Asia Insurance Market Outlook 2023
If there’s anything that the transition into the new year reminds us, it’s that things don’t slow down. The insurance industry is no different. The last 2 years have been challenging for everyone and the early signs are that there are more testing times ahead. Across the world, geopolitical issues continue to dominate the news headlines and as the industry is so entrenched in the world economy, it’s usually never too far away from being directly impacted by current events. ITC’s Merlin Beyts has taken a look at those trends to see how they might impact the industry.
Challenging Global Economic Circumstances
While not as heavily impacted as Europe or the US, Asia still has some difficult times ahead. Growth is predicted to slow up for periods in 2023 and with challenges never too far away these days, carriers have to be prepared. While the Covid-19 pandemic started a wave of technology adoption and changing working norms, it’s arguably even more important to make the right technology choices for the right reasons. Optimising costs and efficiency is never a bad idea and with turbulence just around the corner, now may be the time to pull the trigger.
With each passing year, cyber gets more and more attention. And for good reason. Cyber attacks are becoming both more frequent and more damaging which means there is a great opportunity for insurers in Asia to provide a fantastic service to new customers that may turn into long-term ones. But it’s not just customers that insurers have to think about. While carriers do have to work on creating new cyber products for businesses, they must also protect themselves from ransomware attacks. With the insurance industry being older than most, there are huge data reserves that can be hacked into so effort also needs to be put into addressing the needs of insurers. There’s no doubt about it, cybersecurity is now a business risk as much as a technology risk.
Like much of the rest of the world, natural catastrophes in Asia are becoming more severe and more frequent. Extreme weather events present huge risks to businesses and workplaces as they affect the structural integrity of buildings and affect insurable assets. And they’re costing the industry a fortune. By November last year, natural disasters had cost the APAC region 50 Billion US Dollars and the protection gap was vast with only around 9 Billion USD being paid out in claims. Further reading into the data makes for even more worrying insight. According to a report by Gallagher Re, property reinsurance pricing on loss free risk and CAT programmes has risen up to 20% in some areas. Carriers need to get a handle on this fast as this could have a huge knock-on effect on reviews into how insurers allocate capital to potential risk pools and even departments.
Lastly, it wouldn’t be a proper trend report without looking at the consumer. Consumer behaviour has changed a lot and continues to change rapidly, although unfortunately with no difference in how they perceive the industry. There is still a lot of mistrust. Moreover, insurers are no longer judged against their competitors. They’re now judged against the experience provided by tech giants such as Google, Meta and Amazon. We all know how much blood, sweat and tears has gone into modernising the insurance industry from start-ups, incumbents, investors and consultancies. Yet many consumers are still yet to believe in the change. Insurers need to improve the perception of the industry to show customers that there are positive movements being made to genuinely improve their lives. With challenging economic headwinds globally, consumers are struggling. It’s therefore hugely important that insurers double down on efforts to improve customer experience to maximise customer retention. Pricing is obviously an important area to focus on but flexibility and humanising the experience to ensure customer satisfaction may be crucial to ensuring competitive advantage. As consumers start to become ever more discerning with their money, this could be a huge differentiator for carriers.
Overall, one might think the outlook is bleak for the year ahead. However where there are gaps in customer experience, there are also huge opportunities to serve and create genuine value for customers. With each passing year, more funding gets poured into insurtechs looking to create a difference and for carriers there lies huge potential in partnerships and collaboration. With tech innovation showing no signs of slowing down, there are also plenty of ways that insurers can invest to make sure that they deliver on and even exceed promises and expectations. Also Asia, it could be worse. Europe’s average inflation is 11.1 percent right now – the grass is not always greener on the other side of the world!