A guide to the twists and turns in the region's complex insurance market
No one wakes up in the morning lurching out of bed declaring that this is the day they're going to go out and get accident and health coverage. I wish they did. (I'm in the insurance business. The accident and health insurance business, to be precise.) Pull is so much better than push.
Getting to pull—and building awareness and then demand in Asia—will take time, though, especially since Asia is far from being a homogeneous monolithic block. We've learned that ongoing business diversification from mature markets like Japan is plain reality—and investment in high-potential growth markets like China and India is imperative. Winning in Asia means letting go of presumptions that I can achieve high levels of standardization, scale, and easy-to-replicate sales and development models. Rather, winning is all about striving for the right balance between embracing market idiosyncrasies and importing more standardized business approaches that we can tweak when needed.
For example, as far as I've been able to tell, Indians would rather stay home and be cared for by loved ones than go to a hospital—even when they're deathly ill. Indeed, the very idea of spending time in an Indian hospital seems to make those Indians I've asked break into a cold sweat. Hospitals, they say, will make matters worse. The Japanese, on the other hand, don't have that problem. An average hospital stay in Japan is close to 40 days. Yes, 40 days. Japanese people tend to settle down, install a bonsai, and ride out the time in no particular hurry to get back into the housewife or salaryman groove. Then, there's China, where patients typically stay in the hospital and receive treatment, just as long as they can pay.
Fear of Cancer in Japan
But the concept of insurance does mean different things to different people. In Japan, there is ingrained fear of cancer and a belief that longer hospital stays are just better than shorter ones. Chinese and Indians look at insurance firstly as a savings and investment vehicle. No one wants to talk about death, as it's culturally taboo and a real sales dampener.
That's where focusing on consequences—where wealth creation and wealth protection work hand in hand—comes in. After all, who wants to dig into one's life savings just to cover the unforeseen expense of a cancer diagnosis or hospitalization?
To be sure, as an industry in Asia we have come a long way. In my business, we sell thousands of policies a year—and we, in the spirit of contributing to nation-building and the improvement of life quality in Asia, talk more about lives that we have protected than policies in force over last year.
Consumers are Increasingly Demanding
All very well and good—but not without its risks. We know, for example, that for an accident policy to sell in Thailand, we must have dog bite coverage (dogs in Thailand aren't that friendly). We must include moped cover in Vietnam (try crossing a street in Hanoi). And anything we sell in Japan must be targeted to the Japanese housewife (they control the cash).
Further, the image of the intrepid insurance agent—knocking on doors, tapping friends and family—as the basic industry distribution model is rapidly changing. The direct-to-consumer era has created unprecedented information access. Agents are now confronted by customers who are becoming increasingly demanding and sophisticated and have done their homework on product price and benefit comparisons. This is undoing the traditional paradigm where what the trusted agent advised was good enough.
Certainly, the ease of delivering products efficiently and effectively communicating to consumers does vary. We have learned that in developing markets such as India and China, outbound telemarketing is an effective sales channel where many consumers are grateful that we went out of our way to call, as opposed to regarding telemarketing as the intrusion it's seen in the U.S. and Britain. As incomes rise and as the middle class emerges, there is also surging pride among this new cadre of consumers. And gone are the old days where the banks' business revolved only around lending and deposits. They are in the insurance game now more than ever across Asia, posing both opportunities and threats.
Korean Market Close to Saturation
Not surprisingly, regulators are trying to cope with an insurance industry that's expanding across the region at breakneck speed. So while markets like Korea have become more regulated, saturated, and competitive due in part to data-privacy and consumer-protection legislation, countries like China and India are denationalizing and opening up their largely untouched markets, (India opened up in 2000, for example.) That's causing a major change in industry investment and resource deployment for future earnings growth.
So it's a great time to be in this industry in Asia as it is for many parts of the services sector. The winners will achieve the right balance between customization and standardization and will carefully calibrate investments and resources across the region aligned to various degrees of market sophistication and opportunity.
But be careful.