7 minute read 6 Oct 2020
asian businesswoman reading emails on smartphone on escalator

Four insurance market scenarios accelerated by COVID-19

By Brandon Bruce Sta Maria

EY Asean and Malaysia Insurance Sector Leader

Passionate about assurance and insurance. Diversity and inclusiveness warrior. Husband to a lovely wife and father to three wonderful boys. Avid dog walker and runner.

7 minute read 6 Oct 2020

A conversation starter for Asia-Pacific insurance executives seeking to innovate for the future.

In brief
  • In order to start preparing for this reality, insurers will need new alliances and partnerships to expand existing digital capabilities and foster innovation.
  • Different types of insurance such as new snack-sized offerings embedded in a customer’s daily life will emerge.
  • Collaborations with ecosystem players will result in deeper and more data-driven customer relationships.

Asia-Pacific, and particularly Asean, has never been more in need of an innovative insurance industry. With unsurpassed ability to understand and model risk, insurers have a critical role to play in helping society prepare for and protect against the threats presented by the current pandemic, climate change and social unrest.

The industry has many strengths to leverage, including strong capital positions, decades of risk and claims data, well-known brands and a profitable customer base with relatively low propensity to switch.

However, it also has many challenges. Consumer trust has been slipping and could erode further. Legacy technology needs significant updating, and the workforce requires new skills and higher levels of engagement. As Asean insurers try to shake off the notion of being digitally inert, it is important that they seek talent which will be able to help the industry move swiftly yet carefully into the digital age. In this respect, there is a great need for the insurance workforce of tomorrow to think strategically and adopt innovation-centric ways.

To start addressing some of the issues faced and transforming their operations, insurers need a vision for the future. The following four scenarios reflect our thinking about future developments that have been accelerated by the COVID-19 pandemic. Many of the issues are already influencing C-suite and board-level decisions. Soon they will become operational realities. Which of the region’s insurers will be ready?

1. Direct, digital and embedded sales dominate channels

The pandemic may have the effect of accelerating the decline of the traditional agency model. Now that the region’s consumers have discovered the simplicity and control of online insurance, direct and digital channels are expected to dominate the mass market, dramatically lowering transactional costs.

Embedded sales will also grow as more companies selling products and services seamlessly offer insurance at an attractive price, generating additional revenue.

The transition to direct, digital channels will occur at different rates in different countries. From a broader Asia-Pacific perspective, China which is already among the most digitally advanced markets, will see rapid innovation and sophisticated hybrid strategies. In markets such as Asean, whilst insurers explore the best opportunities for digital distribution, the agency model will remain viable for now, with agencies consolidating to control market share.

However, the remaining agents will need to embrace digital. Insurers will need to equip them with digital tools to match consumer demand for convenience. In the future, agents will embrace next-best-action analytics and once-and-done processing. They will deploy mobile technologies to enhance sales and service experiences.

As they help agents go upmarket, insurers will benefit from lifetime premiums generated and durable customer relationships built on financial well-being.

2. The tech giants weaponize data

The market entry of tech giants, with their broad consumer data sets and experience of monetizing insights, now seems inevitable.

These platforms enjoy high engagement levels where insurance purchases could be easily added as a feature within existing shopping experiences. Their ability to generate high volumes of customer traffic and create superior customer experiences will be extremely difficult (if not impossible) for incumbents to match.

The pandemic has focused consumers on the need for more flexible insurance. Many insured cars sat undriven for months during local and national lockdowns. How many people wished they had the option of pausing their insurance payments during this time?

By using AI within the context of existing platforms, tech giants can launch and scale insurance-as-a-service models and subscription-based products offering clear price transparency and high degrees of personalization.

Given the industry’s high barriers to entry, the tech giants will likely engage insurers with regulatory experience, seasoned books, years of data and nationwide claim networks.

