Singapore's 50 largest insurance companies 2015
Pricing remains ‘acutely weak’ in Singapore’s insurance market.
The fundamental growth story for Singapore’s insurance sector continues to be intact, as the savings rate rises and dependency ratio remains low. Its status as a regional centre for economic activity also continues to bolster demand for insurance across segments. “Singapore continued to build its position as a regional hub for property and casualty insurance and reinsurance,” says Peter Allen, global head of Grant Thornton’s insurance practice. The sector is not without challenges, however, as structural issues put pressure on margins and companies’ ability to generate returns. “Pricing unfortunately remains acutely weak in the local market and it is difficult to see how some insurers and reinsurers are maintaining underwriting profits at these levels” says Allen, adding that “at a global level, overcapitalisation is so extreme that even a major catastrophe may not correct underpricing.”
As firms aggressively try to deploy excess capital, undercutting is a natural consequence as customers often cannot be acquired fast enough to meet the supply being brought to market. “The Singapore insurance market is still attracting new entrants which will make the competition harder in the near future” says Patrick Menard, partner at Ernst & Young’s Advisory business. Insurers are looking to find new, innovative methods of service delivery to adapt to the ever-changing preferences of their customers such as mobile/web-based platforms and a greater move to service online.
Derry Finkeldey, director of research at technology research firm, Gartner, notes that “distribution, and leveraging digital channels and capabilities to drive new business, but also to create stickiness with existing customers and increase persistency and renewals, continues to be a top of mind concern for Singaporean insurers”.
Given that this is quite a mature market in Singapore, firms are continuing to look for new ways to approach marketing campaigns as well as increase spending in innovative technology solutions according to Finkeldey. Insurers have also had to deal with disruption in the industry, as emerging technologies change the competitive dynamic. “A trend which developed in Singapore’s insurance sector in 2015 was the emergence of digital disruptors which have been supported by the arrival of innovation labs, digital garages and aggregator sites” says Raj Juta, insurance sector leader for Deloitte Southeast Asia. As this relatively mature industry is shaken up by new entrants and disruptive technologies, investment in IT to take the customer experience to the next level has become more crucial than ever. Allowing customers access through multiple channels, anytime, anywhere is becoming the new norm.
“Insurers are slowly embracing digital channels for improving service quality. We are expecting a lot of activity around digital in 2016” says Ernst & Young advisory partner Sumit
Narayanan. He notes that we are seeing an increase in insurers looking to find ways to communicate with their customers beyond the traditional points of contact, which are transactions such as premium payments and claims settlements.