As well as moving into new markets, insurers with growth ambitions are looking at the opportunities presented by offering new products. These may be solutions that have worked well in mature markets for some time that may now be rolled out in emerging economies. Alternatively they may be new products, developed in response to emerging risks.

Growth through technology

Technology is rapidly cementing itself as the key to accessing new customers in new markets the Holy Grail for those looking for growth. In the Middle East, as in many other markets, insurers are looking at alternative distribution routes and technology is at the forefront of that. Aggregator websites are becoming big business and the market for mobile apps to sell products is growing.

Compared to other African countries and in particular Kenya, South African insurance companies were initially slow to move into the mobile apps space. However, we note a definite increase in the number of insurers that is moving into this area and we expect rapid growth over the next five years.

Insurers are increasingly looking at how they can deploy new technologies such as artificial intelligence and machine learning to make savings reducing back-end overheads, tackling fraudulent claims and bringing down headcount.

Mark Williamson, London

In markets such as Indonesia, mobile technology could really make a difference. All the right elements appear to be in place: a nation that is disjointed geographically but with a huge population, very low insurance penetration, a massively growing middle class and the widespread take-up of mobile phones. This equates to a recipe for disruptive innovation in the market.

Possibly the most significant example of technology opening up new markets over the last 18 months has been in China. The introduction of new rules has enabled underwriters to distribute products online in all classes of business throughout China without the need to have a branch office in place. This finally opens a path to truly national distribution throughout the country for underwriters, encouraging international players to reconsider the Chinese market both

in GI and life. Although the new rules initially excluded motor insurance, this has now been permitted on an exceptions/ waivers basis. So far, Zhong'An Insurance has been approved by the China Insurance Regulatory Commission (CIRC) to distribute motor insurance online nationally, while Anxin Insurance and Taikang Insurance have been approved to do so only in regions designated by CIRC.

Search is on for better people, better data and better insight

Most insurance businesses are still grappling with the best way to get the most out of all the data they hold. Many require considerable investment in systems, analytics and processes to move the strategies in this area forward in a meaningful way.

Talent is another issue the insurance industry is going to need to start recruiting people with the right technological skill set. In one example of where this might be starting to change, the Australian insurer IAG recently appointed a board member from a strong technology background.

Big data offers significant opportunities for insurers but they also need to make sure they have their own houses in order and are ready to comply with the new EU data rules, due for implementation next year.

Isabel Ost, London

Elsewhere there are opportunities for insurers to team up with companies from different sectors who also have access to large quantities of consumer data. These include supermarkets, with their long-established loyalty programmes, as well as manufacturers of wearable activity trackers, such as Fitbit.

In a different kind of example, last year AIG announced a strategic investment in Human Condition Safety (HCS), an early-stage technology start-up company developing wearable devices, analytics, and systems to improve worker safety. Human Condition Safety is creating tools that help workers, their managers, and worksite owners prevent injuries before they happen. Incorporating wearable devices, artificial intelligence, building information modelling, and cloud computing, the product and service offering is designed for industries that hold the highest risk for workers, including manufacturing, energy, warehousing and distribution, and construction.

Insurtech generating significant interest

Insurtech is also generating huge interest among insurers around the world. As they look to develop process and cost efficiencies, they are keen to leave no stone unturned. A quick look at the numbers explains why. Worldwide, deal activity in the insurance tech space hit its highest annual total in 2016, according to CB Insights data, with deals to insurance tech start-ups rising 42% to 173 on a year-on-year basis in 2016. Total funding to insurance start-ups in 2016 hit USD 1.7 billion, the second consecutive year investment dollars to the space topped USD 1 billion.

Total funding for insurance start-ups in 2016 hit USD 1.7 billion

The large European reinsurers are leading the way in this part of the market, looking to get in on the technology that's been changing financial services on Wall Street. Insurtech start-ups are attracting investment from a growing list of traditional insurance partners, including Excel Innovate, Munich Re, AXA and Liberty Mutual. In two examples in the second half of 2016, Munich Re's Digital Partners took a stake in Slice Labs, a one-year-old start-up that offers insurance, while Allianz SE invested in Simplesurance, a new firm that's offering product protection for online purchases.

Distribution is still critical and we are seeing a big move on the part of insurers, distribution companies and MGAs towards bringing more efficiency to the customer journey through the use of new technology.

Ivor Edwards, London

It could be some time before these investments pay off, as Insurtech is "a long-term challenge and an opportunity, with material effects that may only start to emerge in 10 years' time," according to an S&P Global Ratings report. However, many think that the return will be worth the wait. Some of the technology's appeal is that it can help reduce the cost of distribution. In one prominent example start-up Lemonade, which has attracted prominent backers including Berkshire Hathaway and XL Group, has eliminated brokers and sells renters' and homeowners' insurance in direct competition with primary insurers.

