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4 APAC Insurance Industry Trends That Are Re-Shaping the Market

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The challenges presented by COVID and CX are global. How to best respond is entirely a local, even individual organization matter, based on the varied realities in different parts of the region.

But as we examine the market changes having an impact across the APAC region, we see 4 large-scale insurance technology trends affecting organizations today.

Trend #1: The pandemic has accelerated the need for digital transformation

First and foremost, COVID has been a stress test to the insurance operating model. Some were ready for it and some countries more adaptive to it. But I think it's been a real wake up call, a real eye-opening experience, for a lot of insurance companies.

—Alex Kimura, Partner, Singapore, McKinsey & Company

Hyper-acceleration of digital transformation plans

COVID has been a stress-test on the insurance industry’s operating model. The move from face-to-face to more frictionless and seamless customer interactions at distance has revealed an urgent need for change.

As a result, in the past two years digital transformation has been forcibly accelerated. Inherent resistance in the process for approving and implementing large modernization projects has been broken down. Companies, which typically spent months and months building business cases before initiating any new project, instead had to try to make the best, fast choice possible and correct on the fly. That’s a wholly new approach to modernization for life insurers. For the first time ever, perhaps, the much-hyped word, ‘transformation’ is actually meaningful. Insurers really are now creating significant change in a short period of time.

It’s too soon to tell what elements of this new-found agility will carry forward post-pandemic, but the industry, having now been exposed to the realities and benefits of accelerated implementation, will be unlikely to return to its traditional methodical approach.

Insurers are no different than anyone else, in that once we have accelerated and enhanced digital-driven experiences, there’s really no turning back.

Trend #2: Customer experience is the driver of insurance innovation

And that is the second important point to make about the digital trends redefining the insurance industry—they are all driven by one thing. The same heightened client expectations we all have for instantaneous, online, hyper-personalized experiences, no matter what organization we are dealing with.

Because of heightened expectations for these types of digital experiences, companies have had to fast-track their transformation. Insurers are pivoting their digital transformation strategy on Customer centricity. Plans to digitalize, automate and build better self-service capabilities in the next 3, 4 or 5 years have been collapsed into a 12-month window.

The flip side of customer experience is the employee experience

Customers are definitely seeing the benefits of insurers aggressive implementation of digital solutions, but the pandemic has been especially disruptive to captive advisor agencies. In Asia, insurers operate in a relatively high-touch, face-to-face interaction type model. As a result, they’ve had to adopt digital technologies and pivot quickly from face-to-face interaction to interacting via digital platforms.

As we move forward beyond this upheaval, insurers will be able to continue to build on the advances that have been made so quickly in the past 18 months. But the changes are likely to be nuanced. We will not see the end of traditional distribution or agent channels.

In fact, a recent LIMRA-Boston Consulting Group task force on customer experience revealed that agents and advisors are incredibly valued regardless of which generation you ask. That’s a surprising result since the conventional wisdom is that millennials would gravitate towards online interactions and be less interested in traditional advisor relationships. But, it seems the need for personal advice is a high value service, no matter who you are speaking to.

Hybridization of distribution

Digital solutions are great for speedy resolution of simpler purchases and service but meeting more complicated needs benefits greatly from the input of an experienced advisor. Which means the hybrid model is here to stay. Those organizations that are building their digital capability and aligning it with their agency organization will become distribution powerhouses.

I think we need to rethink client distribution and client acquisition. In totality, I think COVID has been a catalyst to be able to rethink how we engage with our distribution channels, rethink how we look at market conditions and the definition of digital responsibilities with our agent and broker community. We have to make evolve our sales distribution channels and operating models, and make sure that the most beneficial changes are preserved on the other side of the pandemic.

Kartik Sakthivel, Global CIO & Regional Head, Asia West, LIMRA

Trend #3: Legacy technology is retarding transformation

In our recent Addressing Changing APAC Market Conditions: Carrier Solutions for Rapid Product Adaptation webinar we asked participants about their biggest challenges. The results were enlightening…

Biggest Challenge Your Are Facing

The number one challenge insurers identified was legacy technology systems. It’s hard for a carrier to become nimble and agile when they are still trying to pay down the technical debt that has accrued over generations. Yesterday’s promising technology has become todays high-interest loan that continues to create a drag on innovation. Old policy administration systems that require code-changes every time a product is updated and, in some cases, can’t easily access and utilize legacy data for use in the digital tools that drive modern client engagement have become anchors holding insurers back. They prevent any level of effective strategic transformation. They are old, brittle, difficult to maintain and upgrade.

Legacy core system transformation

The level of technology readiness varies greatly across APAC. In many countries profitability is at an all-time low. Margins are extremely tight. Many companies are hesitant to invest in large modernization projects.

And yet the need to transform is real and well understood.

So how do carriers who have the will but not the budget move forward with timely modernization?

APIs jumpstart insurance client experience

Instead of full-blown modernization of core systems some APAC insurers have been targeting high-impact changes that can be made quickly and with a more manageable investment. They are adding API driven digital tools to their existing IT landscape. This enables them to provide their agents and customers with sales and service tools which greatly enhance the client experience—without needing to tear up the foundations.

The other option for those who have systems that are so old they can’t work with APIs and replacement is the only viable option are looking at solutions who have modern digital platforms that are turn-key solutions, that don’t require a lot of configuration and can be implemented quickly. Typically, these systems are offered with a SaaS model, which decreases up front costs and reduces the need for insurers to provide their own IT resources for managing and upgrading the solution on an ongoing basis.

Trend #4: Change management throughout the ecosystem is critical to transformation

The second biggest challenge cited by webinar participants was organizational culture. No matter what technology solution an insurer has or is implementing it is difficult, if not impossible to unlock the full benefits, without company-wide buy-in.

The work that LIMRA/LOMA has been doing with McKinsey and Company over the past year and a half on emerging technologies corroborates that organizational culture is the most important determinant of success. You can implement any strategy, process, or technology, but if your organizational culture does not support the change, it's always going to impeded.

Over the past 18 months we have seen the biggest benefits come from supporting internal change management. Traditionally, even when technological capabilities and processing tools were in place, the most difficult part of accelerating innovation was determining how to work better with our distributor partners and agents to adapt more quickly. But the pandemic was a catalyst. Suddenly we had to work together to deliver tools and access and change the operating model, how we sell, service and support customers. Right away, everyone understood that we need to share our data and use the same tools and processes because everyone is linked in this ecosystem. I think that’s one of the biggest recent improvements, and something that we'll benefit from over the next three years.

—Tomasz Kurczyk, Chief Digital and Transformation Officer, AXA Singapore

Wrap up: What can we learn from recent responses to changing market conditions?

Given the varied responses to these challenges across the region, it is profitable to consider what we can learn from countries who handled the pandemic well and are already coming out the other side.

What does their growth look like? What are insurers investing in? What technologies are they focused on developing? How are they interacting with their clients and their employees? What does marketing and prospecting look like in a post-pandemic world?

Watch the webcast for more answers

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