Monthly Newsletter - Insurance in Asia Issue 1 - October 2014 Editorial Vincent KASBI Head of Asia “ The evolution of the insurance market in Asia is driven by a combination of factors: the rise of the middle-class, urbanization and digitisation. The customers emerging from this evolution have new requirements, which in turn drive the strategies of insurers in the region. In this newsletter we share our insights on the industry’s hot topics and trends. tops & flops | September breaking news   ASEAN Insurance Council launches Singapore insurance summit (http://bit.ly/insurancesummit) Payment industry says ApplePay is great news   Hong Kong: winners of inaugural Hong Kong Insurance Awards unveiled (http://bit.ly/hkiawards) Buffet and Greenberg see insurance expansion opportunities in Asia (http://bit.ly/asiabuffett) Asia still has a huge catastrophe insurance gap (http://bit.ly/asiacatins)  (http://bit.ly/payapple)  ”  Reinsurers need to stop “Me Too” approach and be different (http://bit.ly/reinsmetoo) Expat investors launch suits against adviser, trustees and insurance firms (http://bit.ly/expatsuits)  Singapore op risk charge 16 times greater than Solvency II (http://bit.ly/sgoprisk) Sources: Asia Insurance Review, Bank IT Asia, Post Online, risk.net interview | Reducing the cost-to-serve  An insight by Victor Paraschiv, Senior Manager at Sia Partners Have you noticed different cost-to-serve levels between Europe and Asia? The level of maturity in Europe forces insurers to focus more on the cost side of the business equation: being able to serve similar products at a lower cost points gives more leeway in terms of either margin or discount. The Asian insurance market is dominated by ultra growth, where the top line is much more influenced by the distribution (its breadth and performance in turning over products) than by pure price comparisons. How can cost-to-serve support insurers strategic orientations? As certain product segments mature in some Asian markets such as Hong Kong and Singapore, the redistribution of focus from a top line growth to a bottom line growth, nimble insurance companies will deploy the re-align each product’s distribution strategy to it’s maturity level. Being able to monitor the evolution of cost will enable this gear shift at the right time and preserve their strength for battles on other fronts. Who is Victor? Experience: 13 years Languages: English, French, Dutch, Romanian Victor has led multiple business transformation programs, both on the business side (Target Operating model, business process,…) and the IT side (IT project portfolio management, architecture, system implementation,…). With a wide knowledge of Financial Service companies across Europe, the USA and Asia, he devises solutions from Front to back office. Does cost-to-serve still have a meaning in our digital times? Digital introduces new ways of working but also uncovers opportunities: to identify the customers and propositions which are less profitable (through data analysis) but also to increase the reach of products which have a high profit (faster distribution, omni channel, personalised marketing,… ) and the penetration of those in interesting segments (identified through big data mining). As such, Digital innovation empowers these actions. New York | London | Hong Kong | Singapore | Dubai | Abu Dhabi | Riyadh | Casablanca | Bruxelles | Amsterdam | Roma | Milano | Paris | Lyon CONFIDENTIAL © 2014 Sia Partners Website : http://www.sia-partners.com/us/ | Blog : http://en.finance.sia-partners.com/ 1 page Monthly Newsletter - Insurance in Asia Issue 1 - October 2014 “ digital | Apps are coming Who said that insurance is digitally lagging behind other industries? This sector can hardly be described as an ‘early mover’ and yet, with advances in mobile device technology, it is ripe for development. A new generation of technology-savvy users is inspiring P&C Insurers for car (telematics), home (domotics) and health (connected objects) policies. As full-web subscription raises regulatory issues (declarative data quality, fraud detection, reliability of electronic signature), current apps focus on pre-trade and post-trade services rather than on selling, such as self-care (belonging inventory, accident report) or selfmonitoring (Pay How You Drive). This nascent surge for digital within financial services reveals a global fear of cannibalisation of the in-store consumption. However, customers are not, as yet, ready to abandon their traditional buying habits. Digital strategists and branch lobbying will thus have to collaborate to devise an innovative mobile-centric third approach. The question might be: to app or not to app? YouDrive Conduite Connectee Home Gallery App Snapsheet GoodRide PRUproduct Pay How You Drive app Pay How You Drive app Inventory your belongings Capture images of a vehicular accident Help riders track their route, time and mileage Help agents in the CRM 2014 2014 2013 2011 2014 regulation | Taming operational risks Solvency II is moving beyond European boundaries, an example of which is the introduction in May 2013 of the Chinese Regulator’s (CIRC) C-ROSS framework (China Risk Oriented Solvency System). China is in a unique position, and faces endemic challenges: a sustainable premium growth (annual rate around 18% over the last 10 years), an increasing consumer demand for insurance (due to urbanisation, middle-classification) and regulatory strengthening. These factors prevent insurers from copy-pasting European Solvency II locally. C-ROSSininaanutshell nutshell C-ROSS 3 objectives: 1. Link more closely capital requirements to risks 2. Ensure China’s insurance industry solvency 3. Set up a supervision for emerging countries Tips to avoid the me-too trick: Institutional characteristic Pillar 3 Market discipline It is probable 2015 will be the year the rising Chinese insurance market becomes structured, and with this new strength China stands to take the lead in Asian for solvency initiatives. A pyramidal organisation: Pillar 2 Quanti. Identify cultural shifts Take into account market maturity gap Adapt solvency requirements to the capital injection needs Tailor ORSA-like requirements to Asian risk management processes Recruit local talents (actuaries, project managers) to make the change Pillar 1 Quali.      