Insurers in Asia’s emerging markets are adopting insurance technology (insurtech) solutions at a faster rate than their more developed counterparts, a report by global insurance broking and advisory firm Willis Towers Watson has revealed.
In its Quarterly Insurtech Briefing for July- September 2017, Willis Towers Watson examined how insurtech disrupts insurance markets, focusing on mainland China and other emerging Asian markets.
The report noted that the rapid pace of growth in an emerging insurance sector such as China is not constrained by existing infrastructure. Without legacy systems, developing markets were able to harness newer technologies, such as mobile payments, faster.
“Regulation, existing infrastructure, powerful incumbents and long established customer habits all tend to act as inhibitors to progress and innovation,” said the report.
Another point it examined is the entry of Asian tech giants such as Alibaba and Tencent into the insurance arena. It highlighted how these technology companies harness digital distribution in order to make up for the lack of traditional channels. As a result, e-commerce penetration in China is now double that of the United States.
These factors, according to the report, could spell a shift in the global dynamics of insurance.
“We believe that technology has not only potential to disrupt national insurance markets, but to also alter the global balance of power between (re)insurers in developed markets and those in emerging economies,” said Rafal Walkiewicz, CEO of Willis Towers Watson Securities. “Less hindered by legacy systems, companies in emerging markets are often able to create new innovative solutions faster. They can also attract intellectual and financial capital from partnerships unseen in developed, heavily regulated countries with high penetration of insurance products.”
In the third quarter of 2017, insurtech funding was at US$312 million, which was 68% lower than the previous quarter, which set the record for highest-ever insurtech funding volume at US$985 million. However, the report says that interest in insurtech remains strong. A total of 48 insurtech funding transactions were recorded in the third quarter, a 26% year-on-year increase from 38 in Q3 2016.
Insurance comparison start-up CompareAsia Group of Hong Kong had the largest financing round of Q3 2017, raising US$50 million in July, bringing its total funding to US$90 million.
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