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Asia P&C: Market Round-up and Priorities for Insurers
By Fabrice Benard, Chief P&C Retail Officer, Generali Asia
According to a report by McKinsey published in early 2018, the global P&C market has remained stable over the last five years and although Asia only accounts for 23% of the total market it has been the major driver of growth. Averaging at a rate of 9% per annum since 2013, the region is expected to grow even faster in the future. Where are the hot spots and what should insurers prioritise in order to capture the opportunities?
In a region as diverse as Asia, each country has distinctive features driving the growth of P&C insurance, however there are a few distinct themes. The most obvious is the rise in economic growth, specifically as individual incomes increase, households are more likely to buy expensive items, such as cars, and as a result they will typically take out a non-life policy.
Looking at some of the markets, China, India and Indonesia have the strongest growth at 15%, 23% and 12% respectively. While other countries in South East Asia – the Philippines, Thailand, Malaysia and Vietnam have an average growth rate of over 5% in recent years.
While growth is on the cards for Asia’s emerging countries, the same cannot be said for Japan and South Korea where insurance growth is stagnant due to a slowing economy and increasing market maturity.
Renowned for their quick adoption of technology, China and India rapidly introduced new tech-based products rather than traditional insurance services. For example, in China local insurers are looking at parametric insurance solutions and temperature triggered products, while Insurtech is propelling at a fast rate in the B2C space in India and the government has issued licenses to digital insurers. Despite these positive changes, the Indian rupee remains highly volatile whilst insurers in China have been grappling with eroding profits because of growing competition.
The South East Asian markets mentioned above, are underpenetrated and present different avenues of opportunity. In Indonesia, the local authority has issued a strategic plan to increase the range of insurance products that are able to meet the needs of the local community and positive economic development is expected to boost the country’s insurance premium growth, especially in property. While in Malaysia, the process of implementing flexible pricing for motor insurance has succeeded in increasing the public’s awareness of its benefits. A major industry change that took place in Thailand was the opening of full foreign ownership for insurers. This could further encourage investment in digital-first players who can effectively implement a digital direct model in an industry troubled by high acquisition cost.
At Generali we have the advantage of being able to leverage the knowledge and experience from our counterparts in Europe, a continent where we have emerged with the lowest Combined Ratio among large peers. Replicating solutions that have worked in our mature markets is a key driver for profitable P&C growth in Asia, while maintaining a focus on being a life-time partner to our clients through the development of innovative solutions that enables them to greater manage risk. The core mission of a P&C insurer is to manage risks for their clients after all.
Key priorities for insurers to consider in Asia include:
A sophisticated and agile pricing system provides many benefits aside from implementing pricing strategies. It enhances profitability by combining sophisticated pricing decision-making and a flexible approach that utilises wider data sources from other industries. This increased profitability is a result of gaining a competitive edge from higher accuracy in risk differentiation.
Claims management is one of the most important aspects in the functioning of an insurance company. As such, it is crucial for insurers to implement more proactive claims handling practices and to better leverage on claims analytics which will identify underlying trends. At the same time, rising medical costs and shortage of skilled claims employees are compounding the challenge of processing claims efficiently and effectively.
Fraud detection in P&C accounts for an estimated 10% of the global claims cost, significantly cutting into an insurer’s bottom line. It is therefore essential that insurers make use of their data to not only improve their risk selection, but to also upgrade their analytics so they stop paying fraudulent claims.
A key to exceling in these areas is the ability to understand data and what you do with it. To capture the growing opportunities in Asia, nowadays insurers are utilising historical data for a host of applications ranging from personalized products to usage-based insurance, efficient claims processing, proactive fraud detection and beyond.
As we move into 2019, it is important to keep in mind that there are many changing factors impacting P&C insurance in Asia. At the time of writing this article, the Chinese government has demonstrated that they do, in fact, welcome wholly-owned foreign insurance entities as part of the country’s efforts to steadily open its financial sector. While across the region, natural disasters are becoming more frequent and intense, with 2017 and 2018 being two very expensive loss years on record. For a region as dynamic and fast-moving as Asia, staying ahead of these changes should also be a key priority. My experience gained in developing markets has taught me that only the insurers which are most responsive to change will stay ahead of the pack.