by Fred Hegner, General Manager Regional Health
A 2018 Asian study conducted by Swiss Re showed roughly 61% were overconfident in their health and not aware of major health risks. Fast forward to today, there is less overconfidence and more concern about health, particularly mental health. The early stages of the pandemic (January to December 2020) had life and health insurers on edge. It was all about loss-mitigation and ensuring that reserves were adequate for the increase in mortality and morbidity. As we move to the next phase of managing the pandemic, it is now about balancing reserves with the increased market demand for life and health insurance that offer protection. Risk assessment now factors in the efficacy data of vaccines to help stabilize reserves and allow for increased risk assumption. The next decade will be an exciting and challenging time with a lot of changes for the entire insurance industry, and by observing the existing and emerging trends, insurers will be able to navigate better for the future.
Today’s trends
Here are some of the notable trends that we have observed in the life and health insurance industry today:
Switch from a savings to protection role: Years of low and stagnant interest rate mixed with a resurgence in health awareness due to the pandemic has created a consumer mindset change. While life insurers can offer better interest rates for their single premium products than most bank deposits, customers are putting more of their money in the equity and bond markets due to better average returns. Customers are now looking at insurance to meet more of their protection rather than investment needs.
Switch from “pull” to “push” to retain and connect with customers: Insurers are actively pursuing digital strategies to “push” their products to supplement their traditional forms of agency and telemarketing distribution. Digital is no longer a buzzword among insurers as more are pursuing a “digital first” strategy and making it a core driver in everything they do.
Merger and acquisition activity is heating up: Diminished returns for smaller life and health divisions will lead to more exits. Many banks have offloaded their insurance divisions and insurers with high expense load divisions are selling these to private investment firms.
Capital markets are fuelling insurtechs positioning themselves to acquire or be acquired: The explosion of insurtech firms particularly in India, China, and the US have led to greater adoption of digital technologies across the insurance industry. Likewise, insurtechs have gradually become experts in insurance leading many to venture into the insurance business on their own or consider potential acquisitions with the help of venture capital.
Trends emerged as industry pivots
A closer look at the life insurance industry today reveals the following trends as the industry pivots from a savings to more of a protection role:
Unit-linked remains popular, but whole life and fixed-rate products are at risk: Whole life and fixed-rate products are losing popularity in favour of unit-linked investment products. More customers today are active investors in equity markets and want more choice and flexibility when purchasing life insurance.
Digital term life is on the rise: The advent of simple, cheap, and digitally transacted term life insurance has been popular in the US and European markets for several years and becoming more popular in Asia. Traditional insurers are creating new brands for digital life divisions and there is less barrier to entry into this market as it is more cost efficient to sell through digital means.
Health rider sales are on the rise but simple standalone products from non-life will cut into sales: Due to the COVID-19 pandemic, an increase in health awareness has led to more health rider sales for life insurers, but the general insurance industry is beginning to offer attractive alternatives without requiring a long-term insurance commitment. Products that are simple to understand, affordable and bite-sized in nature will appeal more to customers as they can choose what they really need without having to spend a fortune.
The continuing waves of the pandemic will keep health awareness and fear in focus to sell more life and health: Most countries around the world are now in their second or third wave of the pandemic. With each new wave, there will be new fears raised about life and health leading customers to re-assess their existing coverages and purchase decisions.
Market trends of the next decade
Let’s now switch our focus to the insurance customer markets. What are some of the key market trends that will impact the life and health industry over the next ten years? Here are some key ones that insurers should prepare for:
There will be fierce competition for the same customer in the digital era: Life and health insurers will focus on simplicity, price, accessibility, and necessity to attract their core middle-class Millennial segments that will make up the majority of their customers. The key is being able to attract these segments through creative digital marketing mixing social media with attractive product propositions.
Non-life companies with nimble and digital execution strategies will capture market share from life insurers: Smaller companies with nimble balance sheets can gradually eat into the life insurer market share. With the rise of health awareness due to the pandemic, smaller non-life insurers see this as an opportunity to tap into the Health market and offer health products through digital means.
