After spending the past two decades working with global insurers based in Western markets, I recently moved to Hong Kong to lead McKinsey’s Insurance practice in Asia. Over the past nine months, I’ve met with more than 200 executives in the region to listen and learn. In doing so, I’ve been struck by how the carriers in this part of the globe are leading the world on many dimensions while lagging behind on others. From my perspective, insurance in Asia’s developing markets and insurance in the West have a lot to learn from each other. Below is a selection of my observations:
Three areas where insurance in Asia leads the West
Growth mind-set. In my conversations to date, almost all Asian executives are laser focused on growth—a stark contrast to the West, where many conversations center on optimization. Asian insurers are aggressively investing in growth through traditional distribution expansion (agency and bancassurance), product innovation, and new business building (e.g., digital attackers). While the underlying market growth rates are very different in the West, carriers should adopt a more aggressive growth mindset. This will require investment to tap into latent, unmet customer demand (i.e., mass customer segments).
Customer relevance. In the United States, for example, insurance has lost much of its relevance to mass-market consumers. It is either a compulsory product (motor) or a product tailored for high income customers who benefit from the tax advantages (permanent life or variable annuities). In Asia, insurance is one of the primary savings and protection (including private health insurance) vehicles for mass-market consumers. Western carriers can learn from their Asian counterparts and aggressively innovate their propositions to take back a relevant role in the lives of mass-market customers. This will require simple product propositions to challenge the asset management industry.
Speed. Insurance markets in Asia are evolving at a rapid pace because of fast economic growth and regulatory changes. To compete, Asian insurance carriers have learned to make decisions quite rapidly and to adopt an approach of test, learn, and iterate. Many Western carriers would be shocked at the “clock speed” in Asia. They can learn from this—and push their organizations to dramatically accelerate their own decision-making activities.
Three areas where insurance in Asia can learn from the West
Sales force professionalization. The entire US insurance industry, as one example, has a few hundred thousand agents. Agency forces in Asia are significantly larger—China alone has roughly eight million insurance agents. However, the level of professionalization in Asia lags behind the developed world. Part-time and poorly trained agents are the norm in much of Asia. As customers continue to grow more sophisticated, Asian carriers will have to upgrade their agency forces. They can learn much from the West in terms of recruiting, capability building, and ongoing performance- and compliance-management. Western carriers are now helping agents migrate from product sellers to holistic advisors which provides a blueprint for Asia.
Analytics-driven decision making. The West is increasingly applying data and analytics in all elements of the business to improve the quality and consistency of decision making. In some cases, this has progressed to rely extensively on third-party data. In Asia, the use of data and analytics is less mature. Carriers need to invest in their internal data assets (i.e., capturing and storing more useful data), external third-party data integration, advanced analytics capabilities, and “last mile” adoption of analytics solutions. There is tremendous opportunity for carriers in all elements of the value chain, including pricing and underwriting, sales force effectiveness, customer servicing, and claims. Given the distributed nature of insurance operations in Asia and the talent gap, this is an even bigger opportunity.
Operational discipline and efficiency. Asian carriers can learn from the operational discipline of insurers in developed markets. Faced with the prospect of slower growth, Western insurers have long focused on improving efficiency through more optimized operations. Asian executives have underinvested in operational discipline and efficiency. It is not uncommon to find dozens of branches or field offices with widely varying operating practices. This increases costs, delivers suboptimal customer experience, and introduces significant compliance risk. Asian carriers will have to focus more time and investment on these issues in the near future. They can benefit from the new toolbox that has emerged which combines digital, analytics, robotics, and NLP to re-invent customer and back office journeys.
Despite underlying market and competitive dynamic differences, Asian and Western insurance have a tremendous opportunity to learn from each other.