Struggling insurance companies in Asia Pacific will continue to face tough times in 2013, according to analyst firm, Ovum. However, investing in technology can reduce the impact of a difficult market by driving down costs and improving productivity.
Barry Rabkin, Principal Analyst of Insurance Technology at Ovum claimed the growing middle class in emerging economies is the only positive macroeconomic factor in Asia Pacific for insurers.
“A perfect storm of global events, the western recession, and incoming regulation means the industry must now adopt a technology-centric business model if they are to survive,” Rabkin said.
Insurance companies can navigate these challenges by ramping up technology investment – especially in relation to the regulatory challenges ahead. To deal with an increasingly difficult regulatory environment, Rabkin said “analytics can – and should – be used to determine if the insurance company is complying with insurance risk-based capital requirements.”
With ongoing regulation reforms throughout the Asia Pacific region expected to continue, insurers also need to be aware of the implementation of the European Solvency II regulation (implementation date for 2015/ 2016). Global insurance companies face mandatory compliance with these standards to operate in Europe, which will in turn affect insurers operating in Asia Pacific.
Longer-term, Rabkin warns insurers will need to start preparing for further regulation now. “The International Association of Insurance Supervisors (IAIS) has proposed a global regulatory framework called ComFrame aimed in particular at ensuring that multinational and global insurers can be effectively managed and policy holders protected,” Rabkin said. “While this initiative is unlikely to come into effect within the next five years it does highlight the irreversible trend towards pan-regional and global regulation of the insurance industry.”
According to Rabkin effective use of analytics can resolve these regulatory challenges. The move towards risk-based capital models will require insurers to have detailed understanding of all the risks associated with their liabilities, and hold funds to cover extreme circumstances. This will pose a substantial big data challenge for the unprepared, Rabkin said.
Technology can also help insurers with customer-facing applications, Rabkin predicts. “Analytics can help shape new products by better understanding customer needs and expectations, particularly by capturing and measuring the sentiment from customer commentary,” he said.
Rabkin continued, “insurers have to provide best-of-class customer service the few times their customers do interact with them.”
