Osborne Clark: The future of insurance in Asia-Pacific
Executive summary :
Insurtech in the digital era: the growing investment and opportunities in Asia
Like many sectors of the economy, the insurance industry is affected by increasing technological innovation and disruption in the digital era. Technology in insurance, or insurtech, is experiencing rapid growth, increasing investment and enabling technology to greater influence, and in some cases transform, the insurance industry.
Venture capitalists and insurance companies alike are recognising and investing in the staggering potential of insurtechs with exponential increases in investments in the insurtech industry in recent years. According to an industry standard, while global investment into insurtech had stabilised at approximately US$1.4 billion from Q4 2018 to Q3 2019, Q4 2019 bucked the trend to reach an all-time investment high of almost US$2 billion.
The growing wealth and middle class in huge markets like China, India and parts of South East Asia, like Indonesia, represent untapped potential for incumbents, disruptors and investors alike. And the numbers are big. While the US remains largest insurance market, this is now followed by China and Japan and the shift of insurance business to Asia will continue. According to at least one report, in Hong Kong, between 2012 to 2016, the insurance penetration changed from 12.4% to a 17.6% of the population.
While the increase may not seem significant, it is definitely well below ideal insured rates, but strikingly, more than 80 percent of customers are willing to use digital methods including email, mobile apps, video or phone instead of interacting with insurers via agents or brokers.
A study by Swiss Re estimates that by 2029, Asia-Pacific will account for 42% of global insurance premiums, with the share of China forecasted to be 20% and that country is on course to become largest insurance market by mid-2030s. A report by Bain & Company indicates that consumers in Asia-Pacific’s developing markets are significantly underinsured, with one measure of insurance penetration, gross written premiums as a percentage of per-capita GDP, signalling a significant amount of unmet demand in Asia Pacific’s developing markets where penetration is less than 5% in India, Indonesia, mainland China and Malaysia.
While no doubt the global coronavirus (commonly referred to as COVID-19) crisis is creating major headwinds both economically and operationally for many businesses, early reports indicate the insurance sector faces limited coronavirus claims exposure or a limited industry dampening effect.
Some predict the situation represents a growth opportunity for insurers (especially those that embrace digital transformation and technology) and insurtechs, given the heightened concerns around workers health, insurance and using technology to help people get back to work quickly and to maintain health and wellbeing.
We explore how insurtech is influencing the insurance landscape, including how data is being used, as well as highlight the rise of digital platforms and super apps. Lastly we explore the commercial and legal challenges facing insurtech and insuring for the future.
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