Commentary

Despite significant investments made insurance innovation labs have largely failed to deliver impact beyond positive initial PR stories. Why is that the case and how can it be fixed? Recent years has seen insurance industry leaders globally waking up to reality that the dream of industry being insulated from the digital revolution sweeping across many other industries was just that, a dream. With a heavy baggage of legacy IT systems and rigid corporate cultures, incumbents found themselves in a tough situation. What’s the best way to prepare for upcoming disruption without meantime hurting your existing business. Innovation labs appeared, at least initially, like a perfect answer. In-house innovation that brings the right ingredients to allow for a safe digital experimentation without causing disruption to the existing businesses. The expectation was that innovation labs would become a quasi-startups that would allow insurers to build digital and innovation capabilities to safeguard against the coming digital disruption.

Disruption is shaking the fundamentals of the insurance industry. This is true structural change, not just a cycle. New technologies, new competitors, new markets, new regulations, and changing consumer behaviours are all creating tremendous opportunities, and posing significant risk to the legacy insurance business model. To succeed in this dynamic environment, organisations are reevaluating their portfolio of business and rationalising their global footprint to strategically determine “where to play” and “how to win” in the future. One of the immediate consequences of this trend is the expected rise in deal activity in the global insurance industry.

From tracking drivers’ braking behaviour, to installing wearable devices on factory workers, to funding medical advice mobile apps, many insurance companies are trying to become more present in their customers’ lives. They know that earning greater loyalty will require interacting more with their customers and delivering more value as well. Insurers are finally paying attention to this customer-centric approach as an alternative to the traditional internal focus on products, agents, and in-year financial considerations.

2016 has been officially been declared the year of InsurTech. The marriage of insurance and technology infused with entrepreneurial energy, InsurTech is attracting significant investments from the likes of sophisticated VCs who founded the new economy players like AirBnB and Uber.

Rather than consider the many exciting, and often challenging, technology-enabled developments that lie ahead, I thought for this article I would take a slight different tack. So let’s instead take a look at the reality of our industry from the perspective of where most insurers are today, and against that backdrop, what insurers can do to change.

Disruptive innovation is amongst the most referenced but least predictable trends to impact the insurance industry in a generation and it remains a pervasive challenge for many in this regulated industry. When surveying the insurance landscape across Asia, three key trends continue to play a significant role, leading innovations in theinsurer’s value chain.

Across the diverse Asia Pacific region, a number of forces are converging to create a pressing need for insurers to innovate throughout their entire value chain: premium growth is slowing, even as new markets open; consumer demands for digital products and services are increasing; competition within, and from outside, the region is growing; and regulators are developing more complex rules to protect consumers and reduce market risks.

Customer Centricity and Technology remain the two key themes as the Insurance sector continues to seek growth amidst margin pressures, regulatory demands, and savvy customers in Asia.