June 13, 2017
Why Southeast Asia Is Ready for Disruption
True disruption in SE Asia will require a blend of high-tech and high-touch approaches to make relationships personal but efficient.
The Southeast Asian insurance market is ripe for disruption. With a growing middle class, rising incomes and a propensity to use digital technology for real-time purchases, the market is now looking for innovative, real-time solutions for growing insurance needs.
The past 15 years have truly been disruptive in SE Asia, with real regional GDP growing at an average rate of 6.5 per annum and household incomes growing to $38,000. Technology development and dissemination is equally impressive. Internet penetration is expected to grow from 260 million users today to 400 million by 2020. The overall SE Asia internet economy is expected to grow to $200 billion by 2025.
Growing economic prosperity is translating directly into rapid and sustained growth in the SE Asia insurance market. Munich Re Economic Research is forecasting overall premiums to increase more than 9.5% in 2017. Life products are expected to do even better, with growth of more than 13.5% per annum. With almost two-thirds of the vast population of Asia-Pacific now using smartphones, insurtech is expected to grow quickly. For example, in Malaysia, the online life platform and startup U for Life allows consumers to purchase life insurance products instantly online. All these factors are laying the foundation for the imminent disruption of the SE Asian insurance market.
See also: Insurtech Ecosystem Emerging in Asia
True disruption in SE Asia will require a blend of high-tech and high-touch approaches so that insurance companies can keep their relationship with the consumer personal while concurrently ensuring that they optimize the efficiency of the relationship. Technology will continue to develop rapidly, with an increasing use of artificial intelligence, facial recognition and telematics. Winners in the age of disruption will also maximize the use of robotics, process automation and data analytics to make the customer pleasant — or at least not painful.
True disruption will only come when we throw the proverbial book out and leverage technology to reshape insurance. What if you had the ability to purchase insurance, as you needed it, as long as you needed it and at the moment you needed it? Taking it a step further, what if your insurance provider could anticipate your needs and provide you with the opportunity to purchase a temporary policy before you had even thought of it?
Let’s say that you are planning a three-day deep sea fishing trip with your friends. You receive a text from your insurance agent, who has been notified of your trip via social media. He is wishing you a great adventure and for $25 a day suggests an additional $75,000 in accident/life insurance just for added comfort. As you are spending $1,200 on the trip, the extra $75 is a small expense, but the additional comfort is significant.
This is situational insurance, and to get there a number of things will need to happen. First, insurance providers are going to need to develop very robust data sets for the individuals they plan to cover. Providers need to know the basics: age, marital status, income, etc. and then they will need to dive deeper. Providers will need to know people’s hobbies, aspirations, fears, passions and more. Providers then must keep building on the data and keep it timely.
Of course, the devil is in the details! For situational insurance to become a reality, providers will need artificial intelligence, as they must begin to anticipate behavior so that they can begin to develop relevant products and know when a client is going to potentially need them. Getting to this point will take time, as it will require the support of behavioral scientists, statisticians, mathematicians and of course, AI specialists, all working together.
At Soteria, in Hong Kong, we are actively working on this situational model with the support of Mapfre and Allianz. Actuaries like situational insurance products, as the statistical odds of death or a serious accident during a limited period are quite low, even if extreme sports are involved. However, the model will require the support of insurance carriers and regulators, even though continuity and predictability have been thrown out the window.
See also: How to Respond to Industry Disruption
How close is situational insurance to becoming reality? Five years ago, did anyone really believe driverless cars would exist?
Just don’t be surprised if you get a friendly text before heading out on your next scuba diving adventure.