Regulators in other markets are recognising the opportunity that Insurtech presents and are competing with each other to attract innovators. Abu Dhabi has created a new financial free zone, which acts as an incubator for developers to test products. The authorities work with start-ups and other innovators to help develop specific regulations, in a clear signal that the emirate is very keen to attract this type of business. Singapore has constructed something similar - a regulatory sandbox where innovative ideas can be tested via a limited controlled rollout - as the city state continues to pursue its ambitions to position itself as a regional and global insurance hub. In order to achieve this aim, there is a recognition that it needs to be at the forefront of Insurtech innovation.

Micro-insurance still work in progress

Micro-insurance is another product which offers significant growth potential. In South Africa, a new framework will be established under the upcoming Insurance Bill, designed to help the growth of the micro-insurance market, and lay the groundwork for specific standards to follow. The Bill will reduce the level of capital required to be held by micro-insurance businesses and will lower the regulatory requirements needed for selling micro-insurance products.

Underpinned by strong cultural factors, funeral insurance is the most prevalent type of micro-insurance product currently available in South Africa. Indeed, these are the country's biggest-selling policies and have enormous market penetration.

The global microinsurance market is set to grow at a CAGR of 8.2% during the period 2016-2020

As a result, many large domestic insurers already have substantial micro-insurance expertise in-house and are well placed to expand into other product areas. However, new entrants from elsewhere in the financial services industry will also try to enter this segment of the market to take advantage of the huge potential opened up by the new regulatory regime.

Meanwhile, in Thailand last year, Asia Insurance launched an insurance product aimed at players of the popular Pokmon Go game in response to a spate of injuries following the game's release.

The product is available exclusively online and provides personal accident insurance for a period of 30 days. Mobile phones, motorcycles and cars can also be insured under the policy.

The product offers not only protection to game players, but business opportunities for companies that want to strategically place individual Pokmon at sites where their businesses operate, therefore attracting new customers.

Other developing markets such as China, India and Nigeria possess immense growth opportunities for micro-insurance companies to increase their penetration into different market segments. A number of international insurers including Allianz, Tokio Marine and Mapfre are looking at investing in micro-insurance, with a current focus on the quality of their target market infrastructure and managing operational costs.

Takaful resurgent?

Takaful insurance products that are compliant with Shariah Law has long been touted as a potentially huge growth market. However, a number of structural challenges, including the absence of an adequate reinsurance market and a shortage of Islamic scholars able to underwrite the policies has, up to this point, held this nascent part of the industry back.

Last year, a couple of interesting moves by sizeable players in the market may indicate reignited interest in this sector. In April 2016, Zurich Insurance Group received regulatory approval to take full ownership of Malaysian provider MAA Takaful, a joint venture between MAA Group Berhad and Bahrain's Solidarity, which hold 75% and 25% stakes respectively.

Salim Majid Zain, Chief Executive Officer of the newly renamed Zurich Takaful Malaysia Berhad (ZIMB) explained the rationale behind the move: "For Zurich to fully realise its potential in Malaysia and achieve the market share that it aspires to, we must be able to provide attractive solutions to customer needs right across the country; particularly in providing them with the necessary products to protect themselves and their assets. Through ZTMB, we are confident that we are able to provide our customers with a wide range of Insurance and Takaful solutions across multiple customer segments."

The IPO of Orient UNB Takaful was oversubscribed  by around 13 times

In November 2016, in the United Arab Emirates, Union National Bank announced that it had tied up with Orient Insurance Company to form an Islamic insurance joint venture, Orient UNB Takaful. In January 2017 the entity was subsequently floated on the Dubai stock exchange, the Dubai Financial Market (DFM). The IPO was oversubscribed by around 13 times. Mr Mohammad Nasr Abdeen, UNB CEO, said: "Despite the high number of insurance companies operating in the UAE, we see an opportunity, as there is only a limited number of companies operating in the field of takaful. In addition, there is a growing demand for Shariah-compliant financial products and services and insurance products."

Drones and driverless cars

Drone insurance market to reach USD 1 billion in a decade

The increasingly widespread use of drones is creating opportunities for insurers. In the Middle East, drones are widely used by the fire services, as well as by media companies covering large sporting events. Amazon, the multinational online retailer, is also looking at how drones can speed up the delivery of its products. In doing so it is also looking at the associated risks and considering how to mitigate against them.

Many insurers are now moving into this space by extending existing media and entertainment covers or by pioneering new drone covers, including most recently cover for socalled "manned drones".

Another new risk area which the insurance industry is moving fast to capture is of course that of autonomous vehicles which looks set to become the single biggest gamechanger in the insurance industry. For many insurers, motor policies are their bread and butter and this work will continue in many markets for many years as the new technology will not be introduced or adopted overnight. However, new cyber and product liability covers are starting to emerge that reflect the alternative nature of the risk posed by autonomous vehicles such as systems malfunction and cyber security, as well as residual driver error.

