Life Insurance in Asia – Sustaining Growth in the Next Decade

By Stephan Binder & Joseph Luc Ngai

Published by Wiley (September 2012)

Summary

Binder & Ngai don’t disappoint the professional insurance specialist. The authors succinctly, persuasively and objectively make the case for strong fundamentals for life insurance in Asia – yet at the same time are clear that the existing approaches to both agency and Bancassurance need to evolve rapidly.

The book provides a fact based and objective analysis of the key drivers and trends for the life insurance industry in Asia as well as a series of predictions that are difficult to dispute. The authors are very positive about the favourable macro and socio-economic winds that will drive growth but as the same time make a highly compelling case that insurers will face more challenges in the next decade ahead then they have had in the past 10 years.

The book should be mandatory reading for executives and directors in the Asia-Pacific region who need to maintain the big picture of the trends and drivers in the region. Those executive looking to lead change can do worse than buy their managers copies so they can appreciate the bigger trends and opportunities for life insurance in the region.

The subject matter of the book prevents it from making the best seller list but the authors should be congratulated for taking the time and effort to collate and communicate their knowledge and experience gained as leaders of the insurance practice for McKinsey & Co in Asia.

The Big picture – Pan Asian Drivers

They identify 5 main drivers:

1. Asia as the global powerhouse of growth for life insurance
2. The battle between local insurers and multi-nationals
3. The changing face of distribution
4. Driving innovation (use of technology)
5. New products to meet the emerging needs of new customer segments

Predictions on Distribution trends

“The era of low skilled, mass recruiting agency models will inevitably come to an end in the next decade.” However, “ Tied agency and Bancassurance will remain the main distribution channels in Asia for at least the next 5 years.”

“…There is a possibility that direct, and in particular online, might become a much more  significant focus in Asia than in Western markets.” But “for life insurers, face-to-face distribution will undoubtedly remain a critical part of the sales process.”

The message to read is that the industry is in the process of significant transformation.

On Digital Insurance

The authors have views that correspond quite closely with those of The Digital Insurer:

“Asia is at the onset of a digital revolution …”

• “Asia is at the onset of a digital revolution both in terms of the shifts in consumer behaviour and the rapid increase in penetration of smart devices…”
• “A multi-channel world is emerging rapidly across Asia…”
• “Adopting technology and innovation may no long be a choice …. But the basis of competition.”

Binder and Ngoi identify 3 major opportunities from technology:

1. Maximise value from multichannel interaction
2. Accessing Big Data to tailor propositions
3. Transforming process in front line and back office through automation

The Digital Insurer believes components 1) and 3) above are items for executives to tackle immediately whilst the opportunities from Big Data will be an emerging trend from 2015 onwards.

The strategic importance of tablets, as an ideal device for an advisory salesforce, could have been explored in more detail (see The Digital Advisor article on tablets).

7 Priorities for winners

The authors are crisp and clear that they believe the new paradigm over the next decade is to transform distribution and  search for value.

The authors encourage insurance executives to focus on the following seven areas:

1. Value based management
2. Ensuring a sustainable agency model
3. Finding value in Bancassurance
4. Tapping the expanding and emerging middle class
5. Exploring potential from new technologies
6. Revamping investment management
7. Engaging in consolidation opportunities

How to read the book – if you are a time disadvantaged executive

The Digital Insurer tackled the book in three stages as follows:

1. Read the first chapter on Emerging Themes in Asia
2. Jumped to the last chapter which has a great summary called The Road Ahead
3. Dipped into the intervening chapters which provide country-by-country analysis that support their overall themes

One minor gripe

Like many in Asia the best way to read the book is to download electronically. Unfortunately, the graphs and tables do not display well in a Kindle reader and cannot be expanded. So I ended up buying the hardback. Some books are not yet ready for the digital revolution!

… & One omission

The authors could have spent some time analysing the skills sets required to succeed over the next decade and whether insurers have in place the right “ people architecture” to take advantage of the opportunities and challenges ahead. The Digital Insurer believes new skills, positive mindsets and new ways of executing innovation will be required to ensure success.

By Hugh Terry