Article Synopsis :
Though FinTechs are seen as a major disruptor in the Malaysian financial markets, a disconnect remains between perceived disruption and insurers’ willingness to act. This is the key message emerging from the Asian Institute of Chartered Bankers (AICB) and PwC-Malaysia report “InsurTech: The road ahead”. This report is the insurance-focused cut of the larger AICB and PwC report on FinTech, capturing the views of 84 senior professionals from the Malaysian banking, insurance, asset management and FinTech segments. Key findings from the survey include:
- 74% of insurers believe that part of their business is at risk of being lost to FinTech companies
- 80% of insurers see opportunities for differentiation and cost reduction from FinTech
- 60% of insurers believe the general insurance sector is third most at-risk to FinTech disruption
- 70% of insurers see pressure on margins and information security as the top threats from FinTech
In anticipation, insurers are establishing in-house venture capital funds to engage FinTechs. Per CB Insights, total InsurTech funding exceeded US$1B in the first half of 2016 with deal volumes for the year expected to exceed 2015’s record investment level of US$2.7B.
Still, some Malaysian Insurers remain unconvinced, with 40% still skeptical about customer readiness to embrace FinTech. This level of resistance makes it difficult to envision near-term integration of FinTechs across the insurance value chain.
The key challenges faced with FinTech includes regulation, IT security and IT compatibility.
The report pinpoints three specific areas of potential development:
- Building Customer Experience via mobile apps and greater real-time connectivity.
- Automating basic operations and focusing on building better customer risk profiles.
- New business models capable of customisation of pricing and product structure.
Also worth noting:
- FinTech disruptive trends include, 1) insurers using “self-directed” services as a means of reducing front-office operational costs, and 2) “Robotics and automation in core operations” are, surprisingly, the least likely areas of investment.
- Security is identified as the key enabler of FinTech development.
Insurers must be mindful and strategically focused around FinTech strategy, technology, and processes, and their potential impact on channel management, branding and product. Prescribed steps include:
- Explore market dynamics and alternatives. Invest in R&D across key industry trends to promote innovation.
- Establish strategic partnerships to pilot innovative solutions and boost creativity.
- Get involved with InsurTech through incubators, funding and strategic acquisitions.
- Focus on new product development.
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Digital Insurer's CommentsFlexible and customer-centric digital innovations are already commonplace in industries such as retail, consumer goods and hospitality. It’s only a matter of time before digital technology simplifies insurance—known for its complexity sometimes bordering on incomprehensibility—for the masses.
Uncertainty about customer readiness creates inertia among Malaysian insurers with respect to digital innovation. Over 40% tell themselves customers aren’t ready. But with exploding Internet usage (71% of the population, up 23% over the last two years) and smartphone usage (59% of the population, up over 30% over the last two years), might it be Malaysian insurers who aren’t ready?
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