternative third-party and shared data sources as well as utilising more advanced predictive modelling, the underwriter’s capabilities can be significantly enhanced.

However, the caveat is the risk of AI/machine learning-based models solidifying biases while data security risk must not be overlooked as well.

Such risk, of course, must be counterbalanced with the benefits that come from the minimisation of information asymmetry where insurers finally have more information on the end-consumer due to big data tools.

Meanwhile, Asia’s insurers are also joining multicarrier sales platforms for delivery and use advanced data analytics to improve claims processing.

A new year, a new dawn for emerging Asia

Earlier in the year, I recall celebrating the successful completion of a complex initiative with clients over virtual cocktails!

The way of doing business is changing rapidly – such remote collaborations were more challenging and difficult to realise in the past.

The lessons of the year can be ingrained if we reinforce what it takes for insurers to win in the post-COVID new normal by recalibrating digital strategies to accommodate changing consumer needs.

At Peak Re, we are actively evolving to keep up with the business dynamic to meet changing consumer needs.

We are ready to support clients and create digitally-enabled retail health solutions with a quality end-to-end ecosystem that can be plugged into any existing distribution system.

Such products are here to stay and are key to realising the business opportunities of the future.

Much like how technology helped insurers swiftly shift to remote work environments and ensured employees had the tools to conduct business, it can transform the work models for insurance companies in Southeast Asia.

If done right, it presents an opportunity to help narrow the protection gap in Southeast Asia, a region with a growing digital and physical economy, with innovative digital products at a time when there is a heightened awareness of the need for protection.

[1] https://www.iseas.edu.sg/wp-content/uploads/2020/12/ASEANFocus-December-2020.pdf

[2] https://www.statista.com/statistics/1115610/apac-internet-penetration-by-region/

[3] https://www.mckinsey.com/business-functions/strategy-and-corporate-finance/our-insights/how-covid-19-has-pushed-companies-over-the-technology-tipping-point-and-transformed-business-forever

[4] https://web-assets.bcg.com/62/51/ec25885841818d1d32fd4899029a/digital-partnerships-unlocking-10-bn-opportunity-for-insurance.pdf

[5] https://www2.deloitte.com/global/en/insights/industry/financial-services/financial-services-industry-outlooks/insurance-industry-outlook-2021.html