Now, more than ever, the entire insurance industry requires leadership from its distributors, as well as that of insurers. The whole nature of how insurance policies are developed and sold is changing, and the policy distributor should have a greater say in how the policy is shaped and what it delivers.

Historically, retail insurance is a product-push sale, where the product development is performed by the insurance company with some input from the distributor and nil to minimal input from the target customer. Insurance companies control the product proposition.

In Southeast Asia today, policies are sold by a web of agents, brokers, banks, non-bank affinities and increasingly direct to consumer. To illustrate: a bank’s relationship manager may offer insurance products on behalf of the insurance company. When the policy is sold, the bank and by extension the relationship manager make a commission from the insurance company.

The model is changing. In 2021 in Singapore, a third of new business was derived from channels not tied to representatives, with the remainder of new business arising mostly through bank representatives and financial advisers.

How change is coming

With the COVID-19 pandemic, digital transformation in insurance became about how the policy is sold, rather than the policy itself, or the premium.

From product push, the industry is moving to embed products by offering end-to-end distribution solutions and increasingly, ecosystem solutions. However, the promise is yet to become an everyday reality.

Currently, transformation is, by and large, occurring by verticals. Only a few insurance ecosystems truly work as an ecosystem – motor or health insurance. The travel insurance ecosystem and niche ecosystems, such as within Islamic Takaful operating in Malaysia, are developing.

Products are becoming inclusive, personalized, or designed to support prevention and cure. Health insurance in the past has been about financial compensation in the event that something happens, but today it needs to be more inclusive. One in two employees in Asia say they highly value insurance coverage for mental health, yet only 1 percent of insurers in Asia regard mental health provision as a key priority, despite the clear consumer need.

Data as the differentiator

Data has the capacity to bring together unlikely bedfellows like Barclays and Vodafone, who teamed to offer broadband and reduce credit card churn. Vodafone had data and Barclays had a solution to convert data into value. Similarly, we see bank+retail+insurer collaborations supporting targeted propositions.

The party with the data (acquired through customer engagement and a trusted relationship with the customer) can make the most difference as they serve the customer end-to-end. But all too often, they prioritize making a buck over putting that data to better use. What they sell may yield a tiny amount of claims (profit for the distributor and insurer), yet properly leveraging the data could help develop products that benefit the entire value chain, including the end customer.

The Ping An Group uses its data to hyper-personalize services. With over 500 million app users, less than half of users are considered customers (for example, a user who owns a policy). While their primary business is to sell life and health insurance, Ping An also offers health care through Good Doctor, a digital medicine group; a bank for deposits through Ping An’s bank, or customers can invest through Lufax, their wealth advisory agency. They can buy a car or sign up for educational services, funding their payments through Ping An’s consumer credit department.

Through a large user base, they source new customers – around 37 percent have contracts with more than one subsidiary, putting Ping An around 20 percentage points above the average cross-selling rate for insurers in Asia, illustrating how data can grow a company and diversify its services when data is applied holistically.

Data analytics becomes useful when it helps identify people of similar risk profiles, and peer-to-peer insurance (P2P insurance) works best with such groups. P2P insurance is where groups of people pool capital, effectively self-organize and self-administer their own insurance. In most cases, a percentage of the premium or payout is charged as a management fee. For instance, “Warikan” Insurance, Japan’s first P2P insurance, sees members pay a premium in a particular month if claims were made in the previous month (e.g., if somebody was diagnosed with cancer).

Another trend is the use of data and relationships to create end-to-end ecosystems, in which every part of the insurance value chain is engaged and works cooperatively. Ecosystems will drive growth, and we already see that the host of these ecosystems can come from outside of the insurance sector – the owner of the data. Organizations want to benefit their customers and employees with products that improve overall wellbeing.

Successful insurance ecosystems will offer wins not just for end-users, but for all participants. Their value grows as more people and institutions join the ecosystem, which is why it is important to maintain neutrality or be agnostic. All players should benefit.

For all this to happen, a sea change needs to occur in leadership. Distributors need a say alongside insurers as to how insurance is created and distributed.

Peter Miller is the Chief Executive Officer at Fermion Group.

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