The View From the Road: Insights Into Asia
In reading the news and reviewing industry research, there is no shortage of information or opinion on the state of Asia’s life insurance environment. These broad views are helpful in understanding larger trends and often point to where future opportunities and challenges may lie.
However, we gain a valuable perspective on the region’s industry landscape from visiting it firsthand and taking a grassroots, on-the-ground look at individual areas. It helps to meet and talk with company leaders face to face and feel the energy of one country at a time. This more personal and localized experience provides an authentic sense of current market realities.
Based on my recent travel to several Asian markets — including India, Singapore, Malaysia, Japan, Taiwan, Philippines and Hong Kong — some general, consistent themes seem evident. They provide an indication of the present post-pandemic state of the region and potentially some insights on where the life insurance industry in these markets might be heading.
1. Things essentially have returned to normal in Asia.
While some logistics, when it comes to travel itself for instance, have become more electronically driven, in general, there is a sense of normalcy in each country. For example, I was most recently in Hong Kong, and I would describe the feeling there as positive, with an energy of people moving about their daily lives. When it comes to the daily operations or experience within insurance companies and banks, most aspects do not feel very different.
The one exception may be home office culture — in terms of back-office functions — which seems to have changed since the pandemic. It has become fairly standard to adopt work-from-home practices, where offices are often more empty than before, and employees come in primarily for meetings or other in-person commitments.
However, on the distribution side, operations appear to have returned to business as usual. I did not witness a tremendous change in work culture or in the way distribution teams function. Technology is certainly a factor that will continue to drive change. For instance, we see the evolution that digitalization brings to areas like underwriting and claims, but most of this began pre-pandemic and simply became an increased focus.
For the most part, agencies, independent financial advisors (IFAs) and banks seem to be using pre-pandemic distribution practices. While digital engagement tools may enhance certain processes, the way agents and advisors interact with customers is still very much face to face and dependent on personal relationships and trust. People continue to need an advisory process during which someone explains product options to them in a way they understand and possibly conducts a more advanced needs analysis, especially for more complex and meaningful purchases.
2. Regulators are more energized around ensuring a high-quality advice process.
From the regulatory perspective, there is a real emphasis on making changes and standard improvements across the life insurance industry. To protect consumers, regulators continue to implement requirements for agents and advisors to prioritize clarity throughout their advice process.
While there are varying degrees of development, with some markets already having more advanced standards for distribution, all regulators are moving toward higher standards. They prioritize strengthening market conduct and the quality of advice provided on the face-to-face advisory side. This is evident in India, Malaysia and Japan, as well as many other areas.
This increased focus undoubtedly will have a positive impact on stakeholders. When companies and agencies train the right client-facing people well, they will use professional processes that ultimately create strong customer experiences. Customers have become more discerning, so this aligns with heightened regulatory expectations.
However, it also means that companies must navigate the transition from how they trained distributors in the past to now supporting them to meet more rigorous future standards. To move beyond catching up to minimum requirements, insurers can provide effective training and development resources to ensure a comfort level with strengthening regulations.
3. Agency leadership development remains key.
Company executives want to keep pace with changing regulatory standards and consumer preferences, but some may lack confidence that they have the right programs and processes in place to facilitate it. This often comes back to agency leadership, which is consistently cited as an industry pain point.
Within the agency area of all companies, leadership development is a core focus — mainly because of the way agencies are structured. Their leaders are responsible for all aspects of growing the organization, from recruiting and training new agents to providing ongoing support and mentoring to ensure they are successful. In addition, this role has become even more difficult, as leaders face more demanding expectations to meet changing regulatory requirements.
In some cases, in more developed markets, the agency leader population tends to be aging and reaching the end of their careers, which presents the issue of finding a successor and managing that transition. In less developed markets, the challenge appears to be more about developing the newer agency leaders already in place. Overall, there are clear needs and opportunities to increase the support provided to leaders in agency distribution.
4. Bancassurance has grown dramatically.
Today across Asia, all banks have at least one insurance partner, and some banks partner with multiple insurers. There certainly has been successful bancassurance growth, and it represents a significant share of life insurance sales in many markets. This makes logical sense because banks are in what can be described as a “privileged position” when it comes to their customers; they have their trust with multiple touchpoints and have built ongoing relationships, so people typically are quite open to what they offer.
The initial bancassurance concept was that banks would provide customer opportunities through their database, and insurers would provide the products, underwriting and all other processes. In fact, actual insurance company representatives frequently used to sit in banks. However, privacy regulations have changed this model, now requiring sales to be made by bank staff because they are working with customer data.
The bancassurance model depends on having well-trained advisors providing quality advice. In the past, insurance agents with many years of experience and robust training developed an understanding of the industry’s specific — and often complex — products and processes. They also would solely focus on insurance, deepening their knowledge and expertise.
Today, the bank representatives selling insurance also tend to offer other products and services, meaning they do not have as much dedicated experience in the life insurance space. Success in this area depends on closing the gap between their knowledge and what typical insurance agents would offer. This represents an opportunity for banks to build greater in-house expertise to ensure they provide their customers the most professional and valuable advisory process. It will become even more important to do so as most markets increase their focus around offering other protection-based products like annuities.
Again, my travel experiences around Asia suggest life is back to normal in these markets. While back-office professionals are still frequently working from home, the distribution side operates much like it did before coronavirus pandemic.
While the pandemic may have accelerated digital development that began previously, it does not seem likely that it will replace face-to-face engagement in the foreseeable future. This is still the preferred model, and these customer relationships are still working effectively. Human interaction is still powerful, and people want to trust someone in a personal way to help them through the life insurance decision process. They do not want to rely on digital tools as much as many thought they might have by now, particularly for more complex and meaningful products and solutions.
Across the region, regulators are imposing higher standards. Companies’ challenge is to find enough of the right people to grow the business in the face of these new requirements. On the bancassurance side, the most pressing challenge is to ensure the in-house representatives selling life insurance are equipped with the right level of needs-based knowledge and related product understanding.
Ultimately, wherever you are in the region, there is pressure in organizations to evolve, which can bring about an even stronger industry. There is a sense of positivity and opportunity across Asian markets, and it will be exciting to see what the future brings for their life insurers.