Asian Insurers Must Embrace Internet.Online insurance activity will have a major but mixed effect on the Asian insurance industry, which will need to change substantially to meet the resulting challenges, said Simon Hu,A.M. Best Asia-Pacific Ltd's Managing Director. "The Internet will siphon siphon (sī`fən, –fŏn), tube through which a liquid is lifted over an elevation by the pressure of the atmosphere and is then emptied at a lower level. away some of your business, but on the other hand it will create a parallel market," Hu said. One immediate impact would be competition, he said, pointing to Korea, where there has been a 20% drop in auto insurance rates and a 40% reduction in term life rates because of online competition. There is "a double whammy double whammy Noun informal a devastating setback made up of two elements double whammy n (col) → palo doble double whammy n (inf ," Hu said, as "an online competitor will cannibalize can·ni·bal·ize v. can·ni·bal·ized, can·ni·bal·iz·ing, can·ni·bal·iz·es v.tr. 1. To remove serviceable parts from (damaged airplanes, for example) for use in the repair of other equipment of the same your business" but in response, companies move offline business online and cut into their own business by offering online discounts. Hu's key argument, though, was that Asian insurers would need to adapt themselves and their business to the transforming power of the Internet, which "further advances the competitive advantage" of global players. Hu urged insurers to cooperate with each other. "Regional barriers will have to be removed to give Asian e-industry a chance. Most domestic markets are not large enough to produce economies of scale," he said. But the companies themselves will need to change. One part of this, Hu said, is their need to adopt a risk-based business philosophy to meet online carriers' focus on standard, risk-based pricing "Property type" redirects here. For other uses see Property (disambiguation). Risk-based pricing is a methodology adopted by many lenders in the mortgage and financial services industries. and optimizing risk portfolios in both liabilities and assets. More specifically, he argued that Asian insurers must embrace concepts such as captives, alternative risk transfer and securitization Securitization The process of creating a financial instrument by combining other financial assets and then marketing them to investors. Notes: Mortgage backed securities are a perfect example of securitization. May also be spelled as "securitisation. to prepare for the upcoming competition from global, online underwriting Underwriting 1. The process by which investment bankers raise investment capital from investors on behalf of corporations and governments that are issuing securities (both equity and debt). 2. The process of issuing insurance policies. portals that don't warehouse risk and, therefore, have cheaper capital. |
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