How changing customer behaviour and digitisation is shaping the future of insurance

By Benjamin Yeo, Managing Director and Head of Insurance


Asia's current state of play

Since COVID-19 was declared a pandemic, the world has experienced a crisis like never before. And while some countries are seeing a flattening of the curve in confirmed cases per million, like Italy and Spain, developing nations like Russia and Brazil are showing no signs of a slowing infection rate.

The world is currently deeper in recession than during the global financial crisis of 2008, but the issue is not the depth, but the length of this recession. It is unclear as to when and how quickly global markets will open up again and start to recover fully. According to DBS Chief Economist, Taimur Baig, economic markers are clear. Even as the region comes out of lockdowns and finds support in unprecedented fiscal and monetary measures, there will be low or negative growth in Asia this year.

The recovery will be difficult and staggered. Singapore, aided by significant policy support and its highly competitive labour market, infrastructure, and business capabilities, is likely to adapt to the ongoing seismic changes. We also expect China's domestic demand-oriented markets to deliver strong growth even if external demand remains lacklustre. In ASEAN, although Indonesia's confirmed cases continue to increase, the authorities have taken decisive measures to stabilise the currency and fixed income markets, which should pave the way for orderly financial conditions as the economic recovery begins.

As you can see, the COVID-19 pandemic has had a significant impact on almost all parts of the global economy, and Insurers are no exception. As the pandemic continues to unfold, customers are focused on their health and in many cases, survival, rather than actively lodging claims. But, as life returns to some normalcy, we can expect to see the real impact of COVID-19 on the sector. Insurers too will suffer if they don't turn challenges into opportunities.


The changing customer and its impact on the Insurance industry

COVID-19 has changed customer behaviour forever, and there is no turning back. As a result of lockdowns across the world, and people encouraged to practice social distancing, there will continue to be an exponential increase in demand for more digital touchpoints throughout the customer journey.

Digital natives already expect to be digitally enabled - when they have questions, they will more likely speak to a chatbot than call into a call centre, or use contactless card payments rather than cash. As countries have imposed or strengthened social distancing measures due to COVID-19 the last few months, these digital consumer trends have extended to the population at large. According to Mastercard, 79 percent of people worldwide and 91 percent in Asia Pacific say they are now using tap-and-go payments due to safety and cleanliness concerns.

The industry will change dramatically, including:

  • How to sell insurance. Social distancing is becoming the norm, and virtual selling of insurance products by agents and advisors will be the default mode. Digital banking will facilitate such virtual sales transactions.
  • How to buy insurance. Digital payments will now become the norm, and cheques and cash payments will be a thing of the past.
  • The types of insurance available. New risks are emerging because of changes in customer behaviour. For example, online retail and food delivery will become more prevalent, and insurance is needed to cover these new risks, such as for goods damaged in transit.
  • The introduction of usage-based insurance. For example, usage-based motor insurance would enable drivers to pay less if they did not drive as much, such as during the circuit breaker period.
  • Consumer-led innovation. Customers will start to demand more comprehensive yet flexible coverage from their Insurers. 'Old models' of assessing risk and providing a one-size-fits-all coverage will unlikely meet the demands of a post-pandemic market. And customers may start to request for policies that cover pandemics and other natural disasters.

With so much change, the challenge is now for Insurers to be agile and turn change into opportunity for future survival.


Adapting to the post COVID-19 world

While the consequences of the pandemic continue to unfold, Insurers play a crucial role in enhancing the resilience of society. They also need to build greater resilience as a sector which extends to increased digitisation, especially as individuals and businesses become more risk-averse and therefore prioritise insurance. Who knows when the next global crisis will occur? Everyone must be ready for a changed future.

To build more resilience, Insurers will need to evolve their products to cover risks that have become most pertinent for society since the pandemic such as health, unemployment and business interruption insurance. A public-private insurance partnership may also be needed to address some of the new evolving risks.

COVID has also reminded Insurers of the importance of a stable and robust liquidity position. For example, during the crisis, new insurance sales in certain lines of businesses such as travel insurance grounded to a halt, impacting cash flow. On the other hand, Insurers still need to cover operating expenses like paying claims, rents and payroll. Hence, Insurers needs to have sufficient liquidity to keep going until the business is normalised.

Further, strong capital adequacy is another crucial aspect for Insurers to pay attention to in terms of building resilience in the new world. At the height of the crisis, disruption in the financial markets affected all investment assets, including both bonds and equities, resulting in significant market losses for the investment books of Insurers. Insurers with substantial capital buffers were better able to withstand the pain without the need to liquidate their investment assets.


How to prepare for the new world and accelerate digitalisation?

DBS partners closely with the Insurance sector across Asia, providing digital banking solutions to Insurers across China, Hong Kong, India, Indonesia, Singapore and Taiwan.

Renown as Asia's leading digital bank, we have been at the forefront of leveraging digital technology to help Insurers deliver real-time, digital solutions aimed ultimately at enabling a more seamless and frictionless customer experience. We are adding value to the industry all the time by introducing 'industry-first' solutions. For instance, we pioneered the use of API-driven solutions (DBS RAPID) to affect Insurers' premium collections and claims payments instantly, to reduce the use of cheques and enhance overall policyholder experience.

While the industry has only seen the tip of the iceberg when it comes to digitalisation, there are two critical areas in which Insurers can adopt digital technology immediately to fast-track their readiness for a post-COVID world.

Firstly, is payments. APIs (Application Programming Interface) have replaced the whole paper process of customers signing up for a direct debit authorisation for policy payment. APIs effectively enable a policyholder to sign up instantaneously to allow the Insurer to debit the account for premiums due and payable. Insurers reap operational improvements and cost efficiencies as crucial processes such as claims processing and premium collections are automated, making it easier for the customer. APIs will also facilitate usage-based insurance, allowing small-sized premiums to be deducted efficiently.

Secondly, is claims. Along with payments, claims is an equally important area for Insurers to digitalise. DBS is working with Insurers to link up the electronic payment of claims across a wide range of Insurers' products, which is in line with the Singapore government's push for broader adoption of electronic payments and greater digitalisation. There are still many Insurers who make pay-outs via cheque - and this has led to unnecessary delays. With DBS RAPID, once claims are approved, they are credited into policyholders' bank accounts, significantly improving the customer experience.

The other added benefit of digitalisation is that it enables Finance teams to instantly know at the individual client level when premiums are collected and claims are paid. Such real-time transaction information is useful for reconciliation and liquidity management purposes.

In summary, COVID-19 has changed the face of the Insurance sector. Customer behaviour has dramatically changed, and digitalisation is now vital for the future survival of the industry. Digital solutions enable Insurers not only to streamline processes, but to deliver a seamless customer experience to existing customers making payments and claims easier, more timely, secure, and attract new customers. If Insurers don't adjust their business models and rethink how they can digitally service their customers, they run the risk of being left behind.

To find out more about how we can help you accelerate your digital transformation, drop us an email at [email protected].



DBS partners extensively with the Insurance sector across the world. Our expert and dedicated team of specialists work across all parts of the industry spanning Life, Non-Life, Reinsurers, Specialty Lines, and parallel industries such as Insurance brokers, Insurtechs, associations and system providers. Over the years, we have garnered in-depth industry knowledge and have a strong understanding of the sector's opportunities, challenges and pain points.

We continue to provide support and guidance to the industry during this challenging period across the whole life cycle from the collection of insurance premiums, to investing the collected premiums, safekeeping the invested assets and finally making claims and maturity payments. Through digital solutions and the latest technology, we are helping Insurers to transform digitally and to get ready for a new future.