With a 2.8% growth rate, the Asia-Pacific insurance industry outpaces the 0.6% growth in the global market, and by much wider margins in key markets.
As a result of strong fundamentals such as large and fast growing middle class populations, rising purchasing power, and strong domestic demand, Asia offers enormous potential to players seeking continued strong returns in insurance.
However, to fully understand the opportunities, one must study the detailed drivers in each country, and appreciate the vast diversities across different markets.
If we look at China, Indonesia and Vietnam as examples, they are all fast-growing economies with large populations, and share key common themes. All three have growing middle classes, relatively low banking penetrations, and low awareness about insurance needs. These make them high potential markets for insurers, but they differ wildly in terms of insurance market maturity.
Digital transformation is happening rapidly, and everyone is racing to simplify products and processes, and to deliver frictionless customer experiences. However, the pace of transformation varies widely across each market. Insurers need to be prepared with the right strategy and the optimal infrastructure ahead of the competition, in order to capture the opportunities that may arise from the digital wave in each of these markets.
Every country faces challenges in growth in different ways. China is manoeuvering a slowing macroeconomic environment exacerbated by trade tension with the US, in addition to domestic insurance regulatory tightening. Indonesia, despite low penetration rates, is a saturated market with fierce competition among over 40 life insurers.
For consumers who are not yet savvy enough to make informed decisions about financial planning, or choose the right provider for themselves, the long list of offerings are more confusing than helpful. Vietnam is suffering from classic growing pains with talent shortfall, high fraud rates, and consequentially sceptical customers, all of which could hinder the high growth potential of the country’s nascent insurance sector.
Despite differences and challenges, there are huge opportunities for growth in each of these markets, making them attractive for investors and insurers alike.
In spite of China’s lead in digital advancement and disruption in the insurance sector, penetration rates remain low compared to its huge and fast-growing fast-aging population, indicating high long-term growth potentials for the market. Furthermore, with the removal of the cap on foreign ownership in life insurers in 2020, more international players will likely enter or further invest in this market, stimulating both competition and innovation at the same time.
Indonesia continues to be one of the most attractive markets in Asia given its increasingly stable political environment and open economy post-election. Despite the country being prone to natural disasters, the society and industry have turned around the situation, with active investment in prevention, strong societal resilience and active risk management, which reduces the gap of protection for such catastrophic event and make this an active P&C market.
Driven by a young workforce, Vietnam has grown to become one of Asia’s fastest growing economy, and captured the attention of ever more investors interested in Asia. Life premiums increased by 23% year on year in Q1 this year, driven by rapidly improving consumer education and awareness, as well as expanding distribution networks dominated by bancassurance and agency.
We believe that the overall outlook in these key Asian markets is highly positive, and they have enormous potential for further growth. Insurers able to navigate local nuances in each of these unique markets in Asia, and have relevant strategies to adequately address customer pain-points as well as engage them, will stand to capture and benefit from the growth opportunities.
This article is written by Randy Lianggara, regional chief executive for China, Indonesia and Vietnam at Aviva Asia.
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