BUSINESS SOLUTIONS
SASIWIMON BOONRUANG
IBM has suggested that the insurance industry in Thailand and the Asia Pacific region should spend more on IT and differentiate their business models by offering products on the Web and by using electronic forms, rather than relying on the traditional approach.
According to Paul Robinson, Insurance Industry Leader, IBM Financial Services sector Asia Pacific, cost reduction was a concern for insurance businesses in mature markets, however in Asia Pacific, how to grow the market was the challenge for the multinational insurance companies.
He recommended that insurance companies should differentiate by spending money to make their products easier to access and to offer products through different channels, instead of depending only on agents.
Both foreign and domestic firms were battling for market share, with the mass market being the key segment.
Robinson noted that for foreign companies, the key challenge was sustaining leadership at the premium-end while expanding mass market profitability, and for nationals, it is making changes to compete in premium segments as quickly as possible.
While national insurers have strength in local brand awareness, scale of distribution, better understanding of local markets, better connections with regulators and potential business partners, a lower cost base, low cost products and business flexibility, multinationals have a greater range of experience. They can leverage Asia-centric expertise across multiple countries, accelerating the transfer of knowledge and spreading the costs and risks of capital investment.
Insurers will have similar IT investment levels this year as IT budgets are offset by only moderate premium growth. He noted that insurance businesses would spend around 3.5 per cent of their total income on IT.
Citing the Tower Group, Robinson noted that the top 10 worldwide technology initiatives and objectives for the insurance industry were automated underwriting, data management and tools, disaster response and recovery, enterprise automated controls, legacy replacement and integration, rule/rating and workflow engines, security and privacy, service-oriented architecture, web portals and agency system integration, and workforce transformation and management.
However, he pointed out that the two key areas that insurers must concern themselves with were the front office and co-insurance or back office systems.
"Thai insurers and those in the region should do more IT spending by focusing on the front office and customer segmentation," he said.
In making point-of-sales technologies more effective, they should offer products through multiple channels, such as portals, web sites, kiosks, or electronic forms to make it easier for customers.
Customer segmentation would enable companies to better understand their customers and increase business lines automatically.
Robinson said companies should also utilise the direct insurance model."Call centres will be popular for direct insurance because of low operation costs," he said, adding that $1 spent on operation using an agent compared to 30 for call centre costs, and only 10 for a web site.
The IBM Institute for Business Value (IBV) recently announced a study entitled Insurance 2020: Innovating Beyond Old Models, with a focus on the trends and outlook for growth in the Asia Pacific insurance industry.
The four large-scale trends identified include: Active and informed consumers across demographic groups reward non-traditional operators; technology virtualises the value chain and lowers barriers to entry; mainstream insurance products are dynamic and provide more consistent performance; and regulatory coordination and the use of affirmed industry standards broaden to global scales.
The implications of the trends suggest that the industry will be forced to change and innovate, because old modes of thinking threaten the industry's ability to innovate, and interlopers will increasingly disrupt traditional insurance operations; industry leadership will require experimentation in operating models, processes, products and customer relationships; and strategic investment in innovation today is critical to success in 2020.
Robinson noted that IBM provided end-to-end services and strategic consulting that helped companies to redesign their businesses for IT that ran their operations by working through IBM's business partners.
"We have architectural frameworks that we develop in conjunction with insurers worldwide, so we have the foundation built to serve as a roadmap for those companies in order to help them minimise their risks." he said.
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