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Pandemic spurs innovation and digital transformation in the Insurance sector in Asia

Deputy Prime Minister, Co-ordinating Minister for Economic Policies and Minister for Finance, Mr Heng Swee Keat deleivered a speech at the SIRC 2020 RE-MIND conference yesterday focusing on the potential of digital transformation in the insurance sector in Asia.

“Insurance can play a pivotal role in strengthening risk resilience as the world rebuilds from COVID-19. Despite its critical role, there remains a wide protection gap in Asia. As Asia grows, more lives, wealth and assets will be at stake. But with growing urbanisation and greater connectivity, the scale and complexity of risks have also
grown. Yet, Asia remains under-insured.”

The Deputy Prime Minister explained that the large protection gap in Asia is partly due to the lack of quality data and robust risk models to quantify exposure to natural catastrophes, infectious diseases and other emerging risks. The other reason is that governments and companies underappreciate these risks.

He said that “if there is a silver lining, COVID-19 has raised awareness of future risks and provided greater impetus to close the protection gap and that the insurance industry can build on this impetus, to transform the industry by riding ontwo shifts – digital transformation and public-private partnerships.”

The huge potential for digital transformation in the insurance sector

COVID-19 has accelerated digitalisation. Companies have to digitalise their work processes and adapt to working remotely. The insurance industry is still largely a paperbased and face-to-face industry but clients are now going online to purchase new insurance and file their claims. Digital transformation will bring huge benefits to the insurance secor.

The Deputy Prime Minister said that harnessing data from the end-to-end digitalisation of supply chains, satellite imagery and social media will provide a more granular appreciation of economic and risk exposure.

With IoT, accurate and timely data feed and blockchain technology, risk events can be tracked in real time. Claim payouts can in fact be triggered automatically if pre-defined conditions – such as a flight delay or flooding – are triggered.

The application of AI and big data will lead to more robust risk models and can also be applied ex-ante to mitigate risk and strengthen resilience. These advancements have also opened up many new possibilities for insurers, across the full value chain.

Launch of the Global-Asia Insurance Partnership

Mr Heng Swee Keat announced yesterday at the conference the launch of the Global-Asia Insurance Partnership -GAIP.

The platform is a tripartite partnership between the global insurance industry, regulators and academia. Through GAIP, the aim is to produce actionable research insights, develop policy recommendations, and co-create innovative solutions for the region.

GAIP will be a Living Lab to incubate new risk financing solutions for emerging risks in Asia, with a focus on riding the digital revolution and harnessing other new technologies.

Unlike traditional insurance that fully indemnifies the exact extent of losses suffered by the insured in the event of a loss; parametric risk transfer solutions determine the pre-agreed payout that will be triggered based on an underlying index (e.g. magnitude of earthquake, windspeed, rainfall, temperatures, crop yield index) that correlates with the extent of losses

It will also be a Policy Think Tank supporting Asian insurance regulators and policy makers. We hope to expand insurance coverage for longterm needs such as infrastructure, promote the use of technology and data in insurance, and facilitate global dialogue on strategic industry issues.

GAIP will have a strong emphasis on talent development. This will build a strong pipeline of insurers with new skills in areas such as big data and AI, and position the industry for the future as jobs are being reshaped by technology.

GAIP is expected to startwork in January next year. The Deputy Prime Minister concluded that “there are many structural protection gaps facing Asia, but pandemic risk and climate risk are two critical areas that demand our immediate and collective attention.”

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