Insurers must offer privacy on the back of personalisation

Industry experts at Insurance Asia Forum believe Thailand is bound for growth, but warn against data and health risks.

The Land of Smiles should expect a bright horizon ahead for its insurance industry as a favourable market environment could propel both the life and general sectors. Industry experts foretell market outliers and risks Thai insurers should anticipate amidst high anticipation for growth.

Thailand’s general insurance market is expected to experience a compound annual growth rate (CAGR) of 5.7%%, rising from $8.1b in 2023 to $11b in 2027 in terms of gross written premiums (GWP), as per GlobalData’s consensus.

Parallel to this, the Thai Life Assurance Association predicts a growth rate for the life insurance business in the range of 2.0% to 4.0%.

A Baker McKenzie outlook shared that the Thai insurance sector expanded by 4.5% in 2023, with total premiums in 2024 expected to reach $28b (THB1.0t).

Health insurance, driven by Thailand's ageing population and rising medical costs, has gained significant traction as well, and insurers are increasingly embracing environmental, social, and governance (ESG) principles.

Thomas Wilson, country manager, president & chief executive officer of Allianz Ayudhya Assurance, hinted that conservative investment strategies, innovative product offerings, and a customer-centric approach would propel the Thai insurance market to greater heights.

Wilson emphasised that the Thai life insurance market offers stability and opportunities for profitable growth, despite being a low-growth market overall.

“Since 2018, the life and health market has grown only 0.2% compounded in growth rates. So this is not in principle a high-growth market per se. I said that as a bright point, health has grown dramatically post-COVID because of increased awareness. But like any opportunity, there are challenges there because the health market has been impacted by heavy claims. I would say on the positive side, the Thai market is a stable environment within which to create value. The downsides tend to be a little bit in terms of health claims. It tends to be in terms of interest rates and the low-interest rate environment for the savings products,” Wilson told the audience at the Insurance Asia Forum held in Bangkok last month.

However, Wilson noted that this growth is not without challenges, such as heavy health claims and a low-interest-rate environment, impacting savings products. Moreover, competition remains intense, further complicating the market landscape.

To ensure both short-term profitability and long-term success, Allianz Ayudhya Assurance employs a robust asset liability management strategy. Wilson highlighted that the company is a liability-driven investor, focusing predominantly on fixed-income investments (90%), supplemented by real assets like REITs and dividend-paying public equities.

Personalisation versus privacy

Towards understanding the market characteristics of Thai people, personalisation does come in handy. In fact, six in 10 Thais are confident in sharing their data for a more personalised coverage, Capco’s 2023 survey results revealed.

Amongst the 1,000 polled policyholders, various methods of data sharing were considered, including fitness tests (46%), social media information (43%), and smart devices in the home (33%), Capco’s 2023 survey revealed.

This is why Thailand leads in the Asia-Pacific region for its high willingness to share social media data. Despite this openness to data sharing, key factors like value for money (52%), affordable premiums (38%), and brand trust (37%) remain significant influences on insurance purchasing decisions.

The survey targeted policyholders aged 18 to 65, capturing insights into consumer attitudes, preferred purchasing channels, and views on personalisation and data sharing. Notably, consumers expressed a strong desire for personalised insurance products, particularly in income protection, health, and life insurance.

Florian Magin, a partner at KPMG, delivered a compelling discourse on the enduring relevance of privacy in 2024. 

Whilst the Personal Data Protection Act (PDPA) has been in force for several years, data privacy remains as crucial and challenging as ever, particularly for industries like insurance that grapple with vast amounts of sensitive customer information.

Magin opened by addressing a common misconception: the idea that established privacy regulations like the PDPA mean businesses are fully equipped to handle privacy concerns. He emphasised that the reality is quite the opposite.

Privacy today is more critical than ever due to several factors, including stringent regulatory environments, reputational risks, and the complexities introduced by new technologies.

“And it’s not only that there is now recognition that there’s a continuous need for improvement of data protection capabilities, but we can also interestingly see that there’s also a consensus that the budgets for technology to support these compliance efforts should increase as well,” he told the Insurance Asia forum.

“So, you can see that 70% of the CCOs are actually expecting these budgets to increase, which makes sense because if we are dealing with all the challenges in this digital age, just using old tools and old technology is probably not going to get the job done very well,” he said.

Privacy management

With the advent of the digital age, new challenges have emerged. Companies are now dealing with unprecedented volumes of data, which often reside not only within the organisation but are also shared with external entities.

This data explosion brings numerous business benefits but also raises significant privacy implications. Magin stressed that data privacy violations can result in criminal charges. Beyond financial repercussions, there is a significant reputational risk.

When a data breach occurs, customer trust erodes, leading to long-term business disadvantages that can be far more damaging than immediate financial penalties, he said.

To address these challenges, Magin recommended several strategies for effective privacy management.

He brought to fore the importance of conducting privacy impact assessments throughout the lifecycle of any artificial intelligence (AI) solution, from design to deployment.

“Why do we need to perform multiple risk or multiple impact assessments? Well, because the model might change over time and we have to make sure we are constantly considering the implications that that has from a privacy risk point of view,” Magin said.

He then impressed upon forum attendees just how vital regular audits of AI systems and comprehensive documentation of their workflows and logic are.

“Auditing those systems will also provide a certain level of confidence that the system is actually working as expected, is fair and unbiased, and also is properly documented so that people can address the transparency and the explainability principle; because what is required in order to achieve that principle is to prepare easy-to-understand documentation of the way how the AI model, the AI system works,” Magin said.

He stressed that documenting the workflow and the logic of how the model is functioning is key to coming up with results and desired outcomes.

Outlook

Looking ahead, Allianz Ayudhya’s Wilson told the audience at the Bangkok forum that the future of insurance sales is via digital channels.
But whilst he acknowledged the potential of digital platforms, he also stressed that life, retirement, and health insurance products are primarily sold rather than bought.

“Now, whether that human and assistant sale is through a bank branch or whether it is through an agent, or whether it’s through telesales, we’ll continue to experiment in space,” said Wilson.

He also addressed the future product strategy, noting that the Thai market’s conservatism limits the scope for radical innovation.

KPMG’s Magin reiterated that whilst the digital age brings tremendous opportunities, it also necessitates a refreshed and rigorous approach to privacy.  Organisations must not only comply with existing regulations but also anticipate future legal requirements and evolving risks.

“The other thing that we always emphasise is to not go by the book like letter by letter but rather apply a risk-based approach to privacy that centres on the customers because in that way you can better bridge the balance between good customer experience as well as still being in a defensible position from a PDPA, from a privacy law perspective,” Magin said.