[Insur]Tech: Reimagining the Insurance Industry in APAC

The global insurance industry will grow more strongly than the global economy in 2018 and 2019, Munich Re predicts in its latest outlook.

This year and next, we expect global premium to grow by more than €460 billion in all. This is equivalent to average annual premium growth of 5.3% (in real terms, i.e., adjusted for inflation: 3.7%), whereas global GDP is expected to grow by only 4.9% (3.3% in real terms). Life insurance, in particular, looks set to return to strong annual premium growth of 5.6% (3.9% in real terms) after a weak 2017. Property-casualty insurance is benefiting from the currently favorable economic environment. In this segment, we are expecting annual growth rates of close to 5% (3.3% in real terms). Emerging countries are the primary growth drivers, but somewhat stronger growth rates in high-volume industrialized countries are also contributing to this positive development. – Munich Re

In 2030, Munich Re expects premium volume to be close to €8 trillion – almost double what it is today. China is of particular importance in this long-term perspective shared by Munich Re, with almost one-third of the additional premium income forecast between 2018 and 2030 being generated there.

Source: Insurance Market Outlook for 2018/2019, Munich Re

The disruption by InsurTech may be more profound in emerging Asia than in the rest of the world. – Min Lan Tan, Head of APAC Investment Office, UBS

Insurance-[Insur]Tech integrations in the main areas of operations promise a multitude of benefits – both for consumers and businesses alike. So far, digital distribution has been one of the most active areas where the adoption of advanced tech enables insurers to expand their reach and improve customer service. Some of the largest insurers across regions have been taking steps towards expanding their product distribution capabilities outside traditional channels and methods, partnering with technology companies on their quest towards digital transformation.

The mobile channel will become a critical gateway for insurers to raise awareness, educate customers, distribute products, and provide services. Outlining opportunities and challenges for InsurTech adoption in APAC, UBS shares that mobile penetration in the region is expected to rise to 75% by 2020 – an increase of 460 million unique subscribers, with India, the Philippines, and Indonesia in the forefront. Most of the 1.75 billion increase in the number of mobile internet users between 2017 and 2025 will come from China (~350 million new users), India (330 million), and sub-Saharan Africa (280 million).

The biggest winners from the rise and mainstream adoption of InsurTech will be consumers – they will have more personalized solutions and better customer service for lower total costs. Insurers who are quick to adapt, meanwhile, will likely benefit from cost savings, improved profit margins, and enhanced brand loyalty. But like all technology-driven shifts, this one will come with costs to employment; we believe 1.5 million jobs in Asia’s insurance industry are at risk of being made redundant by new technological applications in the medium term. – Min Lan Tan, Head of APAC Investment Office, UBS

Insurance-InsurTech exploratory integrations are becoming ubiquitous around the world, and APAC has its own interesting examples along with Americas and Europe. The APAC examples that we will look at in this article, are more focused on operational efficiency, whether it’s enhanced risk management, partner integration capabilities, fraud prevention, premiums management or cost efficiency.

QBE Insurance Group (QBE) (Australia), one of the largest insurance groups in APAC, entered an agreement to use Cytora’s technology. Cytora uses AI and open-source data to help commercial insurers lower loss ratios, grow premiums, and improve expense ratios. In 2018, the Cytora Risk Engine will be deployed across QBE property and casualty lines. The Cytora Risk Engine, driven by machine learning algorithms, combines an insurer’s internal data on a specific cover with external information from a broad spectrum of sources. This generates a risk score, which provides enhanced insight into expected claims activity on the whole portfolio and also at an individual risk level.

QBE also has a partnership with another tech company to aid its team in North America in new product development: at the end of 2017, the insurer has entered into a multi-year commercial use agreement for the RiskGenius product. QBE North America will be the first division of the Australian insurer to implement the RiskGenius platform with plans already in place to upload over 125,000 policy documents into RiskGenius in 2018.

Initially, we will be using the RiskGenius platform to analyze policy and endorsement language as well as to aid our teams in new product development. We expect the platform to improve our speed-to-market for new products as well as deliver new insights into our policies and streamline the policy review process. Over time, the benefits to QBE will only increase as RiskGenius further enhances its proprietary machine learning platform and overall product capabilities. – Bob James, Group Head of Transformation for QBE

While the Australian insurer is trying out new capabilities in North America, one French insurer (and one of the world’s largest insurance companies) is on a quest on its own digital transformation with Singapore being the launchpad. AXA Singapore has launched an Insurance-as-a-Service API to make it easier for digital channels to integrate their products. The company shared that Insurance-as-a-Service is a new concept that enables insurers to deliver personalized insurance products in a simplified way to the customer when they need it and how they want it, integrated as part of the broader value chain of the digital ecosystem. Designed to integrate with any digital ecosystem, AXA’s transactional APIs can be embedded into any application, website or digital channel to deliver real-time insurance cover to customers. APIs available to partners are extended to various lines of AXA Insurance’s business: home, travel & car insurance, customer & policy servicing capabilities to support customer service, claims & policy management, etc. This increases the accessibility of AXA solutions, making it possible for customers to get instant cover through partner mobile applications, portals or automated chatbots.

The launch of our partner transactional API marks an important milestone in AXA Singapore’s digital transformation journey that began two years ago. We are excited about the possibilities this launch brings – seamless integration with our partners and other FinTech players means that we will be able to enrich the engagements we have with our customers. This underscores AXA’s commitment to put our customers first, making every interaction our customers have with us as easy and as fuss-free as possible. – Leo Costes, Managing Director, General Insurance, AXA Insurance

But AXA’s APIs are not the end of it – they are a starting point of rapid collaborative development of the insurance business. AXA has already partnered with SATS where AXA’s API was integrated with SAT’s Ready to Travel app, enabling seamless insurance coverage to customers when they are planning their trips.

