Insurance/Insurtech Trends in APAC!
In our previous post, we explored how APAC insurers are creating new breeds of insurance product fit for the Asian consumer, and reviewed the region's fragmented distribution landscape — a landscape ripe for disintermediation, especially via mobile channels. In this final part of our Regional Profile for Asia-Pacific, our focus shifts to the back office: it's all very well recognising that the battle for insurance will be lost and won at the front end, with nimble newcomers looking to corner the market at source, but how do you ensure your back-end systems deliver what you need? How do you growth-hack the back-office?
In Part I and Part II, we reviewed our general statistics for Asia-Pacific, which we gathered in the course of our Global Trend Map, an in-depth quantitative-qualitative account of Insurance & Insurtech trends in all four corners of the globe (download the full thing here). Additionally, we identified several qualitative themes (exploring the first four):
- The high-growth, high-competition dynamic inherent in the Asia-Pacific insurance market
- The new calling for customer-centricity and the related question of disruption
- Using data and analytics to create more customer-centric products, such as personalised, on-demand insurance
- APAC distribution landscape, and what insurers are doing to scale their products
- How to successfully manage back-office digital transformation
Here we present Part III of our Profile on Asia-Pacific, in which we explore the final theme: how to successfully manage back-office digital transformation, in discussion with our three in-region influencers:
- João Neiva, Head of Innovation, IT and Business Change at Zurich Topas Life in Indonesia
- Steve Tunstall, CEO at Singapore-based Insurtech start-up Inzsure
- David Piesse, Chairman of IIS Ambassadors and Ambassador Asia Pacific at the International Insurance Society (IIS), based in HK
You can access the full Asia-Pacific Profile whenever you like, with Themes 1-5 explored in order, by downloading the full Trend Map report (which is totally free of charge)... We hope you enjoy reading!
5. Fast-Tracking Digital Transformation
Let's now turn to what APAC insurers are doing with their back office to facilitate their new customer-centric insurance model — at a commercially viable cost. There is no point coming up with a winning concept and getting it in front of millions of customers only to see your engine room break down or to rack up such a high bill that you can’t make any money.
"It is important to be nimble to the extent possible, in terms staffing and financing. Procedures must be on the shelf so that you can move fast when the opportunity presents itself. There also should be the culture for trying things but ‘failing fast’ and not on a large scale when it does occur."
Damon Levine, CFA, CRCMP, ERM Practitioner, Writer & Industry Speaker
Admittedly, it is hard to completely separate the problem of back-office transformation from the broader questions relating to distribution and the customer relationship. If you are able to achieve gargantuan scale with your products, then you can naturally afford more upfront investment in the back office. These factors are all very much unknown quantities, and if, having made your infrastructure investment, you are unable to achieve the necessary scale with your products, then you may even end up going bankrupt – so the question of digital transformation is certainly a loaded one, and insurers will generally prefer to make their quantum leap in manageable, auditable stages, rather than going for broke and hoping scale pays the bills!
It is in these terms that João Neiva, Head of Innovation, IT and Business Change at Zurich Topas Life in Indonesia, frames the digital-transformation efforts within his team in Jakarta:
‘For the next 12 months, our challenge is: how do we make sure we drive efficiencies by digitising a lot of the back end to then drive the unit cost down,’ he muses.
"One of the first steps is to digitise services and sales platforms, the second is to modernise and simplify core policy administration systems, and the third is to move to a modular solution on pricing, underwriting and servicing to ensure flexibility to better serve customers."
Ash Shah, Regional CIO and Chief of Staff Property and Casualty at AXA Asia
This need for a strict balance between investments and deliverables harks back to an important principle we identified in Part I of our Regional Profile on Asia-Pacific: namely that it is better to achieve more straightforward objectives with flying colours than to promise things that aren’t really essential and then under-deliver.
Personal experience teaches that our satisfaction with a product or service often has more to do with what we have been led to believe about it than with the objective quality of the final thing; in this way, a tin of beans that ‘does what it says on the tin’ can procure a more positive customer experience than second-rate caviar.
Neiva’s principles of clarity and transparency, which we touched on earlier, operate very much along these lines. The primary goal of insurers needs to be to not disappoint the customer. Once this condition is met – and only when this condition is met – should insurers start pursuing more high-flown goals, such as one-hour turnaround for claims resolution.
