Insurtech investment set to skyrocket in Asia Pacific till 2019

Rising margin pressure will compel insurance companies to join the insurtech race.

When Tokio Marine Life Insurance Singapore Ltd. (TMLS) launched TOMI, the first self-learning chatbot for insurance advisors in Singapore, it was part of a strategy to accelerate its insurance technology (insurtech) implementation — an area that will largely drive the Asia Pacific insurance investment playbook until 2019. Baker & McKenzie analysts reckon Asia Pacific-based insurance companies are ramping up their acquisition of and partnerships with non-insurance technology players to mine the opportunities in insurtech space.

Insurance firms are looking at the powerful collaborations banks have forged in the financial technology (fintech) space, hoping to harness similar competitive advantages through stronger insurtech alliances. “Insurance companies are playing catch-up. They are lagging behind their financial services peers in technology implementation,” says Stephanie Magnus, a principal at Baker McKenzie Wong & Leow, and a Singapore-based fintech and insurtech adviser.

“We expect to see insurtech incubator and accelerator programmes to produce key acquisition and joint venture (JV) targets for our big insurance clients, and expect this to remain an exciting space for business tie-ups over the next 18 to 24 months,” she adds.

Walking the talk
This forecasted acceleration comes as a large chunk of insurers still do not walk the talk when pushing out their insurtech plans. Whilst 43% of industry players claim they have fintech — in which insurtech is a sub-segment — at the heart of their corporate strategies, only 28% explore partnerships with fintech companies and even less than 14% actively participate in ventures and/or incubator programmes, a PwC global survey reveals.

“Incumbent insurers who are currently focussed on catching up with their competitors around customer centricity and other current trends are missing the opportunity to become proactive,” says Stephen O’Hearn, global leader, insurance partner at PwC. “They need to create a clear and consistent message that will demonstrate their willingness to play in the new insurtech space and act accordingly — only such an approach will position incumbents to be front-runners in the new insurance era.”

Brian Chia, head of corporate and commercial practice at Wong & Partners, member firm of Baker & McKenzie in Malaysia, says rising margin pressure will compel
insurance companies to join the insurtech race. Insurers will look to harness insurtech to explore new distribution channels, product offerings, as well as risk assessment and management capabilities.

Enhancing efficiency
In the case of TMLS, the launch of TOMI represents an investment to increase human resource efficiency as the self-learning chatbot fields simpler
client queries, freeing up advisors to deal with more complex queries. The insurer is looking to upgrade it soon with more robust features geared towards directly improving the client experience.

Together with TOMI, the Singapore-based insurer also launched TM Wave, an inhouse initiative that streamlines administrative processes for advisers. The app allows outstanding documents to be submitted via smart phones, reducing turnaroundtimes. “TOMI and the TM Wave app set the tone for our technological transformation as we innovate and advance our digital capabilities by implementing new sales tools, customer service portals and data analytics,” says James Tan, chief executive officer of TMLS.

As TMLS and more insurance companies in Asia Pacific invest more resources into InsurTech, they must be prepared to face a “labyrinth” of regulations in the region. Firms will also have to address concerns relating to data privacy, cross-border data transfer and intellectual property protection, especially when investing heavily in areas such as telematics, biometrics, and big data.