Supervisory foundations New York | London | Hong Kong | Singapore | Dubai | Abu Dhabi | Riyadh | Casablanca | Bruxelles | Amsterdam | Roma | Milano | Paris | Lyon CONFIDENTIAL © 2014 Sia Partners Website : http://www.sia-partners.com/us/ | Blog : http://en.finance.sia-partners.com/ 2 page Monthly Newsletter - Insurance in Asia Issue 1 - October 2014 this month, let’s focus on… | Harnessing convenience while serving customers Let’s be clear: Customer Convenience should not be understood as an umpteenth industry “revolution”, but rather as a fresh perspective on insurance, for both customers and insurers. In others words, Customer Convenience sounds like your Granma's secret recipe: “care about your customers” (with the proof being in the pudding). Recipe for a good Customer Convenience mix A pinch of Customer Centricity THINK CUSTOMER - Being customer centric means finding the most valuable customers and serving them with the best user experience on the touch points which matter most (from the client’s perspective). It means providing a constant interaction model (push/pull, seamless cross-channel), capturing the clients’ feedback and being innovation-responsive. A measure of Engagement WAKE LOYALTY UP - The main 5 considerations to engage your customer are the following: customize your offers/products, leverage mobile and geolocation, boost your CRM, trust and take advantage of social commerce, define your purpose and communicate it clearly. MAKE IT EASY – As the Rolling Stones would say – helping your customers find their satisfaction requires an understanding of their two types of need: the ones they are aware of and the ones they are not yet. Insurers have to identify and leverage these two categories to make their clients’ life easy: A dose of Satisfaction A quart of Data - Operational issues • Pre-transaction (seamless journeys, online quotes save-up, ROPO…) • During transaction (electronic signing, instore forms auto-filling thanks to online quotes…) • Post-transaction (cross-selling, up-selling, claims management…) - Communication issues (recommended communication channels adapted to call centres’ workload, web call back or chat, claims management optimization, information quest…) KNOW YOUR CUSTOMER - All roads lead to customer touch points. Insurers need to accurately collect, analyse and use their data goldmine. Historically at ease with handling data, the real challenge for insurers resides in data quality first and data leverage second. Zoom on… | the data quality challenge Common issues 1. 2. 3. Data quality level: often undefined and difficult to interpret A low level of data quality is expensive and is one of the biggest cause of scarce resources waste The supply of reliable information is critical 1. GARBAGE IN, GARBAGE OUT - Accuracy, completeness, accessibility: three challenges that insurers have to cope with to assess their consumer’s risk. Poor data quality lead to poor analysis and a mis-knowledge of customers, resulting in erroneous risk assessment and weak CRM. 2. THE COST THREAT - Large data quality improvement projects have a high, scary cost, when in fact leveraging existing databases and data warehouses can answer most insurers’ needs and lead to greater operational efficiency. 3. THE RIGHT APPROACH - Understanding what quality means to insurers is key to mitigating these issues. Defining data quality implies that insurers have to first refine their customers’ expectations on the one hand, the transactional and relational schemes they want to offer on the other hand. Only thereafter can insurers list the data they need and the associated levels of quality. New York | London | Hong Kong | Singapore | Dubai | Abu Dhabi | Riyadh | Casablanca | Bruxelles | Amsterdam | Roma | Milano | Paris | Lyon CONFIDENTIAL © 2014 Sia Partners Website : http://www.sia-partners.com/us/ | Blog : http://en.finance.sia-partners.com/ 3 page Monthly Newsletter - Insurance in Asia Issue 1 - October 2014 calendar | Save the date in October figures | The month digit 3.0% Is the average penetration rate of insurance in the emerging Asian markets, whereas this rate reaches 11.5% in Japan and South Korea (considered as advanced markets). 18th East Asian Actuarial Conference (EEAC) October 12-15th INSURANCE DATA & ANALYTICS ASIA 2014 October 14th, Hong Kong In 2013, the total Life and Non-life premium amount across Asias reached 1,086 USDbn, of which 62% was underwritten in the advanced markets (25% Non-life, 75% Life). How Can We Develop a Customer-Oriented Organisation and Deliver a Superior Customer Experience? (BritCham) October 21st, Hong Kong This balance is still slightly different in emerging markets (61%/39%), pointing to a sustainable growth in China and South East Asia in the Non-life industry, correlated to the emergence of a new middle-class. ASIARISK CONGRESS October 30th, Hong Kong Source: www.swiss-re.com one step further In your next Sia Partners Monthly - Offshoring in Asia / Reinsurance issues / Brokers in Asia… Digital - Sia Partners launches its Observatory of Digital Strategies (contact us for more information) Regulation - Hong Kong IA launched on September 16th a Consultation Paper on a Risk-based Capital Framework for the Insurance Industry (http://bit.ly/rbcframework) Our latest blog publications:  Singapore Regulatory Overview and Update - Second half of 2014 (http://bit.ly/sgregh2)  Hong Kong Regulatory Overview and Update - Second half of 2014 (http://bit.ly/hkregh2) Learn more about us We can partner your projects across business lines…  Risk management (regulation, actuary…)  Finance  Operations (claim management…)  Distribution 550 consultants 15 offices Established in 1999 110 M$ revenue Vincent KASBI Head of Asia [email protected] … from strategy to operations  Operational strategy  Business Analysis  Project Management  Change management  IT Strategy & Architecture Victor PARASCHIV Senior Manager Insurance [email protected] Charlotte MERY Sia Partners Monthly editor [email protected] ©Sia Partners 2014, All rights reserved New York | London | Hong Kong | Singapore | Dubai | Abu Dhabi | Riyadh | Casablanca | Bruxelles | Amsterdam | Roma | Milano | Paris | Lyon CONFIDENTIAL © 2014 Sia Partners Website : http://www.sia-partners.com/us/ | Blog : http://en.finance.sia-partners.com/ 4 page