|
|
|
|
An Evolving Industry
By Roland Tan
The growth of Singapore's economy in tandem with the rest of the Asia-Pacific region has benefited the general insurance industry here.
As a whole, premiums - in both life and general insurance - have been growing faster than GDP in most emerging markets in Asia. Swiss Re estimates that premiums in emerging markets will grow at 7.5% over the medium term until 2014. Meanwhile, climate and demographic changes are spurring demand for more sophisticated insurance products in Asia, for example, insurance against the risks of natural catastrophes and increasing longevity.
Trade and economic activities have also generated increased demand for specialist insurance coverage for marine cargo, product liability and professional indemnity. These lines of businesses are projected to grow at between 15% and 25% over the coming years.
Mr Damien Sullivan
the Chief Operating Officer for ACE Asia-Pacific |
"The technical expertise and underwriting capacity for many specialised areas of general insurance have traditionally been concentrated in markets like London and New York. We're beginning to see that change in Asia, particularly here in Singapore. The MAS have done a great job in providing incentives to attract both capital and experienced talent. A superior supervisory framework is complemented by Singapore's strategic location, strong domestic economy and efficient legal and tax structure" says Mr Damien Sullivan, the Chief Operating Officer for ACE Asia-Pacific.
Mr Sullivan points to various examples such as insurance coverage for political risk, trade credit, financial institutions and private equity M&A. Specialised insurance products are also being used to support development of regional infrastructure, with sophisticated covers for the oil and gas, power, construction and transport sectors and so on.
The growth is not limited to commercial activities. The consumer side of general insurance has also been growing, particularly in relation to travel and tourism.
"We're seeing a huge growth in the first-time buyer market. The rise of the middle class is leading to demand for accident and health, personal lines and travel products. Greater purchasing power is fuelling travel. More people in Asia are traveling outside their borders to places like Vietnam, Thailand and China. In this year alone, a developing territory like Macau is forecasting over 20 million visitors. Travel-related insurance products have therefore become an important component of the general insurance business," says Mr Sullivan.
|
New business, new risks
The future prospects look good, but that is not necessarily the case for traditional lines of general insurance.
For example, motor insurance incurred a marginal underwriting loss in 2006. This is significant, as motor insurance remains the largest class of insurance in Singapore, accounting for 30% of the general insurance market.
Workmen's compensation is the third largest class of general insurance here, and this particular business has suffered poor underwriting results over the years due in part to stiff competition as well as under-declaration of wages and fraudulent injury claims.
Given these challenges, the time has indeed come for Singapore-based insurance companies to seek higher value-added activities, if not in Singapore then elsewhere in the region.
But increased scopes of businesses also mean increased risk of loss. As insurance companies broaden their products and services, the need for sound risk management becomes more important than ever before. Underwriting and pricing discipline must not be compromised even as companies compete for market share.
"Many insurance companies have been destroyed by the lack of control mechanisms or insufficient understanding of new products, distribution and territories. There is now a greater recognition of the variety, the increasing number and the interaction of risks facing insurance organizations. The challenge is to identify, understand and manage the interdependencies" says Mr Sullivan. "Regulators, rating agencies and investors now insist that insurance companies take greater responsibility in managing risks on an enterprise-wide scale"
"The industry is a lot more disciplined now in terms of understanding risk, appropriate pricing and capital allocation. Insurance organizations are now recognizing the need to manage all risks and their dependencies. The companies which better understand and manage risk are most likely to seize opportunities. Informed risk taking is a potential competitive advantage"
Fresh talent needed
Industry prospects aside, the next key challenge for general insurance comes from the urgent need to attract, grow and develop talent for all activities, from front-end sales staff to senior management.
The Financial Industry Competency Standards (FICS) framework, with an accreditation and certification system, provides transparent and structured programmes that will improve the skills and competency of the financial workforce.
Insurance has become a knowledge-intensive and complex business. At the same time, the Internet has dramatically changed the industry, opening up radically new distribution channels such as Internet kiosks, telemarketing and bundled products in addition to traditional sales channels.
So, insurers not only have to adapt to new businesses but also to the new ways of delivering and selling their products as well. "It is all about meeting the lifestyle and buying needs of the modern consumer," observes Mr Sullivan.
This means that the industry is keen to tap onto the talent and experience of Generation Y, that is, the young, intelligent and financially savvy individuals who are not afraid to "shake trees" and ask demanding questions.
Attracting and keeping such talent becomes a unique business challenge in its own right.
"Being in general management, my greatest challenge is creating the right culture, dynamic enough to motivate and develop people to their fullest potential," says Mr Sullivan.
"At ACE, our flat management structure encourages visibility and open communication. As a young organization with very little bureaucracy, our dynamic corporate culture and global platform promotes opportunity and makes it easy to do business. As such, it gives me great satisfaction to see young people come into the industry, grow in confidence and challenge traditional business practices," he says.
The right skills
The important thing to note is that you do not need to have a background in finance to start in general insurance. Such backgrounds will be helpful of course, but more importantly, you need sound communication skills, an orientation to results and the ability to think strategically. In a nutshell, you need to have business acumen.
"Attitude is very important. External qualifications will only take you so far. You need to be inquisitive, analytical, and ready to take initiative. You have to be confident and comfortable with people," says Mr Sullivan.
In the end, the general insurance industry is all about risk. "At ACE, we are first and foremost an underwriting company. We have the appetite for risk which some companies shy away from. We understand risk, how to manage risk, price risk and mitigate it." says Mr Sullivan.
And those who understand risk are the ones who are best able to exploit the value-creating potential of risk in this evolving industry.
|
|
|
|