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Intelligent Claims Automation Is Reshaping Malaysia’s Insurance Sector

Malaysia, drawn by its strong economic growth, expanding middle-class income and rising insurance penetration levels, is witnessing a new era of innovation – with AI leading the charge in bringing new and intelligent technologies to the mass-market.

According to Bank Negara, the country’s regulator of banks and insurers, life insurance penetration rate stood at 56% in 2018. Foreign insurers have been highly keen in this market despite lingering regulatory uncertainty over the sector’s foreign ownership rules, currently set at a 70% cap.

While ‘motor’ remains the largest class of insurance with a market share of 45.6%, followed by fire at 19.2% and marine, aviation and transit (MAT) at 8.2%; Takaful has been outpacing conventional insurance in the Islamic peninsula.

(Takaful refers to Islamic insurance products.)
Islamic insurance penetration rate in the country will likely touch 16% in 2019. In financial dealings, ‘takaful’ firms follow religious guidelines including bans on interest and monetary speculation and a prohibition on investing in industries such as alcohol and gambling.

Growth in the takaful business in Malaysia, the world’s second largest Islamic insurance market after Saudi Arabia, is backed by government efforts to reach out to the general consumer with affordable insurance coverage and the potential use of better technology as a disruptor.

AI is already poised to play a crucial role in Malaysia’s next big step. By 2021, Artificial Intelligence will allow the rate of innovation to almost double (1.8x) and increase employee productivity improvements by 60% in Malaysia, according to an AI study put forth by Microsoft & IDC-ASEAN Research Group.

While seven in 10 business leaders polled agreed that AI was instrumental for their organisation’s competitiveness, only 26% have embarked on their AI journeys. Those that have adopted AI expect it to increase their competitiveness by 2.2 times in 2021. Though, everyone agrees – every single interaction from here on is going to be digital.

Mckinsey Claims Automation Benefits

Malaysia is also moving towards a cashless society with infrastructure being put into place to facilitate e-payments which have more than doubled per capita from 2011 to 2019. For this, banking solutions in the region have ramped up digital investments so customers can take advantage of convenient and secure banking.

Intelligent Claims Automation

For insurers, claims settlement represents a large customer service touch point. However, taking a customer seamlessly through the claims resolution process is not always going to be simple.

Being an AI-driven insurtech enterprise means being able to fully utilize data and optimize business processes with powerful algorithms, creating the space for data-driven decision making. With AI, the claims process can be augmented using chatbots to convey support and status of a claim, and Machine Learning (ML) that can study large-volume patterns to reveal insights and detect fraud. Claims automation can be achieved at part or whole of the settlement process.

Claims Management Process

The Malaysian Insurance market is already witnessed to big insurers rolling out innovative products for customers, such as “Ask Sara” – AIA’s AI-powered enquiry channel that provides instant, real-time answers to agents anytime via Facebook Messenger. Integrating sensors into the value chain has also provided greater rewards with predictive modelling and data analytics, like Katsana – a telematics company that is enabling insurers to provide usage-based insurance based on driver’s performance data. These measures allow for safer, accurate and more affordable risk-based pricing for consumers.

The attitudes of the insurers and younger generations are shifting alongside their Asian peers, to a seemingly more AI-involved future. While the general insurance trade has witnessed nearly stagnant growth over the past several years, AI can help lower overheads and variable costs that will enable insurers to roll out affordable coverage, including to the under-served segment.


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International Insurance Landscape

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Retention playbook for Insurance firms in the backdrop of financial crises

4 minutes read

Belonging to one of the oldest industries in the world, Insurance companies have weathered multiple calamities over the years and have proven themselves to be resilient entities that can truly stand the test of time. Today, however, the industry faces some of its toughest trials yet. Technology has fundamentally changed what it means to be an insurer and the cumulative effects of the pandemic coupled with a weak global economic output have impacted the industry in ways both good and bad.

Chart, line chart

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Source: Deloitte Services LP Economic Analysis

For instance, the U.S market recorded a sharp dip in GDP in the wake of the pandemic and it was expected that the economy would bounce back bringing with it a resurgent demand for all products (including insurance) across the board. It must be noted that the outlook toward insurance products changed as a result of the pandemic. Life insurance products were no longer an afterthought, although profitability in this segment declined over the years. Property-and-Casualty (P&C) insurance, especially motor insurance, continued to be a strong driver, while health insurance proved to be the fastest-growing segment with robust demand from different geographies

Simultaneously, the insurance industry finds itself on the cusp of an industry-wide shift as technology is starting to play a greater role in core operations. In particular, technologies such as AI, AR, and VR are being deployed extensively to retain customers amidst this technological and economic upheaval.

Double down on digital

For insurance firms, IT budgets were almost exclusively dedicated to maintaining legacy systems, but with the rise of InsurTech, it is imperative that firms start dedicating more of their budgets towards developing advanced capabilities such as predictive analytics, AI-driven offerings, etc. Insurance has long been an industry that makes extensive use of complex statistical and mathematical models to guide pricing and product development strategies. By incorporating the latest technological advances with the rich data they have accumulated over the years, insurance firms are poised to emerge stronger and more competitive than ever.

Using AI to curate a bespoke customer experience

Insurance has always been a low-margin affair and success in the business is primarily a function of selling the right products to the right people and reducing churn as much as possible. This is particularly important as customer retention is normally conceived as an afterthought in most industries, as evidenced in the following chart.

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        Source: econconusltancy.com

AI-powered tools (even with narrow capabilities) can do wonders for the insurance industry at large. When architected in the right manner, they can be used to automate a bulk of the standardized and automated processes that insurance companies have. AI can be used to automate and accelerate claims, assess homeowner policies via drones, and facilitate richer customer experiences through sophisticated chatbots. Such advances have a domino effect of increasing CSAT scores, boosting retention rates, reducing CACs, and ultimately improving profitability by as much as 95%.

Crafting immersive products through AR/VR

Customer retention is largely a function of how good a product is, and how effective it is in solving the customers’ pain points. In the face of increasing commodification, insurance companies that go the extra mile to make the buying process more immersive and engaging can gain a definite edge over competitors.

Globally, companies are flocking to implement AR/VR into their customer engagement strategies as it allows them to better several aspects of the customer journey in one fell swoop. Relationship building, product visualization, and highly personalized products are some of the benefits that AR/VR confers to its wielders.  

By honoring the customer sentiments of today and applying a slick AR/VR-powered veneer over its existing product layer, insurance companies can cater to a younger audience (Gen Z) by educating them about insurance products and tailoring digital delivery experiences. This could pay off in the long run by building a large customer base that could be retained and served for a much longer period.

The way forward

The Insurance industry is undergoing a shift of tectonic proportions as an older generation makes way for a new and younger one that has little to no perceptions about the industry. By investing in next-generation technologies such as AR/VR, firms can build new products to capture this new market and catapult themselves to leadership positions simply by way of keeping up with the times.

We have already seen how AR is a potential game-changer for the insurance industry. It is only a matter of time before it becomes commonplace.

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