Insurance technology (insurtech) is revolutionising Asia-Pacific (APAC), specifically Southeast Asia, by introducing innovative digital solutions to a traditionally conservative industry. Unforeseen circumstances can cause severe financial and medical hardships without the proper insurance coverage. The insurtech scene in Southeast Asia is heating up as a result of challenges such as the COVID-19 pandemic, which have made people wary and eager to acquire personalised insurance products and services.

Bain & Company’s 2019 report: Making the Most of Asia-Pacific’sAsia-Pacific’s Insurance Boom outlined several reasons for the growth of insurance in the region. 

To begin with, the rapidly expanding middle class demanded novel insurance options to meet the needs of their newfound lifestyle statuses. Second, the region’s digital transformation has resulted in the development of online services and ecosystems that are beneficial to the insurance industry.

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The upsurge in insurance has also been aided by deregulation in China and India.. Foreign investors can now financially back or merge with insurance companies because of the changes to the regulatory framework. Lastly, insurers are targeting markets that are demanding insurance solutions.

Despite the regional insurance sector’s expansion, insurtech startups in Southeast Asia face inherent challenges in the industry due to perception and product offerings. People have negative feelings about insurance, from the commission-oriented and salesy approach of insurance brokers to the lack of information on policy coverage. Furthermore, some insurance packages are insufficient because they don’t protect against every issue and the premiums are high, whereas the payouts can be inadequate.

Challenges for insurtech

Many of the industry’s current challeneges can be addressed by insurtech. There are many underserved people, with the majority unable to afford the services, while others cannot access them. Additionally, insurance companies fail to adequately inform customers about their services .

Evolving digital insurance solutions are causing problems for the sector as well. Technology is complex, and many insurance company employees and customers may struggle to adapt to online self-service features. Troubleshooting digital services can also be a nightmare, especially when dealing with non-tech-savvy customers.

Serving consumers using technology like chatbots can pose a challenge to maintaining the human connection that enhances user experiences with a company. People ask many questions before purchasing insurance, and it can be challenging to meet their needs at every stage of the buying process without an expert to talk them through the options.

Customer desire for human touch during their insurance-buying journey was highlighted in Money Smart’s Bots vs Bodies report. From the research, 91% were happy with advisor-assisted insurance purchases, whereas the overall satisfaction for customers using self-service was 86%.

Statista found that price was the most critical factor influencing their decision to purchase insurance for about 80% of APAC respondents. About 67% felt that the ability to handle the insurance purchase online was the second most crucial factor.

The future of insurtech in Southeast Asia

The goal of insurtech is to make insurance accessible, affordable, and uncomplicated. Taking into account the fact that what works in one area might not suit another country, the cover should be relevant to the people it protects. The pandemic has contributed to stakeholders changing their approach with innovative personalised solutions.

Embedded insurance—where insurance integrates with non-insurance services—provides timely coverage for customers in multiple industries. There are a few types of embedded insurance: soft embedded insurance, for example, travel insurance; hard embedded insurance, such as warranties; and invisible embedded insurance, where companies offer insurance cover for the product you purchase. Cover buyers can receive integrated omnichannel solutions like banking and insurance as a result of this microinsurance approach.

Moreover, the region’s growth of financial technology (fintech) startups has increased access to digital payments, making it easier and faster to pay for insurance. There is also an increase in mobile phone subscriptions and internet use, which is aiding the tech revolution in the insurance sector.

This tech revolution involves using AI, machine learning tools, and blockchain technology. According to McKinsey, up to one trillion devices will be connected by 2025, meaning insurance companies will have access to a phenomenal amount of customer data, which requires AI and machine learning to analyse and make predictions. The data will help determine insurance premium prices and understand client behaviour to boost service personalisation.

Insurtech startups in Southeast Asia will likely thrive in the coming years as customers seek to guard against unforeseen incidents. Startups need investment to address the challenges in the insurance industry, such as engaging underserved people. Partnerships, like the one between AIA Vietnam and eCommerce platform Tiki demonstrate the region’s potential for insurtech to thrive.

The insurtech scene in Southeast Asia needs to focus on improving its products, personalising its services, and addressing concerns about technology hindering human connection with customers. Legacy insurers should evolve by adopting digital solutions and combining them with their expertise to offer faster, streamlined, and efficient services.