Consultants sound insurance alarm

AsiaƆs insurance industry needs to focus on IT if it wants to keep up.

Consultants are urging Asian-based insurers to focus on automation and building new channels to reach customers other than agency sales forces if they are to survive. Chia Tek-yew, partner at PriceWaterhouseCoopers in Singapore, says insurers are lagging behind banks and fund managers when it comes to gathering assets. For example, he notes the average insurance company in this region budgets $20-50 million annually for information technology. Banks and fund managers often have budgets of $200-300 million.

Alan Mason, senior manager at Ernst & Young in Hong Kong, says pressures of too much competition will force many players out of the market in the next few years. He fears the industry in Hong Kong will become volatile unless local regulators abandon their laissez-faire approach and establish a limit to the number of providers, as the Monetary Authority of Singapore has done.

“The middle is being eaten by the two ends,” Mason says. Global giants can leverage off their global IT structure, while some local players, especially re-insurers, can exploit niches. The majority in the middle are burdened by standalone systems that are not integrated, incurring huge costs in manually handling information. Furthermore, few off-the-shelf IT packages for the industry exist, and they are outdated, he says.

PWC yesterday held a workshop in Hong Kong for local insurance executives – not just local players but representatives of global ones too – in order to emphasize ways to build beyond agency forces, which Chia says are undertrained and expensive. PWC’s Joseph Wong, director of management consulting in Hong Kong, notes: “It’s about interaction with your customer.” PWC believes insurers need to make a push to stay in touch with existing and potential clients, who are increasingly mobile and time-sensitive, through methods other than sales brokers, such as kiosks, web sites, third parties such as banks or travel agents, and so on.

Mason says: “Local companies are less enthusiastic about major IT expenditures.” If a firm’s management defines a clear strategy, gradual but smart improvements can keep a firm above water. But reactive or muddy responses will spell doom.

Furthermore, many Asian companies are averse to outsourcing, notes PWC’s Wong. Even relatively small players may have an in-house IT staff of 150. He says insurers need a strategy centred on an integrated customer management system. All contacts with a customer, whether through a call centre or an e-mail or a sales agent, must be centrally logged and accessible by all staff, so that a customer’s dialogue with a company is consistent and up to date. There is new technology that can do this, but he believes it will take more than a year before it is implemented. Furthermore, if a company has an entrenched legacy system or a disgruntled agency force that refuses to pass on information, the time and costs of adapting IT will rise.