Digitalisation, product innovation and building a ‘new reality’ workforce emerge as key trends for Hong Kong insurers in 2021, KPMG finds

Digitalisation, product innovation and building...

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9 February 2021, Hong Kong – Insurance has been – and continues to be – front and centre in the public eye as the pandemic continues. As the world looks towards recovery in 2021, insurers in Hong Kong are driven to focus on digitalisation, innovation, talent and the impact of climate change, according to KPMG analysis.

The Hong Kong Insurance Outlook: Key trends for 2021 report looks into how insurers are adapting their strategies to become more successful and more relevant as they begin to operate in a new reality, and highlights the sector trends emerging in 2021.

The effects of the pandemic brought to the surface what many already knew – Many insurers operate on legacy platforms and the way they sell products involves a high degree of personal interaction and manual processing. In the new year, many insurers are expected to pursue a customer-led digitisation of their business and operating models across the front, middle and back office with a customer-first mindset. 

Erik Bleekrode, Head of Insurance, KPMG China and Asia Pacific, says: “Covid-19 has been a significant catalyst for digital transformation, especially when it comes to customer interaction and distribution. The recovery in some markets has also shown that those insurers with better digitised functions and processes were better at increasing sales quickly again. What is really important to insurers is how should that lead to product innovation and how to give clients the best possible access to the best products.”

Direct-to-consumer sales will increase and require significant and rapid upgrades, particularly in many parts of personal insurance. Brokers/agents will need to be integrated at each step through digital interactions and interfaces, while the data requirements for this transformation are complex. New products may emerge around pandemics or viruses, existing products (e.g. critical illness) will become more popular, and usage-based products (e.g. auto) may gain in popularity. New partnerships with clinics or new ways of distribution with telecom providers or Fintech firms are also expected.   

During the pandemic, for many insurers, shifting the entire workforce, including agents, to operate remotely while dealing with significantly increased activity in their claims functions and shared service centres was a challenge. Moving forwards, there will be significant opportunities to acquire new talent – for example in the digital, technology and data areas – as well as to upskill the workforce as organisations will be less reliant on location. Claims handling and contact centres will be reimagined as more automation is introduced and customers become more comfortable with digital interactions, according to the report.

2020 was also the year when business leaders realised the importance of purpose and brought it to the forefront, and when environmental, social and governance (ESG) matters emerged even stronger than before. Walkman Lee, Partner, Co-Head of Insurance, KPMG China, says: “Growing exposures from increased catastrophic weather events – such as hurricanes and wildfires – to pandemic risks are an integral part of the ‘new reality’. Boardroom conversations around ESG will continue to change, particularly on corporate purpose, stakeholder capitalism, and climate risk and resilience. Insurers can move funding into greener investments and will be increasingly challenged by stakeholders if they do not.”

Through all of this, the regulatory and accounting change agenda remains, and insurers continue to run large implementation projects to meet the deadlines set by the regulators. The introduction of Group Wide Supervision, Hong Kong Risk Based Capital and Enterprise Risk Management requirements continues. The new IFRS17 accounting standard also looms large on the horizon. As IFRS 17 enters its final implementation year, it is placing increased pressure on project and BAU teams as they finish their systems build and prepare for parallel reporting. 

 

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