One of the most important financial decisions that we have to take charge of as a millennial is to consider the type of insurance policies we need. This applies to even working adults and baby boomers who are not yet sufficiently covered with a plan.
BUT IT’S FAR TOO EARLY AND REDUNDANT TO ME NOW.
Yes, insurance can be a complicated and confusing component of personal finance. Yet, it is important to note that buying the right type of insurance can not only protect us, but also our loved ones who may depend on us financially. If you’re new to insurance, there’s no better time than NOW to start planning your finances.
First off, let’s recap through some of the developments in the insurance scene over the last century. Fun fact: Insurance has gained a strong foothold in Singapore way long before independence and the rise of modern services. For instance, one of Singapore’s leading financial institutions – AIA – has been serving the island since 1931. It also just recently passed the 100-year mark in Asia.
Take a look at our growth as Asia’s leading financial hub! The stats show a whopping 15775 percent increase in the number of industry assets insured – from 1.6 billion in 1980 to 254 billion in 2017.
DEVELOPMENTS IN INSURANCE AT A GLANCE
Some of the more notable developments in Singapore’s finance and insurance sector include liberalisation and present-day insurtech solutions. Before liberalisation, the bulk of insurance was marketed and sold on traditional agency channels. After the Monetary Authority of Singapore (MAS) lifted its closed-door policy on direct insurers in 2000, we see a rise in the number of new independent players.
Subsequently, these new entrants bring in disruptive tech-enabled innovations to plug the gaps in today’s competitive and contestable insurance market. They are what we know in the news as rising fintech and insurtech startups. But we’ll dive into the nitty-gritty juicy details of that later on.
Your objective now is to get clear on why adequate protection matters and how this is going to impact your financial goals in the long run.
HUH, REALLY? HOW IMPORTANT CAN IT BE?
TO A LARGE EXTENT, YES.
Insurance essentially protects you and your loved ones against unfavourable events and adversities. It’s understandable not to think of disasters when you’re young or when you’re busy juggling other commitments. But in an increasingly unpredictable world, there’s no reason why you shouldn’t be prepared to deal with unforeseeable curveballs life throws at you.
1. Think of who you’re truly buying protection for.
These are dependents closest to you. For instance – your partner, your children, your ageing parents. Are they going to be financially worse off without you around? Are you the sole breadwinner in the family?
Rule of thumb: If you have loved ones around who depend on you financially and practically, you should purchase protection.
2. Consider your priorities and future goals
If you’re running your own business, having term life insurance ensures the company sustains if you are gone. Applying for an education loan for your kids? A life insurance plan can help to pay them off if you are not around. Or perhaps you’re venturing into long-term real estate investments. You would also require enough insurance to safeguard your assets.
3. Research, strategize and get financial advice!
Now that you know how insurance works in various situations, it’s time to start strategizing! Insurance is not a one-size-fits-all product. And you know your financial situation best. Ideally, seeking advice from a finance professional can aid in the journey.
WHAT INSURTECH IS
There’s no established definition of insurtech. But as a whole, insurtech is a subset of the fintech ecosystem which covers the idea of combining insurance and innovative technologies to deliver customer-centric value propositions which improve operational efficiency across the insurance value chain.
Basically, it’s the new cool thing.
HOW IS INSURTECH GOING TO IMPACT ME?
If you’re a finance professional or an insurance consumer yourself , chances are you’re likely to be somewhat part of the insurtech experience already. Insurtech seeks to come into the value chain in various ways.
From intelligent data collection and analysis to automated smart contracts, insurtech leverages on the most advanced technologies to solve one of the greatest challenges in traditional insurance – POOR TRANSPARENCY.
A shortcoming especially in terms of weak oversight and controls over claims handling. Studies found that poor transparency is also inherent in policy documentation and a lack of consumer awareness of the terms and conditions of their policies.
Insurance is considered one of the weakest in data management and transactions handling as compared to other financial services sectors. Extensive and repetitive administration processes which usually involves thorough form filling can easily be automated real-time.
Low IT security
Insurtech now is pushing to for traditional insurance institutions to adopt end-to-end encryption. With the use of public ledger, blockchain can help ensure customer verification and authenticity in transactions and eliminate suspicious and duplicate files.
INSURTECH INNOVATIONS ON THE RISE
Disruption is everywhere. There are over 3,000 insurtech startups across the globe, with Asia accounting close to 20% of the number. And in 2017 alone, the sector has received a significant investment of US$2.3 billion in total! But do traditional insurance companies view such industry transformers as opportunities or threats?
Good news to hear! The rising industry has blossomed more economic partnerships than rivalry.
Leading financial institutions like AXA for instance are aggressively establishing their own ecosystem in the fintech scene. Their initiatives span across AXA Labs, Kamet, AXA Strategic Ventures and AXA Digital Partnerships which focus in incubating and scaling up fintech solutions.
Prudential also has its own ongoing flagship innovation programmes Fintegrate launched in London this 2019. While it aims to support in the scaling of technology companies across the fintech, insurtech and even healthtech sectors, Fintegrate also hopes to bring in these innovative and practical solutions to Singapore.
From this, it is clear how insurtech players and traditional financial institutions come to complement each other in creativity and strong corporate presence to create scalable financial solutions that would benefit a large pie of the economy.
TIME TO GEAR UP!
Ultimately, it all boils down to 2 choices. Choosing to ride the wave of technology or be swept under the currents of change. And it’s up to each and every finance professional to take advantage of the opportunities presented in Insurtech today, or otherwise someone else will.
Look out for our next InsurBites edition so you’ll always be at the forefront in all things financial planning!
Alternatively, contact our growth consultants to find out more about our upcoming masterclasses and programmes. We are committed to creating real change in the community in our in-class sessions, and hope to see you and your teams’ breakthroughs!