Reasons to read this article
We all know that digital has changed how consumers interact with companies worldwide. We also know that life and health insurance is a long way behind other sectors in capitalizing on this change, but the good news is that progress is visible in Asia.
In this article, we identify 10 key digital trends as of late 2019 that we think are going to shape the life and health industry in Asia in the years to come.
We have referenced a number of companies as examples in this report. You will find most of them covered in the Life and Health Digital Landscape in Asia report.
It is a digital revolution
Before we look at the trends, let’s remind ourselves of how we got here.
In 2015 Professor Klaus Schwab, the founder of the World Economic Forum, coined the term the 4th Industrial Revolution to capture the merging of humans with technology.
The changes in customer behaviour as a result of mobility, the quantum leap in data processing insights, the clear advantages of cloud computing, and the rapid penetration of the Internet of Things have unstoppable impacts on the insurance industry. From a macro perspective, business as usual has become the riskiest strategy.
It still remains common to find people saying life insurance is ‘different’ and we will always have face-to-face salespeople. On one level this is true – in the sense that complex products, with infrequent purchase, do need advice. However, to think that digital cannot help in this process, or that new products will not be created, is to ignore the fundamental realities of a landscape that is shifting more rapidly than most acknowledge – or are preparing for.
The 10 digital trends impacting life and health in Asia
The ordering doesn’t represent a ranking but our best view of a logical progression of the trends.
Trend 1: Digitise or die – ‘Legacy’ will humble many insurers
Insurers have, on the whole, failed to differentiate between transformation, which is focused on improving today, and disruption that is about reinventing tomorrow.
We created the TDI Wheel to illustrate these two transformation lenses:
Insurers are already aware they need to digitise quickly, differentiate between the challenges they face, and plan appropriately. But though these areas need urgent attention, insurers remain hampered by a combination of legacy technology and legacy thinking.
Ping An agency is an example of a company that has transformed an existing model at scale, as well as invested in and created new digital business models a number of years ahead of their competitors.
Trend 2: The Omni Customer
Technology is changing the balance of power. Digitally enabled customers are able to search to find the best solutions, complain when they are not happy and research the product they are buying as they go along.
However, as the table below illustrates people have different attitudes towards engaging with technology.
Insurers have struggled to upgrade their people, processes and technology to cater to a genuinely omni experience that can deal with customers on their preferred terms.
In our view the human/digital interface will remain a challenge for insurers until they upgrade infrastructure and introduce new ways of working. There are few success stories to point to so far in Asia. USAA has for many years achieved some of the highest net promoter scores by being customer-centric. In a recent post, USAA CEO Stuart Parker said: “The trust and loyalty our members place in us is humbling and something we do not take for granted. USAA has been, is and always will be focused on serving the financial needs of our members whenever and wherever they need us. We are honoured by the response of members and will work even harder to live up to their expectations.”
Trend 3: Data is the new oil so… AI is the new drilling rig
The opportunities from expanded data will lead to enormous opportunities in pricing, underwriting, claims management, customer segmentation, digital marketing and operational efficiency.
There are many use cases, just a few examples:
- WeSure is one of the best examples of a data-driven marketing model as it is able to use the WeChat ecosystem to deliver targeted customer offers that can be purchased immediately without having to visit an insurer’s site. A person sharing that they are looking forward to their skiing holiday should not be surprised to receive a customised offer in WeChat for specialist travel insurance.
- Ping An agency has invested in AI tools that analyse life insurance agent characteristics and interview responses to help them hire and train the best insurance agents
- AIA has built an AI tool to help improve the underwriting process
- Prudential in Singapore is using AI in their medical claims processes
Life and health insurers remain challenged in the execution of AI with lead times for developing, deploying and then activating AI-enabled insights being measured over many months. A key infrastructure investment for insurers is an agile data repository that links to AI tools and generates easily actionable insights for different stakeholders in the business.
Trend 4 – Mobile payments is an insurance multiplier
Mobile payments have been a key enabler of insurance across the region because they make it possible to easily purchase low ticket insurance and to pay for renewals. This increase in accessibility allows insurance to be sold to traditionally underserved segments.
The first wave of digital micro-insurers, including BIMA and MicroEnsure, have used a blended sales approach (telemarketing led) and relied on mobile pre-paid credits and telco partnerships to provide a push-based communication capability.
