Without innovation, insurance companies risk losing their relevance in the disrupted industry.
By Joelyn Chan
For decades, insurance giants like Great Eastern, AIA and Prudential were Singaporeans’ favourites. Buying insurance policies from an insurance agent recommended by family and friends seemed to be an unstoppable convention. However, in recent years, the industry’s profitability and attractiveness have been going downhill.
Singapore’s general insurance industry has been troubled with a slower growth rate in 2016. Total gross premiums fell below the 1.1% increase in 2015 and increased marginally by 0.6% to S$3.7 billion (US$2.74 billion) in 2016. Underwriting profit fell 16.8% year on year. The foreseeable future is bleak, and the local insurance companies need to reevaluate their game plan. It is unwise to justify their declining performances with an economy’s maturity or sluggish growth.
The regulators, such as Life Insurance Association Singapore (LIA), adopt a reactive stance. The regulators’ apparent lack of proactive and forward-thinking mindset leaves consumers with little expectations for change or progress. A shock migration of 300 Great Eastern (GE) agents to the newly established AIA Financial Advisers triggered LIA’s most recent policy review. With close to 10% of GE agents switching company, their policyholders are very likely to be affected.
Composition of policies by different distribution channels will change
Tied representatives signed 53% of the new insurance policies in 2017, followed by bank and financial representatives, and lastly direct sales products. This proportion will change, as we see new Insurtech players taking a share of the pie and offer competitive insurance products. They also pressure the incumbents to improve and speed up their adoption of digitalisation. If the existing players merely redefine the protection gap and launch plans to enhance customer-centrism, they are set to lose their market dominance in Singapore.
According to management consulting firm Synpulse, only 4% of Singapore’s all new life insurance business premiums were sold through digital direct channels in 2015. In the same year, leading local insurer, Aviva had opened a “digital garage” to develop digitally-enabled insurance services, such as artificial intelligence (AI) chat box and pay-as-you-use insurance. The trend is picking up speed, as Singapore’s insurance economy matures. Technological advances also help to transform customers’ purchasing experience.
Mr Patrick Teow, President of LIA Singapore, said, “Life insurers are increasingly leveraging digitalisation to innovate and respond to these fundamental changes.” It is only a matter of time that digital Direct-to-Consumer (D2C) insurance purchases become prevalent in tech-savvy Singapore. Digitalisation will help firms to stay relevant, but the firms must never rest on their laurels. As aptly expressed by Summit Planners, “We must never underestimate the power and growth potential of insurtech firms.”
Summit Planners is an avant-garde organisation with an aim to be the one-stop provider of integrated financial services. On top of their suite of consultancy services, they distribute insurance policies by Sompo and Allied World. Such positioning and overseas presences give more credibility and assurance to its clients, as they are not hard-selling a policy to gain commission.
Evolution of the insurance scene happens in a multidimensional space; the champion will be one that preempts and surpasses their customers’ needs. KPMG predicts cross-industry technologies like AI, health tech, automotive telematics and the use of commercial drones, will be applied to the insurance sector. With the wealth management scene welcoming their first generation of robo-advisers, what less can we expect from the insurance industry?
Singapore is a hotbed for Insurtech investments
In 2016, Insurtech Asia’s entry had jumpstarted the whole Singapore ecosystem. Excluding industry enablers, incubators and accelerators, Singapore’s Insurtech landscape has more than 30 players. Insurtech firms typically choose Singapore as their headquarters, while they explore neighbouring markets. For example, GoBear – an insurance aggregator, has expanded to serve Malaysia, the Philippines, Thailand, and Vietnam.
The sector’s untapped potential attracts increased funding from overseas investors. Singapore Life is a local Insurtech startup, which raised a blockbuster S$70 million (US$51.9 million) in a series A funding round. With its direct life insurance license granted, the firm offers universal life products, standalone term insurance with associated riders, investment-linked plans and wrappers, as well as endowment assurance. It also partners existing banks like DBS and reinsurers like Munich RE and taps on technological know-how from its investors, Chong Sing Holdings FinTech Group Ltd and IPGL Holdings.
Aside from new funding milestones, there are also novel insurance developments in Singapore. The current diversity suggests that more firms should jump onto the bandwagon as Singapore is nowhere near the saturation point. Peer-to-peer insurance firm Bandboo launched its unemployment insurance and retrenchment benefits in May 2017. Singapore-based Nanyang Technological University has partnered MSIG Insurance and four global industry players to develop an efficient cyber-risk insurance market using cyber loss data and analytics. These advances provide plentiful of choices to meet consumers’ needs better. Partnerships with established re-insurers or insurance firms generate more platforms for innovation, as the incumbents may feel less threatened.
During General Insurance Association (GIA)’s 50th Anniversary Golden Jubilee Gala Dinner, Minister Lawrence Wong highlighted the importance of the general insurance industry’s need to adapt and develop insurance solutions to manage new and emerging risks for the economy.
The disruption has begun, and the new Insurtech firms will continue to alter the insurance landscape. Like it or not, the existing players need to play their cards right or risk being made irrelevant.