As promised, today I’d like to share with you couple of insights relating to key trends that will shape Asia Insurance Tech (InsurTech) in 2017. Being totally immersed in the Asia InsurTech ecosystem this is not a theoretical exercise. It is rather a results of countless hours of work with insurers, startups and conversations with regulators and investors. As always, thanks for reading and I’m keen to hear your thoughts!
An Influx of Overseas Startups to Asia
European and US startups having reached the Series A funding milestone will quickly look at securing expansion opportunities in Asia. With their home markets going through a period of political and economical instability, attractive opportunities in Asia are going to be hard to ignore;
Chinese mega-startups like Zhong An and Ant Financial will look at taking advantage of expanding Chinese economical influence across Asia to explore limited digital insurance pilots across South-East Asia;
I wrote about it in more detail on Forbes here.
Digital Takes Front Seat For Insurers
Digital insurance moves from a realm of an experiment to an agile and vertically integrated business units with a dedicated profit and loss responsibility (P&L). Reflecting strategic importance, team reporting line changes from a Chief Distribution Officer (CDO) directly to the Chief Executive Officer (CEO). Internal digital champions are given access to high potential talent pools and are groomed to lead the digital insurance units. Aggressive growth targets and clear mandates from Board of Directors (BoD) means digital units can effectively cut through the internal roadblocks to start actively pursuing new areas of growth.
Corporate – Startup Collaboration Flourishes
The Return On Investment (ROI) of existing in-house corporate innovation models is facing increased scrutiny; substantial investments made in innovation over the last two years have largely struggled to delivered results. Hence, this exposes the challenges of the insurer’s ability to produce impactful digitally enabled models within the organisations’ innovation labs.
While most corporates are giving up trying to “own” or produce their own innovation, they are growing to appreciate the complementary strengths that startups offer them– agility, velocity, risk tolerance and perseverance. Corporates are thus quickly gearing up for collaboration in both terms of technical interfaces (APIs) as well as internal cultural readiness.
At the same time, corporates are beginning to realise that working with startups is nothing like working with a typical technology vendors; where previously it was mostly projects with clearly defined delivery outcomes and small armies of hired hands (consultants) supporting them – working with startups is a total different ballgame. Collaborations are multi-outcome growth experiments and the only way to do them right is through continuous direct engagement and repeated practice. That very ‘practice’ cultivates critical internal skills among the employees and department. There are some fringe benefits too; the close working relationships also increase startup “empathy” among corporate digital champions which in turn, enables more effective collaboration models.
Exponential Growth of Investment and First Round of Asia Exits
As Asia’s InsurTech market starts to achieve its initial scale – supported by the influx of overseas startups together with maturity of homegrown players – we are likely to see the first wave of exits. The two likely candidates will be Zhong An through a listing in China and CXA through an acquisition. This will in turn fuel exponential growth of investments and attract further entrepreneurial interest in starting insurance related ventures.
Insurance Jobs Will Be Lost At Exponential Pace
Pressure on legacy insurance business models intensifies due to the combination of a continued global low interest rate environment, accelerating loss of revenue to digital channels and further margin erosion as price competition increases.
The sheer scale of upcoming change is dawning on insurers. A senior C-level executive at a large global insurer recently shared a comprehensive study– across our global workforce concluded that 60% of current skills will become completely obsolete within five years. McKinsey & Co. concurs with a recent projection that 25% of insurance jobs will soon disappear. The future reality means that there will be an upcoming combination of massive skills upgrade, change of jobs and redundancies.
This legacy change pressure cooker combined with the allure of entrepreneurship, we will see a certain share of insurance talent coming out this year to try a hand at entrepreneurship through – either starting a venture or joining a successful startup.
While 2016 was the year of laying the foundation, 2017 is the year the relentless forces of digital disruption land in Asia. Impactful startups working in tandem with digital-ready incumbents will begin to re-shape the landscape of regional insurance. Together they will build the ground floor of insurance 2.0 and ignite InsurTech growth in Asia.
Exciting times guaranteed ahead!
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Originally posted in: https://www.linkedin.com/pulse/2017-asia-insurtech-predictions-george-kesselman