Singapore appears to be some way ahead in this part of the market; it is the first country in the world to trial driverless taxis. At the moment this takes place in a contained environment and is being undertaken by single company operating in a certain area. However there will be a wider rollout by 2018 and insurers and regulators around the world will be watching the developments with interest.

Parametrics offer potential but more effort needed

Parametric insurance has the potential to transform the way disasters are managed as governments and aid agencies re-set expectations on how fast aid can be made available using these developing insurance products.

2 weeks = time it took for USD 29.2 million to be paid out on products with parametric triggers following Hurricane Matthew

Neighbouring countries in the developing world have formed mutuals that pay out promptly for defined natural hazards. In Autumn 2016, CCRIF SPC in the Caribbean (the pioneer of the concept in 2007) paid out USD 29.2 million to member countries within two weeks of them being hit by Hurricane Matthew. ARC did something similar when Malawi was hit by drought. But so much more could be done.

As we move into 2017, we think it likely that more commercial insurers will develop an appetite for offering this type of cover to national and regional governments. Swiss Re and a Lloyd's consortium have led the way in China and other parts of Asia. The test will be whether

insurers can work with the UN and other bodies to extend the reach of these products so that other agencies (including NGOs) can use them to fund their own humanitarian interventions.

One of the key challenges for the industry will be to help NGOs and others explain to potential donors why it makes sense to fund premiums for a parametric cover that might only occasionally pay out. In insurers' favour is the inalienable argument, borne out by the Hurricane Matthew experience that payment based on a range of scientific data triggers is faster and more reliable than politicised decisionmaking about aid allocations could ever be.

The advantages of parametric insurance are clear but there remains much work to be done to increase awareness so that products such as these can play their part in building greater resilience to natural disasters and closing the protection gap.

Traditional products in new markets

Beyond these new product types, there are also opportunities for traditional products in new markets.

Health and life

Health insurance and life insurance are a good example of this trend. This is particularly the case in the Middle East and China where new regulations will serve as a catalyst for growth in the market.

Regulations in Abu Dhabi, Dubai, Qatar and Saudi Arabia have made it compulsory to have private health insurance, a move which has led to significant interest from major international players. For those who are not already present in the region, access is predominantly through partnership arrangements with local players. However, the possibility of obtaining direct licences where possible in order to position themselves to grow their market share is also being explored.

Peter Hodgins, Dubai


Cyber insurance, certainly a relatively new product, but becoming more established in mature markets, is also set to make considerable inroads in some of the more emerging economies.

For example, in India, the recent data breach impacting a number of major banks, thought to have been caused by malware on an ATM network, compromised the security of an estimated 3.2 million customers in one of the country's largest-ever cyber incidents. This incident will likely serve as a wake-up call and help to precipitate a reversal of the low growth trend in the cyber insurance market.

The number of providers of cyber cover in India has been limited but more and more Indian insurers are already including it as part of their treaty arrangements. Now, an increasing number of insurers are recognising the scale of the opportunity and looking to launch new cyber insurance products. Many of them will seek collaboration with foreign insurers who have greater experience and capacity in writing cyber insurance business for reinsurance and underwriting support.

In another interesting development in India, mobile wallet companies are increasingly looking for partnerships with insurance companies to offer protection to users from cyber security breaches. At the end of 2016, FreeCharge announced the country's first e-wallet protection plan for all its users, in partnership with Reliance General Insurance. Other insurers are partnering with mobile wallet companies for premium collection purposes. E-wallets are set to become more popular following the Indian government's push towards more cashless transactions.

Meanwhile, in mature markets, demand for cyber insurance has been booming. The London insurance market saw a 50% rise in individuals and companies taking out policies against cyber-attacks in 2016 and a further surge is expected this year. Further ahead, the arrival of the General Data Protection Regulations (GDPR) in 2018 will bring stronger and consistent data protection regulations throughout the EU.

The GDPR brings in obligations to report data breaches, which will greatly increase notification costs and the costs associated with reputation damage protection; as well as the threat of big financial penalties for companies that fail to take adequate steps to protect data. As a result, consent requirements around the collection of data could become stricter, and we anticipate that the new regulations will drive-up demand for specialist cyber insurance cover, while insurers will need to make sure they too are ready to comply with the changes.

Likewise, in the US, the regulatory situation is also changing. However, this is a complicated picture as there are 47 different state data privacy laws. In addition, there is a broader definition of data privacy emerging that includes national security issues, the impact on elections and business continuity, and the laws are likely to change to reflect this broader risk exposure.

M&A and W&I

Another product that has been around for some time in some parts of the world, specifically in Europe, is mergers and acquisitions insurance, also known as warranties and indemnities. We are now starting to see take up of this product in other parts of the world, such as North America, Asia and Australia. This is partly due to the recent buoyant deal environment, but also due to a growing awareness of the product. Insurers are also recognising the opportunities in this class of business, as a result, the number of providers has been increasing.