A PricewaterhouseCoopers report suggests the growing influence of Asian markets on Australian life insurers could signal an industry shift towards greater competitive pricing and “increased customer churn”.
The report, Future of Life Insurance in Australia: Profitable growth in challenging times, highlighted the impact of ‘the Asian century’.
It said that by 2050, 52 per cent of the world’s GDP will be in Asia, the majority of which will be in Japan and China.
It also noted that foreign players – particularly Japanese ones – are already having a significant impact on Australia’s life insurance industry.
“These entrants have access to large capital pools, are used to operating in a low-yield environment and possess extensive claims management expertise,” the report said.
“This, combined with their willingness to focus on longer term gains, suggests that the market dynamic could be shifting towards a greater emphasis on competitive pricing and increased customer churn.”
The PwC report cited its own recent fintech survey that showed almost a third of insurers did not deal with fintech at all even though 75 per cent believed that some part of their business was “at risk of disruption”.
Despite life insurers being traditionally slow to adopt new technologies, rapid improvements are transforming the industry and forcing participants to confront change, the report said.
“While regulatory and capital barriers limit the impact of ‘standalone’ fintechs, the marriage of such capabilities with a successful backer who brings in capital, willingness to meet regulatory hurdles, a recognised brand and customer trust could significantly disrupt the sector,” it said.
“Irrespective of the source of the disruption, in coming years, life insurance will make a fundamental shift from being a risk- and process-based business to one oriented around digital capabilities, data and insights, and one where digital plays a critical role in customer engagement.”