Insurers and industry regulators must do more to safeguard from InsurTech disruptions
The emergence of Insurance Technology (InsurTech) is disrupting the insurance industry and driving insurance companies in Malaysia towards digital transformation. While leading insurance companies are embracing the trend, industry players have yet to explore the full potential of InsurTech and protect their business from the disruption.
Along with disrupting old business models, InsurTech also creates new opportunities for insurance companies, such as increased engagement level as promised by usage-based insurance, tracking via wearables, a faster claims process through the use of real-time, high-resolution videos, and more. Frost & Sullivan’s recent analysis, The Malaysian InsurTech Landscape, 2019, studies the impact of InsurTech on the Malaysian insurance industry and possible future disruptions.
Although there is industry-wide awareness of InsurTech among insurance companies in Malaysia, there have been few actions to counter the disruption.
The insurance industry in Malaysia continues to be heavily reliant on insurance agents to grow the business. However, the declining number of insurance agents over the past two years poses a threat to insurance companies. As a result, insurance companies must adopt online channels to extend their reach and compete with InsurTech.
Bank Negara Malaysia Embracing InsurTech
Bank Negara Malaysia (BNM) aims to achieve a 75% life insurance penetration rate by 2020 and launched several initiatives to provide basic insurance coverage to low-income groups. This has found limited success.
BNM will need to do much more than running a regulatory sandbox. It should intensify competition by liberalizing or approving product types fast and by shortening the time InsurTech spends in the sandbox.
Digital Technologies to Improve Insurance Services
Digital technologies such as telematics that empower usage-based insurance, wearables for health tracking and other technologies are redefining the industry.
New entrants or startups are using these technologies and are primarily engaged in recruiting customers online and offering easy-to-understand insurance products. Active players in Malaysia include Bima, which offers micro term life insurance, and VSure.Life, which offers on-demand insurance.
Frost & Sullivan has identified key steps for industry players to benefit from the InsurTech revolution:
- BNM should create a welcoming environment to encourage new-age InsurTech start-ups to enter the country and offer express sandbox facilities.
- Tier II and III companies that are most vulnerable to InsurTech disruption should embrace digital transformation like InsurTech players while protecting their existing business.
- A handful of leading insurance companies have continued to rely on old channels without many initiatives to leverage digital technologies or form partnerships with InsurTech. These companies are at high risk of losing market share and should quickly embrace InsurTech.
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