Sharing insights from a quick-scan on technology trends in the regional insurance industry

Digital technologies, such as machine learning and blockchain technology and the increased interconnectivity of technology through the Internet of Things, are impacting the way insurers do business around the globe. While some people may think that InsurTech has not yet reached the shores of the Pacific, a recent survey amongst insurance providers in the Pacific shows that some of these companies are at the forefront of these trends. They are already integrating these technologies to seize a competitive advantage and build scale, whilst at the same time improving their customer service.

The Pacific Financial Inclusion Programme’s (PFIP) Inclusive Insurance Specialist, Michael Carr, surveyed the Pacific insurance industry to get a better understanding of how insurers operating in the region look at key technology trends in their industry and to learn more about what changes they expect from the adoption of these technologies. And to explore what impact these technologies are having on product development, distribution, operations and the nature of competition in the Pacific region.

Using a mixture of face-to-face interviews and email questionnaires we sought feedback from insurance companies operating in the general and life sectors in Fiji, Samoa, Papua New Guinea, Tonga, Vanuatu and Solomon Islands. From their feedback an interesting picture emerges.

Incorporating InsurTech

We asked insurers which developments they expect to have the biggest impact on insurance businesses over the next three years. 60% of respondents ranked “digital platform technology”, such as smartphones as the most important trend. Mobile based insurance has already ruffled some feathers in the Pacific market, but the rising penetration of smartphones is seen by many as an even bigger opportunity that goes beyond impacting their distribution. The data that these devices generate will also provide currently untapped opportunities in other parts of the insurance business, such as in the area of risk modeling and profiling.

Whilst the uptake of these types of technologies is steadily growing in the Pacific, some insurance providers report that they have already embraced this trend to improve their levels of customer satisfaction and to increase operational efficiency.

Most respondents are upbeat about the fact that these new technologies present them with a wide range of opportunities to improve and expand their businesses, and more importantly that technologies can positively differentiate a company in an industry and a market that is typically characterized as traditional and not usually known for innovation and being at the forefront of the latest trends in technology.

Tapping into new customer segments

The survey also brought to light the fact that many insurers see InsurTech opening the door to new prospective customer segments, most importantly Pacific households and businesses, that are currently not protected by insurance. In their responses, companies highlight that opportunities exist in various market segments, such as:

• The small and medium enterprises (SME) sector: A significant majority of insurers cite this as the segment with the best business potential to expand their operations, leveraging new trends in technology. SMEs provide insurers with a means to diversify; geographically as well as by business activity. This diversification enables insurers to increase their customer base in a controlled way, without the insurers becoming over-exposed to one type of business or a small group of clients.
• The growing middle class: As many Pacific economies are on growing, a middle class emerges that has more assets to insure; houses, motor vehicles or personal belongings. Assets financed by credit and bank loans will typically also need to be insured.
• Groups: Additional opportunities exist to use groups for insurance cover: employees, students, religious congregations, government officials, or trade associations and cooperatives. Applying technology for group schemes allows for more efficient sales and administration, which results in lower unit costs.
• Low-income populations: Microinsurance schemes, typically designed for low-income populations, are a niche opportunity that for long has seen little interest from the insurance industry in the region. However, two insurers are looking to develop new products and schemes targeting low-income Pacific Islanders and are working to leverage new technologies to work out a financially sustainable business case.

PFIP works closely with and supports insurance companies in the Pacific to jointly develop new insurance products, re-engineer business processes and create awareness and education campaigns to get more people and businesses in the region protected by insurance.

In the coming months, we will share updates on the roll out of two microinsurance based initiatives that use digital technologies to improve cost-efficiency and deliver scalable distribution channels.

PFIP is a Pacific-wide programme that has helped more than two million low-income Pacific islanders gain access to formal financial services and financial education. It does so by funding innovative approaches in development of financial services, supporting policy and regulatory initiatives, and empowering consumers.

PFIP is jointly administered by the United Nations Capital Development Fund (UNCDF) and the United Nations Development Programme (UNDP) and receives funding from the Governments of Australia and New Zealand and the European Union.