Two of the biggest trends in global insurance in recent years are premium growth in emerging markets and the rising importance of technology across the supply chain. The latter has come to be referred to as InsurTech, a potentially disruptive trend that heralds both threats to and opportunities for incumbents and newcomers alike.
While technological solutions are being applied along the length of the insurance supply chain in advanced markets, their focus in emerging markets has primarily been on driving premium growth. Many lower and some middle-income countries have managed to skip the mass rollout of fixed-line telephony, as the prevalence of low-cost mobile telephony has seen a surge in mobile phone penetration rates not too dissimilar to those in advanced economies. This has facilitated access to, and expansion of, digital financial services from e-payments to microcredits as well as insurance products.
InsurTech, as compared to financial technology (fintech), is more often related to service improvements for individuals, as opposed to businesses. Sector participants sometimes use the term more broadly to encompass the application of digital technology to all stages of the insurance supply chain. In its insurance market outlook for 2018-19, global insurer Munich Re noted that, “InsurTech start-ups benefit from the achievements of fintech companies, as new financial technologies also allow insurers’ product ranges to be expanded, alternative sales channels to be created and additional groups of clients to be reached.”
This is highlighted as being particularly relevant in “underdeveloped insurance markets by offering simple, innovative and needs-based products digitally, and thereby developing new markets.” Concrete examples cited in the Munich Re article include micro-insurance for health and crop insurance, which can be contracted and managed via mobile phone. KEY FIGURES: A report from professional services firm EY estimated that total global investment in InsurTech stood at $2.3bn in 2017, following compound annual growth of 45% since 2012. In the first half of 2018 there were $1.3bn of InsurTech deals, putting the sector on track to surpass the annual record of $2.7bn in 2015, according to a report from tech market intelligence platform CB Insights. The bulk of InsurTech deals since 2012 have been made in developed markets, although leading emerging markets, particularly China and India, are catching up. Respectively, those countries accounted for 13% and 10%, of InsurTech transactions in the second quarter of 2018 compared to 5% and 4% in the same period of 2013. According to EY, while new, sometimes disruptive, market entrants are starting to account for a larger share of sales, 83% of those made between 2012 and 2017 involved an established insurer or reassurer as a sole or joint investor.
Although the bulk of InsurTech investment has thus far been complementary, rather than disruptive, major technology companies are entering the market, particularly in rapid-growth economies such as China. For example, Alibaba, sometimes labelled as the Chinese Amazon, teamed up with Tencent, another Chinese technology giant, and insurer Ping An Insurance to launch the country’s first wholly online insurer, Zhong An, in 2013. Over time, it is likely that the biggest global tech firms will look to enter insurance markets in other advanced and emerging economies, either through their own well-established brands or through joint ventures with established insurers. An August 2018 survey by US-based marketing research company JD Power found that one in five US consumers would be willing to purchase home insurance from Amazon or Google.
Beyond China, the extent of InsurTech’s impact varies. Kheedhej Anansiriprapha, executive director at Thai General Insurance Association, told OBG that, “Online insurance sales account for a relatively small proportion of the market, with only motor and travel products being purchased online. For life and non-life, agents and bancassurance will be the vehicles for distribution in the short to medium term.” By contrast, Mark Lwin, president and CEO of AIG Philippines Insurance, explained that some segments have already seen a big impact. “Technology has had a broad and deep effect on retail and high-volume insurance segments, such as life and consumer insurance,” he told OBG. “However, the commercial segment in the Philippines lags globally and has not undertaken major investments in ICT or digitally enabled products and capabilities.” Thailand is one of the more developed insurance markets in South-east Asia, with a penetration rate of 5.3% of GDP in 2017. This compares favourably to Malaysia (4.8%), Indonesia (2.4%), Vietnam (2.1%) and the Philippines (1.8%), suggesting that InsurTech could play an even stronger role in driving catch-up premium growth in less-saturated markets.
InsurTech adoption varies across Latin America. A notable success in Brazil – the largest economy in the region by far, with insurance penetration of 4.1% in 2017 – is Bidu. Established in 2011, the company has been a pioneer in selling online insurance to final consumers, mainly in the non-life segment. Adoption is somewhat slower in Mexico, where insurance penetration is lower, at 2.2%, though market players expect uptake to increase.
Speaking about the expected impact of technology on the insurance sector, Juan Pablo Murguía, CEO of Murguía, an insurance and surety bond broker in Mexico, told OBG that the introduction of core business systems such as customer relationship management, data analytics and portals will have a dual effect: to provide a more comprehensive and efficient system for all actors, and to increase transparency and accountability throughout the entire value chain.
Middle East & North Africa
Both insurance penetration and digitisation rates vary across the region, registering higher rates in the Gulf than in North Africa. Some North African countries are tapping into InsurTech to help drive premium growth. Philippe Vial, administrative director-general of La Marocaine Vie, a local life insurer and subsidiary of the investment management multinational Société Générale Group, said bancassurance holds a competitive advantage owing to the contacts that it has made with customers. “These contacts constitute an asset in that they provide us with personal information that helps us to better serve our customers,” Vial told OBG. “The optimisation of these assets is one of our major priorities in the coming years.” By contrast, the use of technology in Algeria’s insurance sector is in its infancy, though some ground has been broken. Youcef Benmicia, CEO of Compagnie Algérienne des Assurances, an Algerian non-life insurer, told OBG that the firm has “introduced e-payments and bank card payments for insurance premiums, SMS notifications of contract expiry and online subscriptions for some types of insurance”.
While South Africa’s insurance market is already relatively saturated, there is considerable scope for growth in West and East Africa. In Ghana, market players are particularly confident in the potential of digitisation to drive premium growth. “Digitisation is needed to help customers apply advanced payment techniques, such as staggered premium payments,” Esther Osei-Yeboah, managing director of Imperial General Assurance, told OBG. “By removing the feeling of a bulk payment, staggered payments will increase uptake of insurance products.” Bode Oseni, managing director of local insurer RegencyNem, added that premiums are already advertised, sold and collected by telecoms companies in the country. “Mobile money is helping to increase the penetration rate, particularly in rural areas. Premiums are already advertised, sold, and collected by telecoms firms.”
With the largest population and economy in Africa but one of the lowest rates of insurance penetration, Nigeria also has enormous potential. Adebowale Banjo, general manager of global distributor of insurance products AutoGenius, told OBG that, “WhatsApp coverage has provided a great way to distribute insurance online, as most Nigerians already understand and trust the platform. ‘WhatsApp Insure’ has been a very effective tool for delivering vehicle licence information, insurance certificates and e-payment links,” he said.
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