Headwinds, tailwinds and crosswinds
Asian insurers are well ahead of much of the rest of the world in their willingness to adopt new technologies including artificial intelligence (AI). But the use of such technologies also comes with searching questions for the industry, Stephen O’Hearn, global insurance leader, PwC, told SIRC Today.
He said that consumers in Asia are very comfortable using technology and many companies are less burdened by older systems that can be difficult and costly to replace. “Asia is sprinting ahead of the rest of the world on the digital customer experience,” he said.
O’Hearn explained that Asian consumers are more comfortable transacting business using mobile technology than those in the western world. The average Chinese person spends four hours per day on the WeChat app and they’re not just surfing the internet, they’re conducting real mobile transactions, payments, investments and, increasingly, insurance, he added.
Equally, Asian insurers are less burdened with legacy systems, which is a huge challenge for their western counterparts and an inhibitor of the type of agile digital experience being offered in Asia.
In addition, the regulatory environment in Asia is more accommodating to the digital customer experience, seeking to foster the insurer-consumer relationship.
“Regulatory sandboxes have been set up to allow for experimentation on lightened conduct expectations in a controlled environment and there seems to be less concern with privacy in Asia than in parts of the western world,” O’Hearn said.
He said the main focus of insurers in Asia has been on investing heavily in the digital customer experience as well as in data analytics and means of capturing data such as sensors and drones.
“While the cost agenda is less of a burning platform in Asia than in the west, we see some investments addressing costs. Robotics is being used in finance to connect disparate systems and AI is being used in the underwriting and claims processes to allow simple judgements to be made by machines, freeing up the time of experienced professionals for the more complex cases,” he said.
In terms of the motivation behind this transition, O’Hearn said there are two priorities driving the innovation agenda in today’s insurance world.
The first is cost. “Never have we seen this industry as focused on its cost structure as it is today. The lingering low interest rate environment and the soft non-life market have created a significant cost focus, and while labour arbitrage can be of some benefit it’s recognised to be a temporary solution.
“The more permanent, lasting benefit is technology-enabled efficiency through robotics and AI,” he said.
The second driver is the customer experience. “Customers are demanding an almost retail-like experience with their insurers today and that’s a wonderful thing for the industry.
“We’ve been content for centuries with a once-per-year interaction, but consumers are willing today to engage with pay-as-you-go insurance models. Technology enables that increased (and improved) level of interaction.”
Embracing technology also has many challenges. “The regulatory concern is privacy,” O’Hearn said. “In particular, the worry is that insurers become so precise in their risk assessment that those who need insurance the most can’t get it.
“The concept of insurance is pooling risks and providing protection to large numbers of insureds. With the precision afforded by data analytics the concern is that the pool of risks can be sliced very finely and insurers can more accurately shy away from risks they deem undesirable.”
He added that IT security and cyber risk are also a worry.
“With the volumes of personal wealth and health data in the systems of the insurance industry, they are of interest to hackers, so IT security is of paramount importance.”
PwC is investing heavily in the skills necessary to advise its clients on the deployment of emerging technologies for all the opportunities discussed: the consumer experience, the cost agenda, and the risk assessment process.
“These are exciting times and we’re thrilled to be supporting the growth and prosperity of our clients,” O’Hearn concluded.
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PwC, AI, SIRC, Stephen O’Hea, Asia, insurtech, technology, cyber risk, insruance