Open for Model Insurer Asia 2013 Nomination

Nomination for Model Insurer Asia 2013 is open. Nomination form on: http://www.celent.com/node/29673 Through our Model Insurer Asia Awards Program, Celent recognizes the top technology initiatives in the Asia Pacific region. Past winners include Calliden Group (Australia), PICC Health (China), IndiaFirst Life Insurance (India), Nextia Life Insurance (Japan), Prudential Life Insurance Company of Korea, Baoviet Holdings (Vietnam), PT Prudential Life Assurance (Indonesia), Union Assurance (Sri Lanka), to name a few. To find all names of winners for Model Insurer Asia 2012: http://www.celent.com/reports/celent-model-insurer-asia-2012 ) To find all names of winners for Model Insurer Asia 2011: http://www.celent.com/reports/model-insurer-asia-2011-case-studies-effective-technology-use-insurance Deadline for Nominations of Model Insurer Asia 2013: November 30, 2012. For any inquiry, please send email to wyuan@celent.com

Navigating through tumultuous WM landscape in India

The Indian wealth management market is dominated by domestic wealth management providers in the mass affluent segment, while international firms and private banks are strong players in the high and ultra-high net worth segment. Insurance providers are dominant players in the mass market. Brokerages and retail banks have started separate wealth management businesses and they are gaining strong ground in high affluent segments. Another characteristic of the Indian wealth management market is the large share of the business captured by unorganized players. The size of this business is estimated to be about twice the size of the business of organized players. The unorganized segment mainly comprises of private financial advisors and chartered accountants who provide personalized financial advisory such as tax and investment advisory. Increased penetration of the organized players is slowly drawing the clients away from the unorganized players. However, the picture is not all hunky dory for wealth management providers, as the industry is beset with several challenges. Rising competition and resulting downward pressure on advisory fees, along with a large chunk of ‘invisible’ wealth are some of the reasons why private banks and wealth management providers are not able to monetize the opportunity easily. By ‘invisible’ wealth, we refer to wealth that is hidden away in tax havens and black money which has become a topic for heated public debate in the country today. Also, not to forget the negative investor sentiment caused by a series of scams and the slide in equity markets, which has made the challenge greater. Lack of product variety is also a matter of concern. Alternative investment vehicles such as hedge funds and private equity provide limited options for investment, and regulatory constraints on overseas investments have resulted in poor product variety comprising mostly of vanilla products. The Indian market is still nascent for exotic investments such as art and luxury goods. Also, the affinity of wealthy individuals towards investments in gold and real estate which do not require the specialized services of a wealth manager further contributes to target segment shrinkage. There is a gradual shift to advisory based feel model from transaction based fee models, with regulators stepping in protect investor interests. While it seeks to remedy conflict-of-interest between wealth managers and their clients, it also exerts downward pressure on fees. We might eventually see smaller players being forced out of the business. Large players would have to stay invested for sufficient length of time before returns start trickling in. Therefore, large banks and brokerages which have high reach and who can monetize the potential for cross-selling banking/mutual fund products would be placed at an advantage in capturing this market.

IT Spending Trends in the Japanese Insurance Industry: 2011

Celent published a new report “IT Spending Trends in the Japanese Insurance Industry: 2011” which is the updated version of IT Spending Trends in the Japanese Insurance Industry: 2010 (http://www.celent.com/reports/it-spending-trends-japanese-insurance-industry-2010). In March, Japan was rocked by one of the largest earthquakes on record. Despite the massive scale of the Great East Japan Earthquake, the insurance industry has weathered the disaster well. Celent forecasts that insurance IT investments will grow from USD 7.84 billion in the fiscal year ended March 2011 to reach USD 7.98 billion in the fiscal year ending March 2015. The March 11 earthquake will accelerate change in a number of areas, including prompting the industry to revisit business continuity planning (BCP) and reconsider the adoption of green IT. In terms of the latter, the disaster will spur companies that have been dragging their feet to study the introduction of technologies such as cloud computing and SaaS solutions.

