Executives can learn a number of lessons from Asia's recent boom in insurance. Henrik Naujoks and Harshveer Singh, partners with Bain's Global Financial Services practice, discuss the most important success factors for companies competing in this robust market.
Read the Bain Report: Making the Most of Asia-Pacific's Insurance Boom
Read the transcript below.
HARSHVEER SINGH: Henrik, welcome to Hong Kong. I am so glad that you have made the move to come to Asia.
HENRIK NAUJOKS: It's an exciting, bustling city. This whole region, Asia-Pacific, is the center of innovation for insurance.
I think the market environment here is very unique, and this has two aspects. One aspect is on innovation. I think the degree of innovation that I've seen with some leading players in this region is unbelievable. The second aspect is simply the growth aspect. And if I reflect, I have to say this is the most attractive insurance region globally. And this is triggered by three trends. One is basically the economic growth. The second comes along with that, the accumulation of wealth. You have the emerging middle class, and you know that in 2023, the wealth of the Asia-Pacific households will surpass the North American ones, which is quite impressive, and it's not far away. And the third is longevity, which results in a big protection gap in life. So all of that in combination calls out for an attractive region.
HARSHVEER SINGH: I've been watching this industry for the past 15 years, based in Singapore, working across APAC. The demographics are the most important difference. It's a much younger region, and the adoption of e-commerce and digital has been incredible. Openness to tech brands, supported by very friendly, benign regulators who are creating sandboxes for experimentation to happen. Hong Kong and Singapore are two prime examples of that. Attracting a lot of private capital, too; $4 to $5 billion of VC capital is coming to insurtech.
HENRIK NAUJOKS: Where are they investing, actually?
HARSHVEER SINGH: I would mention health as a key sector where data collection is allowing new licenses. At the same time, the newer digital insurgents are beginning to think just beyond risk and are starting to think ecosystem.
HENRIK NAUJOKS: This is one of the most important trends and answers of the industry to the challenges ahead. Because what we see, and you have just confirmed it, there is the risk of basically losing the customer to some of the other players, to platforms, etc. And we both know it's a low-touch industry. Therefore it's so important to redefine the customer relationship and to be not only a salesperson for products, but basically to offer solutions. I think then the whole notion of what insurance is will change. You have to go beyond insurance.
HARSHVEER SINGH: Right, and Henrik, what would you say are the pitfalls or lessons from European examples that our clients could take as they think about ecosystems? They're grappling with it, but it's not easy to figure out.
HENRIK NAUJOKS: No, and I think we have nearly the same situation in Europe. The first lesson is you have to answer some of the strategic questions up front. Why are you doing this? What is the strategic rationale? What is the path to monetization of this? What is your role, your envisioned role? Do you want to really set it up by yourself, which is possible for the leaders but not for the followers in the market? Or do you want to partner with some other insurers or with telcos or other companies, or do you want to simply participate in some of the existing ecosystems? Whom are you targeting? Are you targeting only your own customers or others? So this the strategic layer that is often not answered properly when you're setting this up.
The second success factor is be clear on the design, which services to pick, which interface, what kind of data strategy in order to get it right. And the third is, basically, where many fail: excellence in execution. Have you prepared the sales channel? Is it linked to your operations? All these factors are quite important, but what are other key success factors in this region?
HARSHVEER SINGH: Several lessons I would say people have to contend with right now, Henrik, and most CEOs are beginning to acknowledge. The first is the idea that you could plant flags across Asia and succeed is now past its prime. Focus on a couple of lines, figure out how to win in those lines across Asia in one or two markets and then replicate, replicate.
The second is customer centricity has to arrive, has to become the No.1 priority. The one thing that digital insurgents have is razor-sharp focus on customer, delivering simpler digital experiences. And the incumbents just have not retooled their touchpoints, retooled their product strategies, figured out omnichannel sales experiences. All of that is hard, and it has to be the No.1 priority.
And lastly, M&A has been a very dynamic deal space in Asia—$72 billion put to work—and CEOs have to contend with that. What would be the right M&A strategy for them? Which sectors, geographies do they focus on, how do they maintain the dividend policy? All of these, combined with the challenge from digital insurgents, are big, hairy issues to solve. And I am so glad that you're here in Hong Kong helping us address those needs.
HENRIK NAUJOKS: And I'm looking very much forward, together with you, together with the Asia-Pacific insurance team, to address these issues. These are exciting times.
The region offers huge opportunities for insurers, but the rules of engagement are rapidly changing.