The insurer also partnered with SecurityScorecard, a security ratings company, to provide security ratings as part of the underwriting process for AXA’s growing cybersecurity business. The SecurityScorecard platform will provide AXA’s underwriters with an overall risk rating and detailed view into the cyber-health of their insureds. AXA will use the ratings to determine insurability, as well as evaluate premiums for new policies and renewals.

Fukoku Mutual Life (Japan) is another interesting case in APAC: the company was reported to be laying off more than 30 employees and replacing them with an artificial intelligence system that will be calculating policy payouts instead of human counterparts. According to Fortune, Fukoku Mutual Life expects the $1.73 million smart system based on IBM’s Watson Explorer – which costs around $129,000 each year to maintain – to save the company about $1.21 million each year.

One of the cases where the insurer is enhancing customer service capabilities with advanced tech is Prudential Hong Kong. In December 2017, Prudential Hong Kong announced two new additions to its digital transformation line-up that harness automation, artificial intelligence, machine learning, and other technological innovations in order to provide a more personalized & accessible experience to customers. The insurer launched eClaims, an electronic claims submission system that covers all types of individual hospital claims. The new self-service customer platform enables customers to submit their hospital claims electronically and get instant claims status updates. Following a pilot rollout to financial consultants in August 2017, Prudential is also extending a new AI-powered Chinese-language virtual assistant called Ask Prudence – a chatbot service for its customers that allows around-the-clock online inquiry services. The assistant allows customers to check useful information, such as policy changes, claim request submission procedures, payment methods, etc.

As part of Prudential’s customer-centric approach, in August 2017, the life insurer has also launched a chatbot that can provide its financial consultants with real-time information specific to their customers’ life insurance plans. Named askPRU, the cognitive-powered chatbot is built on IBM Watson technology and integrated into Prudential’s backend systems. Using IBM Watson’s Conversation Service, askPRU has been trained by NCS’ data scientists to understand non-scripted questions, probe users to get to the intent of their queries and deliver responses in a way that simulates human conversations. Between July and August 2017, more than half of Prudential’s 4,000 Financial Consultants have started to use the chatbot.

Customer service is probably one of the hottest areas of development and AI application, in particular (in the US, Europe & Asia, virtual assistants are often as close as companies get to AI adoption in enhancing customer experience). A total of 14 insurance companies including Bajaj Allianz, Bharti AXA, HDFC Ergo, Religare and Tata Aig, have a tie-up with a startup called AskArvi, which has trained its bot – Arvi – to understand the customer intent and take them towards the right product, which then connects to the vehicle database for seamless buying.

Among all examples, Ping An is probably one of the most impressive cases of a large organization on a quest to revamp of its products and services: (aside from having a partnership with CareVoice) in Fall 2017, the company announced the launch of 10 services backed by AI technology focused on enhancing various lines of Ping An business, including insurance:

  • Ping An Life — AI Customer Service, which enables Ping An Life to remotely verify customer’s identity by matching up big data with their face and voice print. This greatly reduces the time needed for customers to handle their business online.

  • Ping An Good Doctor — AI Doctor, a smart auxiliary diagnosis and treatment system, which has accumulated hundreds of millions of online diagnoses and health counseling data. All of these can be used for online medical pre-diagnosis, triage, and consultation, and therefore enhance the efficiency of treatment.

  • Ping An Annuity — Collect Annuity Payment by Face Recognition, a smart annuity service which enables its customers to collect their annuity payment quickly, efficiently, and securely.

  • Ping An Property & Casualty — Cloud Claims on Auto Insurance, a smart claim customized service based on the analysis of customers’ label, the scene of an accident, customers’ needs, and processing methods.

  • Ping An Pocket Bank — Smart Investment Consultancy Service

  • Ping An Bank’s Credit Card Center — Advanced Anti-Fraud Monitoring System

  • Ping An Securities — AI Smart Stock Investment

  • Ping An Caifubao — Smart Wealth Management

  • Lufax — Know Your Customer Management System

  • Ping An Puhui — Face Recognition Technology

New product development has been one of the six major areas of insurance-InsurTech partnerships/integration, with the next example falling into this category. HDFC Life, one of India’s leading private life insurance companies, in partnership with ETMoney, launched a data-led group term insurance plan. The product was reported to be India’s first term insurance plan which is based on the spending pattern of the users. The plan supposedly simplifies the policy buying process by eliminating all paperwork, medical tests, income requirements, and manual intervention that is common in a regular insurance policy. The easy workflow within the app makes it possible to buy a plan in less than two minutes.

In its report called Shifting Asia: InsurTech, UBS shares that advances in the insurance industry could have the greatest impact on Asia as a whole – the most important growth market for global insurers.

According to Munich Re, Asia will be the fastest-growing market for both life and property and casualty (P&C) insurance, with an estimated real CAGR of 10.2% and 9.1% respectively from 2016 to 2025. Asia will be home to around 64% of the world’s middle-class population by 2030, up from 40% currently, according to the Brookings Institution. As disposable incomes grow, the middle class will demand greater protection for their health, wealth, families, and property. The strong and sustainable growth outlook over the medium term makes the Asian market an important battleground for insurers, UBS reports.

InsurTech could spur total cost savings of around $300 billion a year for the Asian insurance industry by 2025. Competitive pressures should drive insurers to pass on a majority of the cost savings to customers, but experts still expect the overall profits of Asian insurers to increase by around $55 billion a year. – Shifting Asia: InsurTech, UBS