THE INSURANCE INDUSTRY IN SOUTHEAST ASIA: EMBRACING TRANSFORMATION

 The insurance sector in Southeast Asia is undergoing significant changes to meet the growing market demands and sustain competitiveness. Despite facing challenges such as market complexity, legacy systems, and legal issues, the insurance industry is rapidly modernizing its operations.

Insurance technology (insurtech) plays a crucial role in reshaping the current insurance landscape, enhancing efficiency, and providing better customer experiences to support sustainable growth goals.

Insurtech seamlessly integrates insurance products across diverse platforms, including e-commerce, financial technology (fintech), and logistics. Physical stores can also become distribution channels to enhance product visibility and accessibility, transitioning offline users to online platforms.

Furthermore, insurtech facilitates the creation of personalized insurance products, addressing the specific needs of uncovered customer segments and efficiently managing risks arising from customers’ digital consumption behaviors.

Amid the continuous transformation of the insurance industry, Igloo, an insurtech company, highlights the major trends shaping the industry in 2024. These trends are expected to drive the efficiency of the insurance value chain, accelerate the growth of embedded insurance, and enhance personalization.

1. Data analysis supported by AI to enhance risk assessment capabilities

Artificial intelligence (AI) is becoming the backbone of the insurance industry, revolutionizing the analysis and risk assessment processes of businesses. According to Igloo, insurance companies will continue leveraging AI advantages to gain profound insights into customer behaviors, trends, and emerging risks. By harnessing AI’s power, insurance companies can improve risk assessment models, making pricing more accurate and responding better to market fluctuations.

2. Blockchain streamlining the claims process for convenience

The significant impact of blockchain in the insurance sector underscores its pivotal role in simplifying the claims process. The decentralized and transparent nature of blockchain ensures efficient transactions, prevents fraud, expedites complaint resolution, and reduces operational costs. This trend will continue revolutionizing the insurance industry by enhancing accuracy, reliability, and operational efficiency.

3. Zero-code platforms for rapid product market entry

The adoption of zero-code platforms accelerates the launch of new insurance products across multiple channels. These platforms enable insurance companies to develop, modify, and deploy applications without undergoing complex programming, significantly reducing the time and resources needed for product development. The ability for rapid deployment ensures insurance companies can timely meet market demands, offering diverse products that align with consumers’ increasing needs.

4. Digitization to enhance operational efficiency for insurance agents

As the insurance industry undergoes robust digitization, insurance agents also benefit from advanced technologies, improving operational efficiency and enhancing customer interactions. In 2024, insurance companies are expected to continue investing in digital tools and resources to support insurance agents, ensuring seamless communication, faster contract issuance, and improved personalization in customer experiences. The digitization of insurance agents also contributes to an overall positive customer experience, fostering loyalty and satisfaction.

5. Climate change mitigation through insurance

Climate insurance emerges as a crucial tool amidst the escalating frequency and intensity of climate-related events. As governments, businesses, and individuals grapple with the impacts of climate change, insurance becomes an essential instrument for managing financial losses resulting from climate-induced events, such as agricultural damage, infrastructure destruction, or personal property losses. This trend reflects a proactive approach to minimizing economic losses, aligning with the transition towards sustainability and resilience against climate uncertainties.

6. Climate change may triple global property insurance costs by 2040

Property insurance costs are projected to triple over the next two decades due to factors related to climate change.

Swiss Re, a leading reinsurance provider, conducted research to forecast the key trends shaping the industry until 2040. The study, presented at the annual Rendezvous September conference of reinsurance companies in Zurich, Switzerland, highlighted the increasing frequency and intensity of extreme weather events, rising sea levels, and wildfires as climate change effects that will significantly drive the demand for property insurance.

Swiss Re anticipates that this trend will further stimulate long-term transformations currently underway due to urbanization and increasing assets in emerging economies.

The research estimates that while the total costs for property and casualty reinsurance may double to $4.3 trillion, property reinsurance costs alone are expected to nearly triple.

With a value of $1.3 trillion in 2040, property insurance costs will constitute 29% of the total insurance costs, representing a 25% increase from the 2020 figures.

As more people inhabit cities and assets increase in emerging economies, there will be a growing need to protect more homes, infrastructure such as railway systems, power stations, and vulnerable structures. The total property insurance costs were valued at $450 billion in 2020.

Conversely, the scale of transportation insurance is projected to decrease from 42% in 2020 to 32% of total insurance costs by 2040, even though the overall insurance value is expected to rise.

This can be explained by the increasing affordability of vehicles in emerging economies leading to more people capable of purchasing cars. However, advanced technologies such as automated driving assistance or new forms of transportation such as electric bikes, scooters, and the emergence of shared ownership models are expected to reduce the demand for transportation insurance. The costs of transportation insurance are forecasted to double to $1.4 trillion by 2040, compared to $766 billion in 2020.