The beginning of a new year is always a time for both looking back at the past year and looking forward to the coming one. As the industry emerges from the past three years defined by the COVID-10 pandemic, QBE Asia CEO Jason Hammond (pictured above) shared with Insurance Business several milestones in 2022 and his predictions for 2023.
Insurance Business: What were some major developments for QBE and the Asian insurance industry for 2022?
Jason Hammond: One of the major developments in Asian insurance for 2022 would be digitalisation. While this is not a new development, it is an area that demands continuous innovation, particularly as our business landscape necessitates strong digital infrastructure and capabilities to work, partner, and communicate effectively. With digitalisation at the forefront, the insurance market also had to dive deeper into cyber protection to make our digital platforms more secure. QBE has also strengthened our digital offerings and infrastructure that will enable us to provide better experiences for our customers and partners. For example, we have enhanced our claims portals to provide more seamless solutions for our customers. One other major development would be our work to adopt better pricing models and the integration of third-party data sets this year.
Another significant development for Asian insurance is the push towards deep tech and the exploration of artificial intelligence to enhance our products and experiences we bring to customers and partners. At the same time, this means examining data and governance mechanisms – which is relatively new territory. Many insurers have turned to adopting new technological advancements, such as AI and machine learning to help them adapt to changing consumer demands and work more efficiently.
ESG has also been topical for the Asia markets. We have seen the industry consciously map out disclosure standards and certifications around ESG frameworks. This will likely continue to develop as insurers iron out the needs and demands for ESG assurance protocols for customers across sectors. For us specifically, we too have been refining our focus areas in the sustainability aspect. Earlier this year, we formally launched our Premiums4Good initiative in Asia, where a portion of our customers’ premiums are put into investments that create social and environmental impact alongside a financial return, at no extra cost to the customer. We have also been fleshing out our sustainability framework as part of our vision to transition to a net-zero economy by 2050.
IB: How has the insurance industry in Asia recovered from the COVID-19 pandemic? Would you say the pandemic is now clearly in the rear-view mirror?
JH: In general, I’d say that the insurance industry in Asia has recovered from the COVID-19 pandemic, but we see new challenges that have come around as a result of the pandemic. As we go from a pandemic to endemic society, the Asian insurance industry has begun to look at the impact of rising inflation, new insurtech innovations, and climate change and how the industry can meet these new needs and hurdles.
In more immediate times, we have seen more demand for non-life insurance products such as accident, travel and health. This is of course accompanied by the gradual recovery of Singapore’s economy and the reopening of borders.
IB: What are the biggest challenges insurers will face in 2023?
JH: Climate change is certainly one of the more prominent issues to tackle. Green bonds and social bonds have been taking off this year, but the looming threats that climate change poses to our environment and communities do require much larger collective efforts, whether it’s businesses or individuals. For our part, we have been actively pushing for positive green action through the Premiums4Good initiative, to inspire others to take up the mantle as well.
Another significant challenge would be rising inflation. Inflation impacts the cost to repair or replace insured assets, and it’s crucial that insured clients have sufficient coverage for all their assets to avoid finding themselves underinsured in the event of a loss. If clients choose to retain more risk themselves to offset any increase in costs, they should ensure they are fully informed in doing so and don’t leave themselves short of cover if needed. With costs increasing across sectors, customers could be at risk of taking short-term cost cutting measures at the expense of longer-term risk management that could impact their business operations and increase the chance of losses occurring.
On a related note, insurers will likely face an increasing brand-agnostic customer demographic as they face these cost challenges, meaning that customers will have preference for more on-demand insurance products, or products that are able to meet their current needs, whether its costs, convenience, privacy, for example. In response to this shift in demand, insurers will have to look into ways to improve their analytics and data sourcing tools, as well as consider partnerships or business strategies that play to building customer-centric experiences.
A key cost for insurers is their reinsurance program, particularly for those with material catastrophe risk exposure. Globally, there is a current tightening of reinsurance capacity, and terms and conditions. Insurers in all markets who have been particularly reliant on treaty reinsurance will find that in 2023 they may have to retain more risk themselves and/or pay more for their reinsurance protection.
IFRS17 is the most significant change to insurance accounting requirements in over 20 years. It represents a systemic change in the way our insurance contracts are valued, necessitating an overhaul of financial and actuarial systems, processes, accounting, and disclosure policies.
At a high level, IFRS17 requirements will impact the way we report profitability and our financial position as determined by insurance liability measurements as well as how we present and disclose in our financial statements.
The impacts will also be felt by investor relations, product design and distribution, development of revised incentive and wider remuneration policies and reconfigured budgeting and forecasting methodologies.
IB: Any other predictions for the coming year?
JH: Moving forward, we can see firms being eager to embrace international trade and cross-border business opportunities.
At the same time, businesses are aware that 2023 is probably a precarious economy. Similar to the points made above, with global challenges such as a potential recession on the horizon, the industry will have to examine resource and capacity allocations and be discerning about which to push or pull back on.
Concerns around operating costs and increased efficiency might also see the industry shifting their business models to adapt to newer technologies such as cloud computing and AI that could help achieve a higher operating efficiency without necessarily jeopardising growth prospects or customer offerings. This is also in line with the general move towards embracing insurtech innovations that improve efficiency and create capacity for work across more sophisticated and mature business functions.
