McKinsey says Asian insurers need to boost digital analytics to survive
EMERGING markets in Asia present a significant opportunity to insurers that are willing to adapt to the needs of customers and provide products and services tailored to local and individual needs.
Over the past decade, the region has been one of the fastest-growing markets in the world as far as insurance is concerned — although the quantum of the protection gap indicates that emerging markets are still significantly underpenetrated.
According to a recent report by McKinsey, Asian insurers need to take charge of the opportunity that lies ahead of them or lose out to fast-paced, digital-natives entering the insurance market to delight small customers just as effortlessly as they wow those that invest significantly in insurance policies.
“To remain competitive and sustain continued growth and market share, incumbent insurers must build their own digital and advanced analytics capabilities,” pointed out the report.
McKinsey said that its research shows that digital leaders increase revenue at five times the rate of other companies and total shareholder returns by two times — which is a significant motivator for business leaders to jump-start their digital projects and programs.
According to the think tank, digital analytics is a stepping stone to digital maturity and a significant first step on the digital transformation journey.
While it isn’t too late for those that are yet to get started, McKinsey’s consultants believe that leaders in the insurance space need to adopt a sense of urgency in order to leverage analytics to build scale and stay ahead of new-age disruptors.
In Hong Kong, for example, a new company Avo Insurance recently made a debut with support from the Insurance Authority in the country. Avo is a challenger in the general insurance space and could potentially disrupt millennials looking for interesting products to meet everyday insurance/protection needs.
To compete with companies such as Avo Insurance in Asian markets such as Vietnam, Hong Kong, Philippines, Indonesia, Malaysia, China, and so on, incumbents need to tap into their data repositories and find ways to inject digital analytics into everyday workflows.
In order to get started with data analytics, McKinsey provides two strategies for traditional players in the insurance space. The key to remember, however, is that the choice of strategy need not be mutually exclusive — companies could choose to pursue both simultaneously if they have the resources and capabilities necessary.
# 1 | Reinventing the core business
The report advises insurance leaders to re-evaluate their core business to identify areas where digital analytics can solve customer and operational challenges.
“Insurers that choose this pathway can become future-ready, modernize their operations to improve customer experience, and uncover innovative ways to use advanced analytics to more effectively serve customers.”
McKinsey points out that in Asia, especially in emerging markets, a majority of insurance companies deal with customers face to face — and hence, there should be a natural emphasis on the use of digital analytics to transform that interaction in a way that delights customers, boosts engagement, and helps foster a bond more quickly.
Further, using data analytics can help back-end operations to boost the TAT (turn around time) and SLA (service level agreements) that ultimately result in better services to the customer.
# 2 | Building new businesses
“Insurers that already have a solid digital foundation and the required capital can attempt to build new digital businesses in two ways.”
According to the report, the first revolves around mimicking the strategy that digital-native insurance companies use to disrupt the industry in emerging markets. This means, constructing a new value proposition that can be used to penetrate new customer segments.
The second approach involves expanding into new ecosystems. This requires traditional insurers to think about how they can use new information to offer different services to customers — of course, digital analytics plays a significant role when using this approach.
Overall, building a new business can provide significant benefits, especially when it comes to bolstering revenues in the digital era — it also means organizations need to establish a strong digital foundation before they invest in this strategy or route.
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