AI will transform the re/insurance industry: Aon
Digital transformation is sweeping across the re/insurance industry, and the Asia-Pacific region is rapidly catching up. However, the trajectory in the region is uniquely shaped by its regulatory environment, John Morley (pictured), growth lead in Aon’s Strategy and Technology Group in Asia-Pacific, told Intelligent Insurer.
Morley highlighted that the regulatory environment in different countries can be a significant driver of digital transformation. The vast diversity within the Asia-Pacific region, ranging from the technologically advanced markets of North Asia (such as Tokyo, Japan, and Korea) to the less sophisticated Southeast, paints a diverse picture. “There are huge differences,” Morley observed.
The existence of more lenient regulatory regimes in Southeast Asia means there is a “polarised diversity”. Traditional entities still rely heavily on paper-based processes, whereas new, digitally-native entrants, unencumbered by outdated systems, can rapidly adapt and distinguish themselves. As regulations begin to tighten, Morley said, “we’re seeing those more digitally native insurers come to the fore”.
Zooming in on the current market conditions in the Asia-Pacific, especially from a reinsurance viewpoint, Morley says the environment is challenging. “It’s difficult to call it a hard market,” he said, but conceded that determining the right price is an ongoing challenge.
“To navigate this, insurers are retaining more risks and devising innovative ways to manage capital,” he suggested. “In recent months, we’ve looked to set up internal reinsurance vehicles for insurers.”
Capital management isn’t the only hurdle, however. With a plethora of insurers targeting the same segments, especially the small to medium-sized enterprises (SMEs), setting oneself apart is tough. Morley noted the SME sector, while underinsured, is a challenge to penetrate, with every insurer attempting to tap into its potential.
No drastic shifts
Morley expects the current market conditions to persist in the upcoming renewals. He doesn’t foresee drastic shifts but remains optimistic about Aon facilitating constructive dialogues between insurers and reinsurers to reach mutually beneficial outcomes.
Tackling the topic of underinsurance and its resultant low penetration rates, Morley said: “Low penetration doesn’t automatically translate to heightened competition.”
Citing Indonesia as an example—a country with low insurance penetration but brimming with insurers—he emphasises the growing focus on efficient pricing and leveraging technology for quicker market response and capturing growth.
“We’ve seen a lot of companies looking at pricing, how they can price more efficiently, how they can effectively differentiate themselves and move more quickly in terms of changing prices in order to seize market share and growth. That is certainly something where technology can play a huge part,” he said.
The quality of data, Morley stressed, is paramount, especially in the realm of commercial insurance and reinsurance. The challenge lies in elevating data capabilities and “applying technology to make better decisions more effectively to hit your growth and strategic ambitions”.
Data is so valuable
Morley is unequivocal in his prediction about artificial intelligence (AI): “In eight to 10 years’ time, AI will have transformed the industry. We can’t put that genie back in the bottle.”
He is equally vocal about the challenges AI presents, especially concerning data privacy. “For Aon, our data is one of our most valuable things, and for many others as well. Their data is hugely valuable. It’s a differentiator.
“When you put it into these data languages how do you prevent your data leaking out into the public domain?” he asked.
“It is important to take an ‘extranet’ approach to ringfence that data, and make sure we have robust governance around that,” he said. “Things such as robotic process automation, offshoring, and outsourcing will also be hugely challenged by AI,” he noted.
Morley revealed that Aon is already exploring use cases, particularly in policy administration and claims processing to replace that with AI models to enhance operational efficiency before venturing into more complex areas.
Beyond AI, Morley highlights the ongoing shift towards cloud technology. He said: “The early adopters have already been through it and a lot of lessons have been learned. “Now’s the time for the smart followers to come through and actually apply some of that technology in a way which can be differentiating for them.”
Morley suggests that now is also the time for insurers to make informed technology investments. “But without breaking the bank in terms of huge amounts of costs.”
On Aon’s future plans, he shared: “We are looking to expand across Asia-Pacific. We have a presence in Singapore and Australia. We’ll open capacity in Hong Kong, which addresses the life side as well as the general insurance and commercial insurance side.”
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