Mobile payments offer a route to more sales, increased persistency and if applied creatively an opportunity for regular engagement with customers.
It is clear that the pre-paid, telemarketing led models are reducing in attractiveness as lower-cost payment platforms are available and customers are increasingly selective about answering inbound calls.
When combined with social media platform we move to powerful insurance fulfilment platforms – such as WeSure’s use of the WeChat platform.
In this first edition we have a separate article on mobile payments that looks at some of the interesting use cases in more detail.
Trend 5: Risk reduction is the exciting new vista for life and health insurers
Technology and access to data is providing life and health insurers with a unique opportunity to move from ‘payer’ to ‘partner’.
As the case for digital therapeutics, digital triage and virtual/online GP consultation comes into focus we can expect to see a reduction of risk and a reduction in healthcare costs.
Clearly those insurers who reserve the right to ‘re-underwrite’ their customers cannot ethically become partners with their customers. So, a ‘partner” promise needs to be Board level endorsed, consistently applied and extend to permission-based use of customer healthcare data.
Trend 6: Ignore the reorganisation of the healthcare value chain at your own peril
The opportunities for risk reduction using digital are becoming available at the same time as enormous technology innovation in healthcare. There are ongoing challenges to overcome lifestyle diseases and cancer, but the reason we are so concerned with these diseases is that they are generally ‘diseases of the old’ and reflect success in eliminating many other causes of death.
The healthcare value chain is changing and how should insurers participate in this change?
There is a time limited opportunity for insurers to establish the direct ‘partner’ relationship with customers by providing digital services they need. With the benefit of hindsight, outsourcing medical claims processing to TPAs has resulted in a lack of connectivity and cost control over claims and new virtual TPA models.
Some of the largest insurers are doing this directly – Ping An Good Doctor and Prudential Pulse are notable examples. Others are choosing partnership models – notably AIA with its Vitality partnership and WeDoctor alliance in China.
Brokers are also seeing opportunities e.g. Aon partnering with Dacadoo, or developing their own capabilities e.g. Connexions Asia.
There is no doubt that those who establish healthcare models delivering better health outcomes at optimal price points will be superbly well placed.
A lot of smaller and mid-tier insurers lack the scale to compete directly so they will be interested in partner models offered by the non-insurance health and wellness platforms including CareVoice, Wellteq and Dacadoo.
Trend 7: Employee benefits is becoming much more interesting!
So insurers and brokers are investing to build health and wellness platforms to provide consumers with better services and logically this extends to employee benefits.
The evidence remains that for large employee benefit programmes brokers are well positioned to develop health and wellness systems. So, insurers without their own platforms will have to decide whether to become a more commoditised risk financier in this space.
Unsurprisingly, insurers are starting to focus on the opportunity to distribute employee benefits to small and medium sized companies. This is a more profitable segment in its own right but also opens up opportunities for ‘digital worksites’ – the opportunity to provide additional insurance and wellness solutions directly to employees. This SME opportunity is one of the few natural ecosystems available to insurers – and also offers transversal distribution opportunities across agency, bancassurance and digital ecosystems.
Connexions Asia is developing a platform in this area as is Haelthtech that offer a path out of employee benefit legacy backends into a modern integrated platform supporting group and voluntary benefits.
Trend 8: Online v offline is a sterile debate – Distribution goes omni as well
For years we have been drawn into a binary discussion of online v offline distribution in insurance. It is becoming increasingly clear for complex life and health products that this is a false choice and the correct question is: How do insurers enable the creation of real physical relationships in a digital world? We have seen little evidence that customers want a digital only relationship with their life and health insurers, and our view is that as the digital infrastructure is put in place there will be increased value placed on the ‘human touch’.
The TDI pyramid below summarises our view of the market space:
Life insurance agency still has much runway for growth but the race for quality agency models and increased professionalism and productivity is well underway. Leaders such as AIA and Ping An invested early and are reaping the rewards. Others need to catch up and move beyond treating agent digital toolkits as operational productivity tools, but as a key business enabler to their sales forces.
Breakout and leapfrog strategies to move to an omni advisor model are up for grabs – providing agents the tools to be the human interface for sales, marketing and servicing. If insurers don’t provide a digital presence for their agents, then they are missing out.
