Insurance has always been equated to protection. But according to chief technology officer Gary Goh at AIA Malaysia, the sector has now progressed and with the help of technology has moved towards prevention and recovery.
“It’s about being connected to our customer throughout their life cycle with continuous engagement,” says Goh. “And health is the key theme.”
The industry is pivoting, partly, as Goh describes, because of changing consumer preferences. A flourishing insurtech industry, able to quickly seize upon digital opportunities, is also playing a role. Investments into insurtech for 2018 reached a record $4.2 billion in 2018, almost double the year before.
“The insurance lifecycle is always about sales to service, and then to claim. And now, at every stage, we see technology playing a prominent role,” says Goh, noting the dramatic acceleration of internal processes and the rise of ‘straight-through processing’. “It’s a huge shift from the way we used to sell insurance and serve our customers. Now our customers don’t have to wait for 15 days for their policy to be processed and issued. In addition, they also have access to us 24/7.”
Over the next five years, technology will transform many insurance fundamentals, including customer acquisition, risk calculation and management, and all of the internal processes that occur in the back office. At least 80% of AIA’s new sales in all markets are done digitally, says the group’s chief executive and president Ng Keng Hooi. An example of this is AIA Hong Kong’s new online sales platform called AIAiShop, which allows customers to buy insurance products in three minutes. The company also announced a blockchain solution that allows the insurer and its bank partners to share policy data on a real-time basis, reducing processing time and increasing transparency.
Goh describes how much of the innovation agenda is aimed at increasing customer centricity. Whether that is lowering the cost of operations in order to reduce premiums for customers, deploying AI enabled chatbots to increase customer service availability and accelerate issue resolution, or replacing physical insurance cards with a mobile app, AIA is focused on “fulfilling our brand promise of helping our customers live healthier, longer, better lives,” he says. “It’s very easy to make processes complicated. It’s more difficult to make them simple.”
Transforming the technology, systems, and processes has three main pillars, says Goh. The first is to transform the core and retire legacy systems. The second is technology risk management, around governance, compliance, and cybersecurity. The third pillar is digitalizing operations and making sure there is an end-to-end digital strategy for distribution. Formerly manual processes, such as applications, submissions, back-end processing, underwriting, and policy administration, are also now being digitalized.
While the new breed of insurtechs have the advantage of being able to design digital processes from the ground up, this shouldn’t worry incumbents too much. The majority of insurtechs, McKinsey data says, are aimed at providing services to existing insurers, with only 9% aiming to replace incumbents themselves.
In the next few years, and particularly with the advent of 5G, innovation and growth will go hand-in-hand. Big data, fuelled by telematics, the Internet of Things, and wearable devices, means that individualized premiums will become a reality. Sensors will allow insurer and insured to continually transfer data back and forth, so that premiums are based on increasingly precise calculations of risk, and claims can be reduced and mitigated through monitoring and prevention. From vehicle alerts to industrial equipment failure notices, insurers will move towards actively preventing claims.
Asia is expected to lead global growth. China’s growing weight in insurance “is simply amazing”, according to a report by Allianz in May 2018, whereby in just one decade, the country has almost tripled its world market share. And the country is on track to overtake the US as the largest global market in the not so distant future. New technologies such as pay-as-you-go, mobile health services and micro-insurance have the potential to bring better and more customized insurance coverage to more people, including those in lower income brackets.