Celent Model Insurer Asia – Nominations now open

Celent’s Model Insurer awards have become a standard for recognizing excellence in technology best practice at insurers globally. Insurance in Asia faces its own set of business challenges and insurance technology has evolved along a distinctive–and sometimes more advanced–path. For these reasons, Celent is conducting an Asia specific program to identify the potentially unique “model insurer” components that have recently been deployed in the Asia-Pacific region: Celent Model Insurer Asia. Celent is pleased to announce that it is now accepting submissions for Model Insurer Asia 2012. This report is designed to illustrate best practice use of IT in the Asian insurance industry. Celent will highlight examples from individual Asian insurers in short case studies, and cite them as “Celent Model Insurer Components.” In addition to having their best practice case study publicized in the media, each featured insurer will receive an award at a formal awards ceremony later in the year. We anticipate featuring initiatives from 20-25 insurers in case studies of 100-300 words. We would like to invite insurance companies in the Asia Pacific region to submit a nomination. Our online nomination form is at here We also welcome technology vendors completing the nomination on behalf of insurance company, but please make sure that the insurance company know you are nominating them. We will contact insurance company directly to review the nomination and draft their Model Insurer Asia case study. The deadline of nomination is July 31, 2011. If you would like to learn more about the Model Insurer Asia initiative please refer to the Model Insurer Asia 2011 report. Please contact me for any question.

Insurance and Japan

One might naturally assume that the tragic events in northeastern Japan would also be devastating the Japanese insurance industry. By the beginning of April some 320,000 P&C claims related to the disasters had already been filed with insurers. After the Kobe earthquake of 1995, when many home and business owners discovered their policies did not cover the damage, people got in the habit of buying earthquake / tsunami insurance. So fortunately more properties were insured on 3/11 than may have been otherwise. In conversations with Japanese carriers, however, Celent has found that insurers are remarkably sanguine about the likely effect on the industry here. Firms say they have adequate reserves set aside precisely to cover an event of this magnitude, which has long been predicted. As a result, Celent expects that major Japanese insurers will continue to invest in strategic initiatives to boost competitiveness and lower costs in this very crowded market. IT spending growth at Japanese insurers, which has been close to flat for years anyway due to the maturity of the market, will suffer a modest dip in the short term. Smaller insurers are likely to put off renewal projects for a while. Pressure to merge will increase at some firms, but again the industry has seen a spate of consolidation activity in recent years already. The recent events are likely to encourage Japanese insurers to accelerate their international expansion efforts, which are already underway. Carriers have been looking abroad for growth opportunities, especially to the Asia Pacific region but further afield in the Americas and Europe as well. In Tokyo, along with the concern, there is a new competitive spirit in the air. April is the start of Japan’s fiscal year and businesses look determined to find ways to grow even as the economy is forecast to contract. The insurance industry would be no exception. For example, the past year has seen the emergence of new internet and mobile based distribution models and products, approaches which seem almost tailor-made for the post-3/11 era. Technology suppliers will want to know that amplified interest in business continuity is leading insurers to think seriously about cloud computing. The blooming sakura and early spring sunshine might be distracting me from some of the harsher realities of 21st century Japan. But certainly a little optimism is not misplaced in what is after all one of the world’s major insurance markets.

You were not able to attend Celent Model Insurer Asia event in Singapore? Register for the webinar!

Insurance in the Asia-Pacific region faces its own set of business challenges, and insurance technology has evolved along a distinctive path. Celent recognized 18 Asian insurance technology initiatives as “Model Insurer Components” in a recent Celent report “Model Insurer Asia 2011: Case Studies of Effective Technology Use in Insurance”. These best practices in the use of technology span key areas of the product and policyholder lifecycle, including product definition, distribution, underwriting, policy administration, service, claims, and infrastructure. Celent held a Model Insurer Asia Award Ceremony on January 13th in Singapore. During the ceremony, I introduced trends in Asian insurance business and technology, then Michael Fitzgerald, Celent Senior Analyst, introduced the Model Insurer concept, after that, Neil Katkov, Senior Vice President, Head of Asia, and I introduced the Honored Initiatives and presented the Awards. In the afternoon, Michael Fitzgerald gave a presentation on Innovation in Insurance, then insurance companies attended Insurer Roundtable. The event was a great success. If you have missed the oppotunity to be with us in Singapore, join my webinar on either: February 23, 2011 (North America): 5:00 p.m. EST / 2:00 p.m. PST, or February 24, 2011 (Asia/Europe): 10:00 a.m. CEST / 6:00 p.m. JST In the 30 minutes webinar, I’ll give a brief introduction to the 18 initiatives. The content of two webinars are the same. Choose the one that suits your time best and register now by clicking the link above.

