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What’s Happening in the Asian HNW & UHNW Life Insurance market.

Introduction

The disruption caused by COVID-19 on Asia’s wealth management industry has further augmented existing challenges with its economic impact. Financial advisers are facing several dilemmas in predicting the future landscape of risk assessment, physical and digital interaction with HNW & UHNW Life Insurance clients, and their expectations.

There are, however, new epiphanies that will impact the industry. The pandemic has brought back a life appreciation that will resonate well with the life insurance and estate planning industry in Asia’s vast spectrum of UHNW individuals. 

Industry professionals are now taking initiatives to bring back the strained glory of the life insurance industry after the COVID impact that brought huge revenue and premium losses. An estimated 4 million policies and $6 billion in revenue ($2 billion in new business premiums and $4 billion in renewal business premiums) was lost because of the pandemic.

Today, the industry needs players that can adapt to the new view of life insurance – a product that safeguards the future interests of the ultra-rich. 


Impact of COVID-19 on the life insurance sector

Before the emergence of the virus, the life insurance sector enjoyed a stable footing in Asia. With the growth in business premiums and first-year premium collections reaching double digits year-on-year, the sector was booming. However, life insurance in Asia was still viewed as an investment by UHNW and HNW clients. 

The COVID-19 humanitarian and economic impact changed the world view. It brought in the reality of mortality that had almost vanished from the surface of general consciousness due to developments in healthcare over the past several decades. 

From an economic point of view, COVID-19’s disruption is comparable to the bursts of the subprime mortgage crisis of 2008 and the dot com bubble burst of 2000. 

Major insurance companies reported contraction in business premiums with budget cuts, job loss, and insurance payouts. There was a 30% decline in the number of year-on-year life insurance renewals in March. There was also an increase in the long-term persistency ratio of 61 months, while the short-term 13-month metric suffered a cut. 

A significant decrease of AUMs (assets under management) by 12 life insurers in India, stock market decline in March 2020, and customer redemption to increase liquidity, dealt a serious blow to the industry.

Also read: https://canetwork.com/ultra-rich-prefer-multi-family-offices/ 

Disruptive forces pushing towards the next normal

There was a stark decline in Asian equity markets from February to April 2020 by around 10 – 15%. 

However, with the gradual containment of the COVID virus, the economic activity in Asia regained momentum. China is the only market that was able to show some resilience to the impact of the pandemic and helped the Asian wealth management industry stay afloat (Chinese investors account for 35 – 40% of the wealth management industry in Asia.)

Nevertheless, for wealth management firms to survive, companies had to start rethinking their business plan in response to the pandemic. 

All are united, businessmen form a humanoid pyramid to prevent the red arrow from collapsing

Horizon 1: Managing through the crisis

The first horizon mainly focused on establishing business continuity for wealth managers throughout the crisis. From developing infrastructure to managing investor panic and addressing initial IT costs, businesses were already strained by dwindling resources. 

Horizon 2: Stabilize and unlock new growth

In the next phase, wealth management firms moved to a more advisory role. Initially, digital analytical infrastructure will be balanced and growth opportunities will be prioritized. 

A stabilization after assessing mergers and acquisitions will help strengthen the foundations of the business. 

Horizon 3: The new normal

The first and foremost thing for wealth management businesses would be to rationalize physical channels, strengthen online engagement to increase the effectiveness of the sales. 

Here a few things that will gain importance for wealth management firms in the next normal: 

  • Renewed emphasis on operational risk and policies that would optimize business continuity in case of further escalation of the crisis. 
  • An increase in digital engagement will be the new way for investors. 
  • Lowered valuation and the recent need for the transition will set wealth management businesses up for more expansion and consolidation. 

HNW & UNHW life insurance structural change after Covid-19

Billionaire wealth catapulted to a new high for the super-rich in spite of the past several months of economic setback and recovery.. 

Today the Asian market has close to 2200 billionaires, with a combined wealth amounting to around $10 trillion. In the new normal, changes in consumer behaviour also saw structural changes. 

  • Life insurance became firmly established as risk cover (from the earlier risk cover + investment point of view)
  • Life insurance became essential spending and the ultra-rich who earlier lacked interest and are now eager for the right product 
  • Customers wanted increased flexibility, better benefits and product features, and enhanced digital capabilities from the insurer.

Post-COVID transformation and future

While there will always be the requirement for the personal touch in life insurance and financial wealth management of the super-rich, the new future of the industry will be defined by: 

  • Increased automation to reduce routine work for advisors
  • Dynamic analysis and product recommendations for clients
  • And increased on-client engagement through digital channels

The ripples of the COVID pandemic will spread far and wide in the Indian and Asian wealth management market and only companies that can assess and adapt to the new needs of clients will be able to flourish in the future. 

If you are someone who is finding it challenging in attracting high-net-worth clients after the pandemic? Let CAN guide you with one-one training and access to bespoke dollar-denominated solutions on a globally successful referral model.   

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Data Sources: 

https://www.mckinsey.com/~/media/mckinsey/industries/financial%20services/our%20insights/asia%20wealth%20management%20post-covid-19/asian-wealth-management-post-covid-19-vf.pdf

https://www.hubbis.com/article/hnw-uhnw-life-insurance-in-asia-opportunities-challenges-for-the-world-ahead

https://www.adlittle.com/en/insights/report/bright-future-life-insurance-india-post-pandemic-world

https://www.cnbc.com/2020/10/08/asia-pacific-is-home-to-most-billionaires-globally-pandemic-grows-wealth.html

https://theasset.com/article/41826/even-the-ultra-rich-need-life-insurance

https://www.asiaadvisersnetwork.com/Article?aid=75061

https://image-src.bcg.com/Images/BCG-Global-Wealth-2020-Jun-2020_tcm9-251066.pdf