Insurance markets around the world are not immune to the impact of digitization and advances in technology. In fact, according to the 2016 EY Asia-Pacific insurance outlook report, insurers are being required to innovate quickly to improve products and service standards, formulate cyber insurance policies, and minimize facility and operational costs. What impact is this having on the insurance industry in Hong Kong and how can the city’s insurers keep up with the latest trends?
The changing consumer mindset
Compared to 20 years ago, when many viewed insurance purely as a risk transfer mechanism, the sector today is being rapidly shaped by changing customer needs and demands. Younger buyers in particular have different requirements when it comes to insurance products, expecting them to offer a return-on-investment (usually through additional benefits) rather than just a transfer of risk.
On top of this, the rise of mobile users in Hong Kong and increasing popularity of sharing economy services, such as ride-sharing, are having an impact on customer needs. Buyers now expect policies that are flexible and allow them to make changes instantly. For example, when sharing rides, consumers expect to be able to change aspects of their policy – such as the number of passengers in the car – instantly via an application in their phone.
To cater to these changing needs, insurers are increasingly working with external partners to put in place systems that offer a better view of customers and insights into how they can best be served. Some are also experimenting with FinTech solutions to enrich their services and deploy a faster and cheaper insurance experience. Those who are adapting and offering new services are fast pulling ahead of the competition.
IoT is changing the game
Whilst there has been much discussion about the potential impact of IoT solutions on a variety of industries, players in Hong Kong’s insurance sector have been quick to implement device-led initiatives for their customers.
Take for example the recent rollout of Manulife MOVE that integrates an activity-tracking program on a user’s phone with insurance solutions, rewarding active customers with discounted premiums. Accessible via mobile apps and online, when Manulife MOVE users reach simple goals they enjoy premium discounts tied to health related policies in Hong Kong. This shows that, when done right, IoT can equip insurers with the capability to precisely calculate the individual risk levels of buyers.
Despite the far-reaching benefits of IoT, many insurers are still finding it challenging to widely implement it. This can largely be traced back to cost, with the current price tag for IoT devices still too high for many. Insurers need to evaluate whether it will actually be cost-effective to employ these products in situations where the premium values are calculated to be low.
What the future holds
Over the coming years, the insurance industry is likely to become increasingly automated. Analytics will be much faster and take place even closer to real-time. The industry will also become more connected to our daily lives and commercial operations – allowing unprecedented precision in the calculation of individual risk assessments. As such, the price people will pay for insurance will become highly customized and based on their individual risk profiles.
The growth of the sharing economy will also continue to impact the sector. We can expect to see a rise in ‘micro-insurance’ – short-term policies that cover specific services or risks, such as ride-sharing. Most prominently, insurance companies in APAC will continue to face challenges from stringent regulation, growing competition and tightening margins.
Insurers will also continue to focus on innovation, establishing partnerships with external suppliers and specialist companies to provide the additional non-insurance benefits that their customers now expect. These partnerships will be interconnected at a digital level, as the economics will not allow service provision to be delivered in any other way. In the fight to increase market share and defend margins, we will also see a large number of insurers shifting away from self-hosting and instead look to outsource to third-party data center providers such as Equinix.
Ultimately, those who can keep up with changing consumer needs and aren’t afraid to embrace the changes being brought about by new technology will be the ones that stand out. To be successful, Hong Kong’s insurers need to focus on improving product offerings and gaining customer loyalty while remaining competitive and efficient.
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