Episode 21: Asia In A Rebalancing World, A conversation With Ben Simpfendorfer, Oliver Wyman Forum Asia-Pacific Leader

Speaker A: Hi everyone and welcome to Oliver Wayman's Reinventing Insurance podcast. I'm um, your host, Paul Ricard. Welcome to Reinventing Insurance Today. I'm delighted to welcome Ben Simfendorfer with me, who's a, uh, partner and the APAC lead, uh, for the Olive oilman Forum. Welcome Ben.

Speaker B: Thank you very much.

Speaker A: So Ben, why don't we start uh, with a quick intro about yourself first of all.

Speaker B: Well, as you explain, I'm a partner here at Oliver Wyman in Hong Kong. I've lived here for over 25 years, so it's definitely home. I lead um, the uh, firm's leadership activities across the region. So the forum convenes senior leaders from, ah, across industries, uh, to talk about some of the hottest issues of the day. And we do that by putting together roundtables or publishing thought leadership. So it's a fabulous part of the business, particularly at this point in time with the uh, global markets in such disruption. Previously I ran a business for 10 years, a boutique consulting business and we did a lot of uh, work in Asia, Middle east and Africa. Again, fast growing, uh, emerging markets, uh, but I equally had the pleasure of spending 10 years at the uh, investment banks, uh, as a chief China economist at an exciting point in time when China was just emerging and really capturing the attention of global markets.

Speaker A: So Hong Kong for 25 years, you've obviously seen things evolving in this part of the world for this long. What's been, by the way, the most exciting and surprising things you've seen happening in these last 25 years in Asia, in Hong Kong, in Greater China?

Speaker B: I mean, China's explosion onto the world stage was perhaps without a doubt, number one, there was a period at the banks when we struggled to write anything about China that would capture global attention. And by 2003 that all changed. And all everyone wanted to hear is China, China, China. Uh, and at the same time that, you know, the country's uh, announcement of a belt and road strategy, uh, really took the world by surprise as well because, uh, China's connectivity to markets across Asia, Middle east and Latin America really disrupted the way many multinationals did business. It changed the way they thought about the region. And then of course I'm all mentioned the pandemic, uh, especially here in Hong Kong and how that changed the way that we do work and the way that we meet with clients. But there is no doubt this region is just fabulously exciting. And if there's one thing I always tell myself every 18 months, you've got to relearn, uh, Your assumptions about how this region does business. It's exciting.

Speaker A: With that, I think we have quite the packed agenda for today. You've recently been running a lot of thought leadership around what will Asia look like in 2030 onward, is that right? So we'll dive into some of this. What are some of the megatrends, what are some of the hottest topic, to quote you, that are shaping the future of Asia? And then obviously, since we're talking here with a lot of folks from the insurance ecosystem, we'll also talk about what are some of the most disruptive forces that will shape also the insurance industry. And looking forward to an exciting conversation there. And then maybe to wrap this up, we can also talk about what's happening in the world more broadly, what are some of the big global trends, whether they're impacting Asia or all the world more globally. So I think quite a packed set of things for us to go through. How does that sound?

Speaker B: Sounds ideal lot to talk about.

Speaker A: Well, let's dive in, uh, and talk about the forces and the megatrends that are shaping Asia. So maybe first of all, do you want to share a little bit of context about the work that you've been doing recently on that front before we dive into the trends themselves.

Speaker B: So megatrends are front and center for boards, for executive teams. We've seen a convergence of trends and I know we're going to get into many of them. But everything from geopolitics to supply chain to demographics to technology, that is really shaking up the way that we think about our business models. And so that we've tried to approach this from a number of ways. One is that we're putting together roundtables across the region where we bring together senior executives from across industries just to share their views on where they see both opportunities and challenges and equally putting together a little bit of thought leadership on the topic, such as the survey we recently did with NYSE CEOs. So these are 100 plus CEOs from New York Stock Exchange, and we are asking them a series of questions on the forces that were impacting their business and their potential levers to uh, uh, respond to some of those forces.

Speaker A: You've looked into a range of scenarios, right, of how Asia could evolve in the next few years. So can you tell us a little bit more about that?