The role of the life and health insurer will evolve from provider to partner: Keeping the customer engaged throughout their personal journey is key to building customer “stickiness”. Instead of just being a solutions provider, insurers will evolve to being partners to their customers, being with them along the way in their health journeys.
Trends to look out for
We have already mentioned the role of the insurtech firm over the next ten years as the insurance industry continues to transform itself. What are the key notables of the insurtech industry that should be monitored by insurers?
The insurtech industry is worth roughly 1.5 USD billion in 2021 : This massive amount of investment capital is clearly a sign of things to come. Insurtechs are leveraging their intellectual property (which is mostly in the form of people) to help insurers come up with effective and efficient solutions to minimize cost and capture market share.
Those insurtechs with access to the most data will have a competitive advantage: An insurtech’s intrinsic value to a life or health company comes down to two key things – how much data (or access to data) does the insurtech have and how accurate is it?
More insurtechs will be acquired by insurers to boost intellectual property: Insurers who have long-term relationships with insurtechs may decide to absorb them into their IT and digital studios. Those insurtechs with strong balance sheets and expertise in insurance may purchase smaller insurers to grow their business model.
Insurtechs will enhance data platforms for life and health: Life and health consumers increasingly willing to share data will see a big return in benefit. Life and health consumer loyalty programs will grow to the same popularity as airline and hotel point systems.
Products and distribution in the next decade
As we see new industry, customer, and insurtech trends developing, what will life and health product offerings and distribution look like over the next ten years? Here are some key predictions:
Life and health companies will have mature telematics for their industry: Lifestyle prediction underwriting and on demand products based on “shared value” data will become the norm. It is currently transforming the auto industry and it will help to transform the life and health industries as well. Currently there are innovative ways to pay for health insurance based on geolocation and usage. There will be new “pay as you go” life and health insurance products that will be readily promoted based on the consistent stream of new data available from customers. Underwriting will improve from the growth in data allowing insurers to proactively measure customers’ health for lifestyle products.
The agency role will dramatically change everywhere: Agency and some specialized brokers will decrease in number in many markets and redefine themselves. In some markets, they will become “digital extensions” of a smaller segment of customers instead of based on commission model.
Insurance marketplaces will become less specialized and fully enter the wholesale space: Wholesale insurance models will begin to take over some agency markets. Currently being experimented by Walmart, Amazon, and Alibaba, these wholesale markets will eventually become ubiquitous. In mature markets, more individual customers will purchase insurance wholesale or direct; wholesalers will develop group business arms that work with participating life and health insurers to quote.
Chronic disease protection and prevention will be at the heart of the value proposition: Those over 60 years of age will grow 50% by 2030 and chronic disease will represent 71% of total mortality. With dynamic risk prevention and marketing, life and health insurers are poised to capitalize on this segment if they start to properly plan for it now.
Protection gaps will continue to challenge public and private sector support: The life and health protection gap in Asia (forecasted at USD 119 trillion by 2030 ) will continue to outpace insurance penetration due to rising medical inflation and the public sector’s inability to fund healthcare in many countries. Pension funds will dry up and new group annuities will be considered and marketed by wholesalers to both the private and public sectors.
At Tune Protect, we are laser-focused on the trends that lie ahead for the health and life insurance industry over the next ten years. Prior to the COVID-19 pandemic, we had already committed to being a “digital first” company in anticipation of the trends that we have discussed here today. But being digital focus is not enough to transform the industry. All industry players will need to closely lobby with policy makers, regulators, and other public and private agencies to help close the life and health protection gap around the world and particularly here in the ASEAN region. As an industry, we need to collectively raise awareness about the importance of health and life insurance to capture new segments of the market over the next ten years, especially the growing Millennial market who are in their prime time to plan for their future with the help of insurance.
Frederick Joseph Hegner (“Fred”) is the General Manager, Regional Health of Tune Protect Group Berhad (“Tune Protect” or “Company”). A seasoned industry speaker and writer, Fred is passionate about building the Health journey at Tune Protect which goes beyond just offering products and services, but being a dedicated partner in customers’ personal health.
