Swiss Re: Asia’s insurance players target health industry in 2024

In Singapore, shifting focus to health underscores the need for insurance players to close the protection gap that has remained unchanged in the last 5 years.

Over the past five years, Singapore’s economically active individuals have experienced unchanging mortality protection and critical illness (CI) gaps. To address this stagnation, the insurance industry is called to develop tech-driven insurance programmes that boost health protection.

“Health is definitely a top strategy for many of the key players who are very active in Asia,” said Daisy Ning, who heads Swiss Re’s Life and Health for Asia Pacific (excluding China).

“You can imagine all the big names who are active in Asia and the Chief Executive Officers (CEOs) would tell you the top strategy is health. I definitely see in 2024, there will be a lot more movements and progression in the health protection space,” added Ning during her interview with Insurance Asia.

Delving into the transformative role of technology in reshaping the landscape of insurance in the region, she emphasised the challenges, innovations, and future trends in the industry — from enhancing affordability to addressing protection gaps.

The mortality protection gap in Singapore stood at SG$373b (US$279b), representing 21% of the mortality protection needs for the economically active (EA) population, according to the 2022 Protection Gap Study done by the Life Insurance Association (LIA).

This gap, which considers insurance and savings, has increased in absolute terms since LIA’s previous study in 2016.

However, as a proportion of mortality protection needs, the gap has remained relatively stable between 2017 and 2022. The apparent stability is attributed to an overall increase in income levels, leading to higher wages, savings, and insurance coverage.

The report emphasises the importance of individuals regularly reviewing and updating their financial planning to align with evolving insurance needs.

Meanwhile, the CI protection needs of the EA population is SG$783b (US$586b), translating to an overall CI protection need of 3.9 times annual income.

The CI insurance coverage, including individual and group insurance CI coverage, is estimated to be SG$204b (US$152b), leaving a CI protection gap of SG$579b (US$433b).

Compared to the previous study in 2016, there has been an increase in the absolute amount of CI protection needs.

However, the CI protection gap as a percentage of protection needs has reduced from 81% to 74% between 2017 and 2022. The reduction is mainly attributed to an increase in CI coverage, which has grown by 67% since 2017.

Despite the influx of capital, the primary objective remains clear: to reduce loss ratios and enhance cost efficiency throughout the value chain, Ning said.

Challenges in tech-driven insurance

Recent technologies play a pivotal role in achieving these goals, which can further reduce the loss ratio and increase costs for insurers.

“I believe it’s about a 3% to 8% reduction in loss ratio, and also a 10% to 20% gain in cost across the rest of the value chain,” Ning said of the potential impacts of technology in the insurance industry.

She stressed that technology is pivotal for better decision-making, utilising alternative data and analytics to enhance both business decisions and customer experiences.

She also noted a trend where companies create their own apps from digital platforms. “A lot of companies now are producing their own apps right out of digital platforms, partnering with some health and wellness providers to make the insurance experience richer,” Ning said.

Swiss Re’s Magnum automated underwriting tools, developed over two decades, exemplify the industry’s commitment to leveraging technology. These tools automate the underwriting process for simpler cases, and the automation trend extends to the claims process as well.

Despite the strides made in technology, challenges persist, particularly in Asia.  The quality of data in many markets is still in the developing stage, posing a significant hurdle.

Ning acknowledged the importance of high-quality data, emphasising that the output is only as good as the input. “The quality of the data sometimes is what we struggle with. Just like the saying ‘garbage in garbage out’. You have to have very good quality data in order to have a quality assessment,” she told Insurance Asia.

Achieving higher straight-through processing rates requires a nuanced approach to risk assessment and a greater focus on building underwriting capabilities whilst incorporating artificial intelligence (AI).

“On the automation side, we are getting more policies. Through it, on the underwriting side, we’ll have what we call straight-through processing. This means in many markets, many policies can be automated automatically – underwritten by a machine,” Ning explained. On average, this covers about 60% to 70% of applicants that approach insurers, she said.

“What a lot of companies now are working on is to improve that straight-through processing rate. Some have very big ambitions to say, to go above 90%,” Ning said.

But achieving this involves strategic thinking on risk assessment, expanding underwriting capability, and harnessing artificial intelligence for automated underwriting. These challenges, as she mentioned, reflect the industry’s ongoing efforts to streamline processes and leverage technology for efficient operations.

One typical example of this challenge is the foray into financial reinsurance or capital-motivated reinsurance. These structures unlock capital for insurers, enabling them to fund growth initiatives.

Swiss Re’s recent ventures — such as the coinsurance funds withheld arrangement in South Korea with Samsung Life and the longevity arrangement in Singapore with Income Insurance — show the reinsurer exploring new avenues.

Collaboration shrinks the gap

As the conversation turns to addressing critical illness and mental health gaps, Ning emphasises the importance of partnerships with third-party providers.

Swiss Re collaborates with mental health providers like Wysa in Australia to expand provider networks, develop new products, and offer value-based models.

The company also engages in extensive research through the Swiss Re Institute, raising awareness about key health topics and contributing to the industry's knowledge base.

In response to a forward-looking question, the industry’s strategic shift to health should offer comprehensive services and protection coverage to consumers, addressing rising medical costs and the prevalent protection gap in many Asian markets.