I recently moved to Hong Kong to lead McKinsey’s insurance practice in Asia, after spending the past two decades working with multinational insurers based in Western markets. I’ve met more than 200 executives in the area in the past nine months to listen and know. In doing so, I was struck by the manner in which the carriers in this part of the globe lead the world on several dimensions while lagging behind others. Insurance in the emerging markets in Asia and insurance in the West, from my viewpoint, has a lot to learn from each other. This is a list of my comments:
Three Places Where Insurance Leads the West in Asia
Nearly all Asian executives are focused on development in my conversations to date — a sharp contrast to the West, where more conversations concentrate on optimization. Asian insurers are investing actively in growth by conventional expansion of distribution (agency and banking), product innovation, and new business development ( e.g., digital attackers). Although the underlying patterns of market growth in the West are somewhat different, carriers will adopt a more aggressive attitude of growth. To tap into latent, unmet consumer demand (i.e., mass customer segments) this will entail investment.
Relevance to the Client. Insurance, for example, has lost much of its appeal to mass-market customers in the United States. It is either a mandatory product (engine) or a product geared to high-income clients benefiting from tax benefits (permanent life or flexible annuities). In Asia, insurance is one of the key savings and safety mechanisms for mass-market customers (including private health insurance). Western carriers should learn from their Asian peers and vigorously adapt their plans to reclaim a critical role in mass-market clients ‘ lives. To challenge the asset management industry, that will require simple product proposals.
Asian insurance markets are developing at a rapid pace due to rapid economic growth and regulatory changes. Asian insurance companies have learned to make decisions very quickly and follow research, learning, and refinement approach to compete. A lot of Western carriers in Asia will be surprised at the “clock level.” They should benefit from this – and drive their organizations to speed up their own decision-making processes drastically.
Three Fields in Which Insurance Companies in Asia Should Benefit From the West
As one example, the entire insurance industry in the US has a couple of hundred thousand employees. Asian agency powers are considerably larger — China alone has around eight million insurance agents. The level of professionalization in Asia, however, lags behind the developed world. In most of Asia, part-time and poorly trained agents are the rules. As consumers keep growing more sophisticated, Asian carriers need to upgrade their agency powers. They can learn a lot from the West in terms of training, building capacity, and ongoing performance- and compliance-management. Western carriers are now helping agents move from drug sellers to holistic consultants, which gives Asia a blueprint
The West is gradually applying data and analytics to enhance the efficiency and accuracy of decision-making in all elements of the sector. This has advanced in some cases to rely heavily on third party data. In Asia, data and analytics are less easy to use.
Carriers need to invest in their internal data assets ( i.e., more efficient data collection and storage), external third-party data integration, advanced analytics capabilities, and analytics software “last mile” adoption. In all aspects of the value chain, including pricing and underwriting, the productivity of the sales force, customer support, and claims, there is enormous potential for carriers.
Asian carriers in emerging markets should benefit from the insurers’ operational discipline. Western insurers have long concentrated on increasing performance through more streamlined operations, despite the prospect of slower development. Asian executives underinvested in the discipline and quality of operations. Finding hundreds of divisions or field offices with widely differing business procedures isn’t unusual.
This raises prices, offers suboptimal customer service, and creates a substantial risk of compliance. In the near future, Asian carriers will need to spend more time and resources on these issues. They should take advantage of the evolving new toolbox that incorporates digital, analytics, robotics, and NLP to reinvent customer and back-office journeys.
Despite underlying market disparities and competitive dynamics, insurance in Asia and the West has a huge opportunity to learn from one another.