According to a recent report by UBS, by 2025, InsurTech could reach savings of around USD $300bn a year for the Asia insurance industry.
UBS expects competitive pressures to drive insurers to pass on a majority of cost savings to customers, however the overall profits of Asia insurers is expected to increase by approximately $55bn a year.
The increase of InsurTech will mainly benefit consumers with more personalised solutions and better customer service experiences with lower overall costs.
Insurers who can quickly adapt to InsurTech may also benefit from cost savings, better profit margins and enhanced brand awareness.
Insurers who are slow to adapt may be affected by rapid decline in market share.
All technology-driven shifts bring costs to employment with UBS estimating that 1.5 million jobs in Asia’s insurance industry are at risk of redundancy by new technological applications in the medium term. This is mainly in the operations and administrative support areas.
Although the agency channel will continue to play a main role, especially in emerging Asia, UBS expects the agency forces to gradually reduce as digital distribution becomes increasingly popular.
The disruption by InsurTech is likely to be more profound in emerging Asia than the rest of the world. Asia is a very tech savvy region however, due to low awareness, low incomes and low insurer penetration, the region remains heavily underinsured.
With insurance processes increasingly gravitating to mobile platforms, and insurers’ ability to lower premiums from improved efficiencies in distribution, risk pricing and product development, InsurTech has the potential to structurally change the way Asian consumers view insurance – from an undesirable purchase to a necessary one.
Meanwhile, Asia is one of the most underpenetrated insurance markets in the world. Emerging Asia held 43 percent of the world’s population but only 13 percent of total premiums in 2016. Due to the large populations and geographical dispersions in emerging Asia, traditional distribution models are costly and inefficient.
UBS expects InsurTech to accelerate the penetration of insurance protection in Asia. As the population of uninsured decreases, the burden on government resources should reduce meaningfully, resulting in an increase in excess funding for other public services such as education and infrastructure which will benefit the entire society.
Competition in Asia’s insurance industry will likely intensify as customers demand greater transparency and convenience, more tailored products, easier claims processes and better customer services. Differentiation in pricing, services and customer engagement can induce meaningful shifts in market share in the medium term.
Incentive-based products could lead to positive shifts in customer behaviours. As these products become more widespread, such changes could potentially occur en masse and have far-reaching implications. Even marginal changes in the prevalence of fire and car accidents, healthcare costs and employee productivity can yield immense benefit to society.