Smaller insurers may be able to white-label products to be sold through embedded channels. Other insurers may provide advanced skills (such as specialized underwriting) that tech giants don’t have or can’t easily develop. We have seen this already happening in the more advanced markets in Asia-Pacific. Asean continues to move in this direction, as more and more, insurers begin to see the benefits of tapping into established ecosystems, tap consumer data and provide bespoke insurance solutions.

3. Auto insurance contracts dramatically

Ironically, COVID-19 has been kind to auto insurers. Fewer cars on the road has meant fewer accidents and lower claims ratios. However, the new work-from-home trends introduced by the pandemic are likely to enhance the region’s love affair with ride sharing, creating an enormous potential negative impact on future property and casualty (P&C) revenue. Many auto insurers in the region have since moved to offer flexible pay-as-you-drive cover options, given the new norms.

Some insurers will exit the auto business. Others will adapt by providing new types of insurance products for ride-sharing services and passengers – and autonomous vehicles when driver-assisted and driverless vehicles share the roads.

In making this transition, insurers’ product innovation capabilities will be severely tested. They will need to rapidly adjust premiums based on vehicle safety features, fewer claims arising from distracted driving, hybrid products that cover a mix of vehicles for a household or business, and coverage for both ride-sharing drivers and passengers.

Leaders will engage with autonomous vehicle manufacturers and ride-sharing platforms to provide real-time risk insights that direct cars and trucks where riders need them and along the most efficient and safest routes.

4. The subscription revolution arrives

Insurance subscriptions – effectively "on demand" insurance – are attractive to many consumers and businesses because of their easy and convenient bundling of holistic services.

Many subscriptions will be provided by ecosystem partners, making sure the customer is continuously thinking about their insurance needs. In this scenario, insurers will serve as concierges, connecting consumers to complementary service providers aligned to life or lifestyle events, big and small.

For example, with cycling becoming an increasingly popular weekend activity, we may see increasing consumer appetite for "snack sized" insurance whenever someone is embarking on a long bike ride. This type of "immediate coverage" service can be white labelled and embedded in GPS cycling apps, or marketed as a branded offering, with members benefiting from preferential rates.

In Singapore, a leading local insurer is currently offering a one-of-a-kind product that meets the digital lifestyles and ever-changing needs of consumers. This offering is an excellent example of how consumers can link their daily life activities to the purchase of a range of micro-insurance products via the use of a mobile application.

The product allows for the build-up of coverage whilst having the flexibility to manage an insured’s protection portfolio. Rising affluence and a sizeable Gen Z population – the digital and social natives - should give Asean insurers great impetus to push these types of innovative ideas and solutions out to the market. 

Insurers already operate somewhat like a subscription service, with regular payments and auto-renewals. In future, they will need to engage with consumers more often and through new channels, embedding the purchase of insurance into the consumers’ lifestyles. By partnering with new ecosystem players, they will gain deeper and more data-driven customer relationships.

How should insurers prepare?

To capitalize on these trends before they become mainstream, insurers will need new alliances and partnerships to expand capabilities and foster innovation as they seek to adopt:

  • A mindset change – Today’s strategy needs a rethink. It’s time to start thinking about how the world is changing and how customers are viewing insurance. This is the moment for business leaders to step forward and drive innovation.
  • Full digitization and mass automation – To participate, insurers must modernize their core systems for straight-through processing, use AI for claims processing and prepare to engage customers wherever they may be in social and mobile channels.
  • Data and analytics in everything – Insurers need the ability to rapidly assimilate internal and external data and make it available to data scientists and business analysts. Top performers will have hundreds of predictive models to optimize everything from pricing to claims to customer acquisition.


The future of insurance will include direct and digital channels and new snack-sized offerings embedded in a customer’s daily life, curated through ecosystem players. Transitioning to this future may see insurers collaborating with tech giants or other digital partners, digitizing their operations and learning to make better use of data.

About this article

By Brandon Bruce Sta Maria

EY Asean and Malaysia Insurance Sector Leader

Passionate about assurance and insurance. Diversity and inclusiveness warrior. Husband to a lovely wife and father to three wonderful boys. Avid dog walker and runner.