Indonesian insurers told to walk the talk on tech: AXA CEO

The industry must tap digital distribution channels to unlock growth, according to AXA.

Indonesia’s insurance companies should invest in technology, boost cybersecurity and improve data management, according to AXA Insurance Indonesia’s top official, as the sector tries to unlock growth in a country with persistently low insurance penetration.

Insurers should continue improving their digital purchase and claim processes by carrying on with their digital transformation plans, Laurent Bourson, CEO at AXA Insurance Indonesia, told Insurance Asia.

“The global economic and health crisis caused by the pandemic has had a significant impact on the insurance industry, including AXA Insurance,” she said, adding that keeping up with the changing risk landscape requires “significant investments in new technology for all players.”

Indonesia’s insurance penetration was 1.39% at the end of 2022, according to the ASEAN Insurance Council, largely due to fewer than half of its citizens being financially literate. Top-ranked Singapore had 10.49%, Thailand 5.02%, Vietnam 2.51%, and the Philippines with 1.98%.

A 2023 survey by the Otoritas Jasa Keuangan (OJK), Indonesia’s Financial Services Authority, showed that only 56% of local insurance companies use information technology, whilst 38% have not fully embraced digital marketing channels.

Bourson said Indonesian insurers must adopt and use artificial intelligence (AI) to gain a competitive advantage. Here is the excerpt from her interview.

What are the barriers to IT adoption in Indonesia’s insurance industry?
The global economic and health crisis caused by the pandemic has had a significant impact on the insurance industry, including AXA Insurance. We are facing several challenges, including enhancing digital transformation, managing cybersecurity risks, improving data management and analysis, and adapting to a changing risk landscape. It will require significant investments in new technology for all players. 

At AXA Insurance, we aspire to be a market leader in terms of customer excellence through service digitalisation throughout the customer journey. Overall, our investments will be focused on changing our customer journey through an enhanced digital purchase experience, digitised post-purchase experience, smooth and easy claims experience, renewal experience, and building customer awareness through digital marketing. 

What best practices can be used in the Asia-Pacific insurance sector?
The application of artificial intelligence in the Indonesian insurance industry is still in its infancy. Nevertheless, the potential advantages are significant. Those insurance companies which can adopt AI successfully will gain a significant competitive advantage. 

Several insurance companies in Indonesia have begun to implement AI technology. These companies have leveraged AI to enhance operational efficiency, effectiveness, and competitiveness. 

The application of AI in the insurance industry is expected to bring significant benefits, including a healthier insurance industry in Indonesia, increased public confidence in the sector, and an incentive for players to expand insurance penetration in Indonesia. 

How is Indonesia’s regulatory framework evolving? 
It is important to stay informed on compliance and regulatory news, implement comprehensive training programmes, engage in periodic audits and assessments, utilise technology for compliance and regulation in operations, develop a robust compliance framework, encourage open communications, and stay proactive in compliance and regulatory matters in business. 

In Indonesia, I see that OJK as the regulator of financial services, including the insurance sector, is open to digitalisation and a change towards better customer service and customer data protection. This is proven by the initiatives from the regulator to initiate a regulatory sandbox for innovations, sharing sessions, and facilitating two-way discussions with industry players.

How is the regulatory environment for AI in insurance changing? 
In December 2023, the Indonesian Financial Services Authority published documents providing guidance on the code of conduct for responsible and trustworthy artificial intelligence in the financial technology industry to mitigate risks and optimise the use of AI in the fintech industry. 

It is essential to always maintain accountability, ensuring that organisations have robust mechanisms in place to monitor the decision-making processes of AI systems and accept responsibility for the outcomes. It is imperative that all industry-specific laws and ethical guidelines are always adhered to, particularly regarding the deployment of AI systems. 

It will be in a company's best interest to make AI processes transparent, easy to understand and explain to consumers and regulators. This should include providing clear information about the factors that influence the decisions made by the system. 

Last but not least, companies will need to ensure that the system is safe, secure, and robust. In that context, companies must implement robust security measures to safeguard sensitive information and maintain the integrity of AI technologies employed in operations.