Digital bancassurance faces additional challenges with a need to invest in data and analytics and digital marketing to identify and engage with customers at the right time and place. And in an omni world, how sustainable are bancassurance insurance specialist distribution models that have no incentives for ongoing servicing of customers?
New digital first insurers are emerging across the region and include Taikang Life, Singlife, Blue and Bowtie. However, the economics for direct life insurance remain largely unproven and this where ecosystem models come in.
Trend 9: Ecosystems will become leading distribution channels
An ecosystem model offers the following advantages to a consumer:
- A bundle of services that are compelling
- Quite often a free, or nearly free, initial offer that is attractive to the consumer
- Convenience of online purchase and fulfilment
- An ability to extend services across multiple industries
From an insurer’s perspective creating an ecosystem will fundamentally shift the distribution economics of insurance as they are able to acquire customers at scale and at little cost, understand customers better, build relationships in a digital world, and ultimately provide solutions and generate revenue. Ecosystem models require patience – the results take years to materialise.
Unfortunately ‘pure play’ ecosystems for life and health insurers are limited – health and wellness in employee benefits and more generally for consumers are obvious examples – and we have already discussed the strategic investments Ping An, AIA and Prudential have made. TAL in Australia has had some success in its partnership with Qantas.
In the face of the shortage of pure play ecosystems insurers are investing or partnering in established or new ecosystems. Allianz, for example, has invested in Gojek in Indonesia and NTUC Income has teamed up with Grab to provide micro cover for critical illness insurance with a pay-per-trip micro premium and accumulative coverage arrangement.
Another ecosystem premise is based on the long awaited arrival of wearables, with Apple and Discovery part of ongoing efforts to combine real time health metrics with life insurance and other partnerships in the form Huami and Garmin.
Telco and mobile payment partner models will continue to draw insurers, although the terms of these partnership will be critical – and the industry should look for long term sustainable models.
Trend 10: Composite Insurers have advantages in a digital world
The strategic case for a composite is compelling as they have a wider product offering for digital first insurance. This means they will be more effective in both securing and developing ecosystem partnerships.
ZhongAn, when it burst onto the scene in 2016/2017, has the classic ingredients of an ecosystem model and by offering a low value shipping refund policy embedded into ecommerce was, and is, selling hundreds of millions of policies. ZhongAn has more than 600 million customers. It has the opportunity to turn initial relationships, which have a premium of less than US$1, into longer term life and health business at 500x the premium level or more.
Composites will go from strength-to-strength when they have fully embraced an omni business model and are able to effectively build ‘real’ relationships with customers and give them relevant advice and solutions at the right time and place. Meanwhile pure life and health insurers should be looking at their strategic partnership options with general insurers.
How well placed is Asia to take advantage of these trends?
Asia is superbly well placed to be the global leader in digital insurance in life and health and this is bolstered by the following:
- The rapid rise of the middle class in Asia
- World leading adoption of mobile
- Fewer preconceived notions of insurance – resulting in faster adoption of new products
- Societies across the region provide a range of experiences to learn from including Japan’s aging society, Indonesia and India’s young populations, and China’s challenge of an aging population ahead of full economic maturity
- Regulators that are forward thinking and willing to provide the space needed for innovation
How should Insurers react?
Over the last five years, digital insurance in Asia has gone from a tactical discussion around online insurance to become the number one strategic issue facing Boards and executive teams across the region.
Over the next five years, the ‘rubber will hit the road’ as all insurers focus on the execution of their digital plans and winners will emerge.
At the same time many insurers have not yet clearly defined their digital strategy and need to catch up quickly
But they don’t need to go about it alone. “Gen Re with its committed team and strong experience in digital insurance, is well placed to support insurers and business partners to thrive in the rapidly developing digital insurance scene in Asia,” says Heifei Chen, General manager, Life & Health, Gen Re. “Joining forces with The Digital Insurer, Gen Re hopes to play its part by working with the industry and contribute in accelerating the digital transformation of insurance, particularly in the life and health space in this region.”
In future editions of Life & Health in Asia we will explore some of the many execution challenges as well as these trends in more depth. We hope you will become a regular reader of TDI thought leadership and this Gen Re supported quarterly report on life and health in Asia in particular. Your feedback and insights are much appreciated.