Why embracing changing consumer demands is critical to boost opportunities for insurers in Southeast Asia

With rising prosperity, burgeoning aging populations, and increased incidences of natural disasters, there is a swelling demand for savings and protection in Southeast Asia, creating opportunities for insurers to grow and create value.

In brief

• Emerging markets in the Southeast Asia offer growth potential due to low insurance penetration, rising awareness, and favorable demographics.
• Insurers in the region are adapting to changing circumstances by embracing digital sales platforms and remote signatures, among others.

Southeast Asia remains a target expansion market for global and regional insurers, with the region’s economic growth among the fastest rising in the world but a large sector of its population remains without an insurance cover.

Singapore aside, the life insurance penetration in the region is low, at approximately 1.1% to 3.1% of gross domestic product across the different countries. Non-life insurance penetration is even lower at just 0.5% to 1.3% across the region. Combined with rising prosperity, aging populations and increasing occurrence of natural disasters in the region, these trends underpin increasing demand for savings and protection across Southeast Asia and create significant opportunities for growth and value creation for many insurers.

Different markets offer various growth opportunities

Across the region, emerging economies, such as Vietnam, the Philippines and Indonesia represent the markets with the biggest growth potential, driven by low insurance penetration, rising consumer awareness and favorable demographics.

• In Vietnam, the compulsory feature of insurance in motor and professional liability lines is expected to propel growth in non-life, while universal life continues to generate increased demand among consumers.
• In the Philippines, microinsurance is driving the increased penetration with insurers partnering with telco firms to provide cover via mobile phones, for example, offering accident and health and online travel policies that cater to largely rural and low-income groups.
• In Indonesia, there are huge opportunities in Takaful (particularly life), driven by growing awareness among customers (the largest Muslim population globally) and government support for the Islamic financial industry.
• Recognition of the size of the protection gap, especially around catastrophic events, is also expected to boost demand for property and casualty (P&C), with governments pushing for more public-private partnerships with the establishment of catastrophe insurance facilities such as those in the Philippines, Indonesia, and Thailand.
• Infrastructure protection is another growth area, with governments, such as the Philippines and Indonesia investing more in infrastructure projects which are expected to act as a catalyst for the long-term growth of the property, construction, and engineering insurance segments.

The COVID-19 pandemic has heightened consumers’ perceptions of risk across all markets, highlighting the need for more financial resilience and access to health services. As a result, there is increased demand for life and health products which are designed for all consumer segments, whatever their situation, life stage or coverage requirements.

• In Thailand, for example, the country’s aging population gives significant growth opportunities for insurers to offer retirement products; while in Malaysia, there’s regulatory growth focus on providing simple products targeted at the bottom 40% of the income group. 

Overall, across the region, near-term prospects of premium growth in both the life and P&C sectors are positive, as emerging markets avoided the full brunt of the economic slowdown. Increasing risk awareness, improving financial literacy, and evolving regulations will further underpin the prospects for growth, despite macroeconomic uncertainties.

New value propositions needed

But potential alone is not enough. To succeed in these markets, insurers need to re-design their propositions in the face of emerging risks and developing trends, particularly around changing customer preferences.

The pandemic has triggered a paradigm shift in consumer purchasing behavior with lockdowns pushing shoppers toward e-commerce platforms to access a broad array of goods and services and demand more digital solutions.

While traditional distribution channels remain highly relevant in the region, we’re already seeing insurers shifting to digital sales platforms and remote signatures to adapt to changing circumstances. In Indonesia and Vietnam, we’ve seen insurers launched self-service digital portals and new digital products in partnership with banks and e-commerce platforms.

Across the region, insurers also launched mobile apps for their health care offerings as well as to enable end-to-end consumer services virtually.

In terms of product innovation, we’ve also witnessed insurers providing tailor-fit coverage for younger consumers as the region’s median age population is just 29.6 years1. For example, a life insurer in Malaysia is offering a protection plan for the age group between 19 to 30 years, to provide them with coverage for multiple life events, including accident, disability, and medical emergency, among others.

Insurers have also expanded partnerships with non-financial service players to provide coverage through embedded insurance. An insurer in Singapore collaborated with a telco firm to launch mobile phone protection offerings to complement existing home, motor, and travel solutions. The same insurer also forged new affinity partnerships with a capsule hotel provider and insurtech firms to offer bundled insurance solutions on their platforms.

We’re also seeing this in emerging markets, such as Vietnam wherein a national telecom player partnered with global insurtech company to provide insurance products through the telco’s customer app.

These developments have been aided by new regulations across the different markets, lending a more supportive environment for digital transformation, thus, making them more attractive for insurers. 

• In Indonesia, there’s a new circular which aims to bring online sales and operations of third-party distribution platforms or aggregators under a regulatory ambit. Moreover, it requires insurers and their digital distribution platforms to provide better customer services and data protection.
• In Vietnam, the new Insurance Law provided general regulations for the sale of insurance products via online channels; and in Malaysia, the regulator recently issued a discussion paper on Licensing Framework for Digital Insurers and Takaful Operators to attract digital players. 
  

Nevertheless, much more work remains to enhance and integrate digital channels and to become truly customer-centric.

Going forward, we expect significant new products, services, and value propositions, as well as richer, omnichannel experiences for all customer segments. Insurers, who make the most of these opportunities, will make much more sophisticated use of advanced technology, with increased digitalization helping to reduce costs at the same time as it enhances customer experiences. Workforces will be considerably leaner and feature new skills and talents; and distribution networks will be remixed.