Insurance technology (insurtech) has been on the rise for several years now in the Association of Southeast Asian Nations (ASEAN) due to the region’s digital transformation policies. According to the National Association of Insurance Commissioners (NAIC), it involves innovations that affect the entire insurance value chain, such as underwriting, claims management, life and health policies, and other areas.
Many industries are now comfortable with digital payments, which are part of financial technology (fintech) solutions. Insurance tech is a subset of fintech and integrates with other services to provide a one-platform app for addressing challenges like paying premiums. The global Insurtech industry, to which APAC contributes significantly, is expected to increase at a compound annual growth rate (CAGR) of 36.52% from $10.53 billion in 2022 to $14.37 billion in 2023. Regionally, the Asian-Pacific Insurtech Market was expected to produce revenues over USD 4000 million, with a CAGR of more than 7%.
We look at the role of digital lending platforms in preventing scams in Malaysian society
Insurtech in Southeast Asia benefits from a tech-savvy population seeking digital solutions, citizens who like convenient services, and the spread of internet-capable smartphones. Moreover, many residents—especially in rural areas—need affordable and accessible insurance solutions, and digitalisation is helping to make it a reality. Insurers can offer discounts, incentives, and loyalty programs to reward customers through mobile applications.
Some key players in the insurance sector in Southeast Asia include:
bolttech
Singapore-based bolttech aims to have an insurance ecosystem and operates in 30 markets worldwide. It simplifies purchasing covers, making them more accessible and user-friendly to customers.
Singlife
Another Singaporean company is Singlife, which provides life insurance to high-net-worth individuals. It offers wealth management solutions through innovative digital solutions and is regulated by the Monetary Authority of Singapore (MAS).
Sunday Insurance
Thailand-based Sunday Insurance uses artificial intelligence (AI) to offer health policies and other insurance products. It adopts video solutions like telemedicine and provides seamless cashless transactions at hospitals and other locations.
Opportunities and challenges for insurtech in Southeast Asia
Southeast Asian insurance technology companies face many regulatory and economic challenges. Even though governments are providing funding for startups at a time when investors are tightening their purse strings, founders still have to deal with prohibitive and oppressive regulations. For example, some policies may increase taxation, meaning businesses will earn less revenue than expected, hampering their cash flow.
Furthermore, there are lingering supply chain problems due to geopolitical conflicts in Europe, Asia, and the Middle East. Russia and Ukraine are still in battle after a year, the United States and China continue to argue over Taiwan, and Israel is locking horns with Hamas in Palestine amid background rumours of eventually going to war with Iran.
These geopolitical tensions prevent the free flow of goods, damaging international import and export businesses and heaping pressure on insurers to cover the losses. Plus, it means that venture capital (VC) firms and investors need to earn more money to help struggling businesses. Many are keeping a hold on their investment funds while waiting to uncover startups with good governance and policies that can help them succeed in insurance and other industries.
Insurtech companies are also dealing with negative perceptions. Customers are wary of using brand-new, untested solutions in an industry they are already suspicious of. Sales approaches, unclear information, inadequate insurance packages, commission-hungry brokers, high premiums, and insufficient payouts deter many Southeast Asians.
Climate change is another challenge that poses all sorts of problems for insurers in ASEAN. It threatens business continuity, increases premiums, creates cover pricing issues, and opens up an avenue for fraud with false damage claims from startups. There is also a lack of underwriting experience—evaluating risks to protect customers—for insurtech companies trying to manage emerging clean energy sources.
Finally, digitalisation brings issues of data collection, storage, and privacy. Customers must be confident that insurers will keep their information safe and that their financial details will be processed securely. Since the COVID-19 pandemic, cybercriminals have spread online, and the insurance industry is vulnerable to those threats as it stores health, professional, financial, and personal details.
The potential and scope of insurtech Southeast Asia
With insurtech growing, insurers can find solutions to many problems affecting ASEAN. For example, it can help to study data and establish which insurance policies are working or what modifications are required. Reviewing the data can highlight and enhance the understanding of risk and help mitigate it.
Insurers can encourage sustainability by offering discounts to customers using eco-friendly policies in their operations. It can provide affordable covers for green products, vehicles, and machinery powered by renewable energy sources, such as wind farms. Plus, the insurance sector in the region can use blockchain to create smart contracts to pay claims automatically when they meet pre-written conditions.
Overall, the industry has the potential to improve access to insurance and provide affordable solutions to urban and rural residents. The key will be to work with stakeholders and policymakers to establish rules and regulations that support innovation, funding, and research, which will help insurtech in Southeast Asia to thrive.