INSURANCE | Contributed Content, Hong Kong
Jonathan Zhao

A six-step framework for strategic change


Across the diverse Asia Pacific region, a number of forces are converging to create a pressing need for insurers to innovate throughout their entire value chain: premium growth is slowing, even as new markets open; consumer demands for digital products and services are increasing; competition within, and from outside, the region is growing; and regulators are developing more complex rules to protect consumers and reduce market risks.

Major factors likely to impact the Asia Pacific region’s insurance market in 2016 and beyond include: changes in regulatory and economic environment; increasing levels of technological innovation and urbanization, and the rise in consumer wealth. Inexorable changes in the insurance market will compel insurers to embrace innovation and find new avenues to growth and profitability. Asia Pacific insurers will want to apply the following framework for strategic change in order to gain the upper hand to adapt to this new environment. The six step framework is as follows:

1. Accelerate the shift to online and mobile access
With mobile technology expanding across the region, Asia Pacific insurers will need to extend their digital presence and reconsider how they interact with customers and handle internal processes.

The priorities around this would focus on: a) A shift from a transactional to a relationship perspective by the personalization of sales and marketing strategies to enrich the customer experience; b) Rethinking products and customer interactions for the digital marketplace which will require insurers to reimagine their products and services and to recast many aspects of their business to become more customer-centric; c) Expanding beyond traditional insurance services by refocusing their internal business units insurers will uncover new opportunities for expanding customer relationships.

2. Build business through health market innovation
The demand for private health coverage will increase due to greater regulatory pressures and consumer awareness. Asia Pacific insurers will want to take advantage of this opportunity to expand their private health insurance business and generate new premium growth.

Key priorities include: a) Moving from a product to a service orientation as insurers will want to change their roles from sellers of insurance products to active health risk managers and advisors; b) Leveraging partnerships to provide a stronger value proposition–this could be new strategic partnerships with other healthcare services or via non-traditional partners; c) Embracing wearable technology - wearables will likely help health insurers to promote wellness and measure risks more accurately.

3. Identify M&A and alliance opportunities
Asia Pacific insurers will want to put particular emphasis on careful partner selection and post-merger integration to confirm their M&A activities succeed. Key priorities include: a) Building an effective post-merger integration plan, especially where M&A activity crosses borders or regulations change during an acquisition; b) Exploring alternatives to M&A– strategic goals can be accomplished through acquisition alternatives; c) Being on the lookout for opportunities in emerging markets.

4. Transform underwriting and pricing analytics
Asia Pacific insurers will need to respond to changes in the insurance risk landscape and customer expectations. In order to achieve this, insurers may prioritize: a) Staying on top of risk patterns and alternative risk management solutions; b) Leveraging new sources of data and analytics, such as pay-as-you-go and pay-how-you-drive insurance products, the trend toward usage-based insurance and custom-tailored products is expected to grow rapidly in Asia; c) Capitalizing on regulatory changes–such as the liberalization of insurance pricing seen in Malaysia and South Korea.

5. Reinvent operations to reduce costs and drive growth
Top-performing Asia Pacific insurers will need to transform their operations to provide an integrated customer experience across all channels and customer touch points.

Key priorities include: a) Speed transformation through shared services and outsourcing; b) Enhanced efficiencies through digital technology - Asia Pacific insurers have access to a growing array of technological solutions for improving processing efficiencies; c) Transform operations to address both changes in regulatory and customer requirements.

6. Set corporate governance as a strategic imperative
Governance plays a pivotal role in helping to identify hidden risks and finding solutions, as customer expectations continue to increase, demonstrating strong governance will be a competitive advantage to attract new customers. Key priorities include: a) Strengthening corporate governance; b) Building better governance through people by attracting, developing and retaining people with requisite skills for implementing and managing new governance systems. 

The views expressed in this column are the author's own and do not necessarily reflect this publication's view, and this article is not edited by Insurance Asia. The author was not remunerated for this article.

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Jonathan Zhao

Jonathan Zhao

Jonathan Zhao is the Asia Pacific Insurance Sector Leader at EY.

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