For the insurance industry, Covid-19 has been both a wake-up call and a catalyst for change. Having traditionally relied on manual processes to execute claims requests and onboarding procedures, many insurers are now looking at technology tools to enhance their operations and provide a hassle-free customer experience.

The demand for digitized insurance service has led to an explosive growth in the insurtech market globally, which was worth US$5.4 billion in 2020 and is expected to more than double in size by 2027 with a compound annual growth rate (CAGR) of 10.80% over the forecast period, according to research firm AllTheResearch.

Insurance firms in Asia are also jumping onto the insurtech bandwagon, partnering with nimbler insurtech companies which offer online distribution channels or technology tools such as robotic process automation (RPA) to efficiently process manual repetitive tasks.

Insurers are also looking at artificial intelligence and cloud computing to draw relevant data for their underwriting procedures. Generali Indonesia, for example, announced in July 2020 that it had finalized a collaboration with Allfinanz Spark, Munich Re’s cloud-based business, to improve how risk assessment questions are presented to potential clients.

China and India, due to their sizeable populations, have captured 78% of insurtech investments in the region, according to data from S&P Global Market Intelligence.

The two insurance markets have seen substantial growth over the past several years. Insurance premiums in China grew at a 13% CAGR from 2014 to 2019 to US$617 billion, data from the National Bureau of Statistics show. In India, insurance premiums hit US$107 billion in the 12 months ended March 31 2020 after growing at a CAGR of 10% from fiscal 2015 to fiscal 2020, according to the Insurance Regulatory and Development Authority.    

Other markets such as South Korea are also seen as having enormous insurtech potential as incumbent players accelerate their transformation journey. “We believe that online distribution in Korea will continue to grow rapidly, due mainly to the Covid-19 pandemic impact, technology development and the rise of younger customers, who are more familiar with digital services,” Fitch Ratings highlights in a recent industry report.

Korean insurers, however, need to ramp up their defences against cyber-security attacks as they experiment with new digital processes, Fitch says. Data from Korea’s Financial Security Institute reveal that the number of cyber attacks on the financial industry surged to more than 1.8 million cases in 2019, compared to 366,000 in 2016.  

This is an issue that the whole industry needs to constantly keep an eye on despite the excitement around digital innovation. Just a few months ago, CNA Financial, one of the largest insurance companies in the United States, had to pay hackers US$40 million after a ransomware attack.