‘Digitalisation’s first stage is pretty much front-end: we try to make things nice for our customers and distributors,’ Neiva comments. ‘But then the back end is still very manual. We're no exception, so we still have that challenge.’
He cites underwriting as an example of where this mismatch between front-end promises and back-end systems can cause problems:
‘When we talk about underwriting, we can bring a fancy front end but, if you still have an old-fashioned way of looking at underwriting at the back end, you will still have a lot of stuff going through manual or case underwriting rather than going into a straight-through process.’
We can see from this that there is an obvious trap insurers can fall into, and this applies equally to all digitally disrupted industries: chasing the game at the front but neglecting the more mundane-seeming stuff at the back, which, unexciting as it may seem, is as necessary today (and tomorrow) as it was yesterday.
Even if insurers do have the budget to match their front-end ambitions with back-end investments, this is not always wise. Digitisation initiatives have enormous financial implications, and the cost of failure is therefore substantial. One approach that recommends itself is to spread risk and guarantee a base level of return by focusing not just on the big one-off system replacements but also on incremental improvements to the surrounding processes, workflows and even mentalities.
Two areas that Neiva believes all organisations should focus on are new methodologies and new ways of delivering things, such as fast-prototyping, design-thinking and Agile. These can benefit the entire organisation and yield positive results both operationally and in product development.
On the workflow side, there is plentiful interest in robotics and process automation – for instance, nearly half of (re)insurers in Asia-Pacific have automated some aspect of claims-handling – but we often encounter the fetish of the turn-key solution. While methods for automating underwriting and claims-processing are improving, we are not talking about achieving 100% straight-through processing.
In reality, the systems in question are akin to giant traffic wardens and while, to use underwriting as an example, they can take a lot of straightforward policy creation off the road, anything non-routine will remain to be dealt with. Unless the manual processes – and employees themselves – are suitably informed and keyed in when these non-routine cases come along, we will still end up with congestion in the back office, and in some cases worse congestion than what existed before.
Back-office digitisation is not therefore synonymous with automation. It also involves, in addition to the systems aspect, a redesign of general organisational workflows and a sea-change in staff mindsets.
"It is increasingly important to find ways to renew the business model, and data and innovation capabilities are an important prerequisite. New roles and organisational set-ups might help to achieve this goal. Big Data, and the ability to collect the right data and act upon it, is one of the key skills needed by the industry in the future."
Monika Schulze, Global Head of Marketing at Zurich Insurance
This sea-change cannot be limited to carriers but, especially in a market such as Asia-Pacific, must embrace agents and brokers as well. While the proportion of business coming through direct lines is likely to increase, the indirect channels can still play a positive, facilitating role as part of the omnichannel mix.
Much of this comes down to instilling agents with the same ethos as one’s own staff (or a least with a compatible ethos that takes on board the changes that are occurring in the insurer-customer relationship). On a more prosaic level, it involves aligning agency processes and incentives with those of the insurer, and it may even entail equipping agency sales forces with more up-to-date tools (such as tablets) and analytics.
"The new way of dealing with insurance data could dramatically improve the efficiency of agents and customer interactions, as well as improving cost structure with a decrease of human resources involved, thanks to automation. It will increase insurers’ competitiveness in the long term."
Minh Q Tran, former General Partner at AXA Strategic Ventures
The point about organisational alignment across the value chain is particularly pertinent in the case of bancassurance, where numerous possibilities exist for cross-selling and for complementing insurers’ data with that of the banks as regards their shared customers. This channel warrants a separate mention, on account of its growing significance in Asia-Pacific. According to stats from TechNavio, annual bancassurance market revenue in APAC currently stands at 173 billion USD and is growing at a compound annual rate in excess of 8%.
According to stats from TechNavio, annual bancassurance market revenue in APAC currently stands at 173 billion USD and is growing at a compound annual rate in excess of 8% ...
That concludes our Profile on Asia-Pacific (see also our earlier entries on Europe and North America). Next week, we move on to Latin America, followed by dedicated profiles on the Middle East, Africa and Central Asia. And if you don't want to wait, you can access all the Regional Profiles (along with our dedicated sections on Global Trends and Technology Developments) as part of the full Trend Map report, which you can download for free at any time.
For any inquiries relating to the Insurance Nexus Global Trend Map, this on-going content series or next year's edition, please contact:
Alexander Cherry, Head of Research & Content at Insurance Nexus (firstname.lastname@example.org)