Reflection on Asia Insurance 2010

As we approach another year-end we can reflect a few post global financial crisis (GFC) happenings that have reshaped the world we live in. We have seen an ongoing decline in the value of the US$, unheard of mortgage foreclosure rates, a number of crises in Europe, a steady decline in personal wealth and ongoing stock market volatility. On the other side of the coin we have seen the continued emergence of the Chinese economy as a new power in global economics as their economy expands to fuel the demands of a wealthier middle class. The world of banking may never be the same again. New regulations and closer scrutiny of business practices will attempt to avoid the issues that nearly brought global finance to a standstill. Many countries, especially in Europe, will be carefully monitoring all government spending for some time as the large debts are repaid and government investment is channeled into selected areas targeting the rebuilding of their economies. In spite of many of the negative influences we have seen ongoing efforts by insurance companies to create innovative products and business practices. The recent model insurer Asia project attracted many superb submissions from all over Asia and Oceania, covering areas such as infrastructure enhancement, streamlined claims, and new business and servicing practices. Included too were a number of extremely innovative ideas in using new technologies. The effects of the GFC will linger on for some time but based on what we have seen this past year we look forward to a new year where we will see more innovative and creative practices come into production and delivering more sustainable and customer-focused practices across all areas of the insurance market.

Outsourcing in Indian Life Insurance Market

India’s domestic outsourcing market is gaining momentum. Most outsourcing service providers are turning inwards both to diversify risks and partake of the growing opportunity on home ground. Focus is now shifting from telecommunications and technology outsourcing to financial services outsourcing in the country. Of these, the Insurance BPO services market is expected to grow to USD 1.5 billion in size in the next three years- a substantial increase over its current USD 720 million size.Interesting to note here is that unlike their European & North American peers, Indian carriers are not driven by cost compulsions but rather are challenged by volume and manpower constraints resulting in the built-up of a favorable disposition towards outsourcing (See Image).

Carriers see vendors as partners providing best in breed knowledge and performance to enable them to focus on their growth objectives. Indian vendors and multinational vendors have only recently started catering to the outsourcing needs of the domestic market. With the increasing incidence of outsourcing in insurance sector, critical manpower base and know how specific to the Indian geography are also evolving at the vendor end. More firms are likely to realize profitability once the market acquires sufficient breadth and depth.

Celent recently published ‘Outsourcing Trends in Indian Life Insurance’ which captures the key issues and trends in the domain.

Insurance agents equiped with new tools to realize policy issue in real time in China

Ping An insurance company in China produced e-policy for new insurance application from Oct.1st 2010. Now insurance agents from Ping An insurance company could do bunisness in a brand-new way: -generate insurance proposal on laptop computer; -discuss with customer and make adjustments, send the final proposal to headquarter by wireless network for underwriting; -receive short message about underwriting result in about 1 minute later; -customer pay premium by useing mobile POS device (insurance sales agents bring mobile POS device); -e-policy go effective; customers are able to check their policy information from Ping An website; This kind of technology platform is innovative in China. Many insurance companies like to follow Ping An model, we can expect more insurance companies will adopt e-policy in new business, and streamline the sales process to be more efficient.

Financial inclusion in India and micro-insurance, the new buzz word

‘Greater financial inclusion’ figures prominently on the economic development agenda set by the Indian government in recent times. The much-talked-about UID project which aims to provide unique identity numbers to all Indian citizens, and links the number up with a compulsory bank account is indeed a bold step towards realizing that goal. The recent buzz word, however, in discussions on financial inclusion seems to be micro-insurance. The Finance Minister, in his recent address at the Global Insurance Summit, stressed on the need for popularizing micro-insurance in semi-urban and rural areas of the country. The attention on micro-insurance seems to have come at a right time, when the success of several government sponsored welfare schemes for the rural poor in India like the National Rural Employment Guarantee Scheme (NREGS) depends quite a lot on the ability of the financial system to mitigate the risks arising out of unforeseeable natural calamities and other disasters. In this context, the increasing efforts of insurance companies in tapping semi-urban and rural markets are an encouraging sign. Insuring the vast rural population against losses from disasters is indeed a big challenge for the Indian insurance industry, when at the same time it is important to ensure that premiums remain affordable. IRDA, the Indian insurance regulator, has in a recent exposure draft on a standard insurance product suggested that the premiums will be decided by the regulator and insurers might not get any leeway in this regard. The regulator’s goal of promoting financial inclusion is laudable, but greater freedom to insurance companies to design products and price them might be more desirable. The regulator has also proposed that insurers will have to mandatorily offer the standard product. The draft also talks about placing restrictions on selling other products with higher premium and lower benefits. Overall, it could be surmised that the regulator is concerned about insurance agents pushing expensive endowment products to the poor, which is a very valid concern. It would be interesting to monitor developments in this area for the next few months, as IRDA is also considering a proposal to allow cross-selling of micro-insurance products which would essentially provide insurance companies access to the large network of public sector banks for selling their products. The banks would benefit too as it would enable them to enlarge their portfolio of products.