Speaker B: So, uh, we see scenarios where the, uh, shift in supply chains, for instance, is rebalancing growth across the region. China used to be the single focus of most big multinationals, but as supply chain shifts in capital Flow shift. Increasingly, multinationals are also excited about Southeast Asia, South Asia. That's certainly uh, one scenario we're exploring, but there are others, such as uh, a climate impacted world where rising flood risks, water scarcity risks, equally demands on governments to spend more on resilience. They change the way that uh, corporates need to think about their footprint and their exposure to these potential risks. So there are a number of scenarios

Speaker A: out there we're discussing and so diving into, let's say, the growth rebalancing that you were talking about, you know, I think you were talking a little bit earlier about China. So you know, is there a, uh, doubling down on other parts of the world, uh, other parts of Asia from global companies? How do you see that evolving? What are the trends that you see happening and what are the implications for a range of industries with uh, that in mind?

Speaker B: So to put this into perspective, you turn the clock back ten, uh, years. China was growing at double its current rate. So growing at close 10%, it accounts for over 50% of the region's economy. So there was no surprise that multinationals, if they had to do anything, were doing it in China. China's growth rates have since slowed, uh, and are now trending around about 5%. At that level, markets such as um, India, Indonesia, Vietnam are all growing at faster rates. Now admittedly their markets are ah, smaller but nevertheless those growth rates have become quite attractive. And so you've seen companies begin to rethink where they invest their next dol. So you take Japanese uh, firms as an example, whereas previously uh, they used to invest dollar for dollar into China or Southeast Asia. That's changed, uh, significantly, uh, very little investment going into Japan, uh, the same if not more investment going into ASEAN as they look to capture some of those uh, faster growth rates.

Speaker A: And does that link up with the demographic shifts as well that are happening in the region? I know this is also a scenario you're looking into. I'm just curious how this is all intertwined between what we're seeing in China, in various countries in Southeast Asia, et

Speaker B: cetera, Demographics has a role to play. So one of the reasons China grew so rapidly is there was an abundant and seemingly infinite supply of young labor at the time. Well that's all changed. Of course. The youth demographic is in decline, uh, it's harder to get factory workers uh, than ever. So of course that's impacted growth rates overall. If growth rates are going to be sustained at this rate or accelerate, you're going to need to, need to see significant productivity growth and we can certainly chat about that later. But perhaps what's more interesting and the focus of your question is that companies are now excited about the youth demographic in Southeast Asia. Now not, not all the region is young. Thailand is 10 years older than Malaysia. But you look at markets such as uh, India, Indonesia, Malaysia, uh, these are young markets. These are markets where income levels are reaching a threshold, where households start to spend on big ticket items.

Speaker A: Looking into what this means for insurers.

Speaker B: Uh.

Speaker A: Right. Obviously there's an element of how do I rebalance my portfolio across the region? Where do I potentially place the right, the bigger bets? And as you were talking about the populations getting younger, there's an element also of how do I capture these younger populations? How do I capture these individuals early in their lives and stay with them, you know, throughout their, throughout their life, basically.

Speaker B: Exactly. And your reference to rebalancing I think is particularly important. So you know, China is still very important for all of us.

Speaker A: Right, right, right.

Speaker B: But there's a recognition that perhaps we're over indexed on China compared to Southeast Asia. So now we're just needing to correct that, um, and to rebalance those portfolios and capture to your point some of these younger populations earlier in their, earlier in their, in their careers or their insurance journey, if you like. Yeah.

Speaker A: Uh, what are some other scenarios or big trends that you're seeing across the region in these megatrends shaping Asia?

Speaker B: Well, we're also looking and thinking about the way financial uh, markets are uh, changing.

Speaker A: Right.

Speaker B: So increasingly funds itself. So whereas previously we relied on capital from the rest of the world, such as Europe, the US over the last 10 years the ground has shifted significantly. Japanese capital is more important than ever, Korean capital is more important than ever. And over time we may begin to see more Chinese capital. And those internal interregional capital flows are really an important source of funding. At the same time we're uh, seen the development of uh, non bank players who are perhaps finding it easier than ever to reach to customers because of the digital transformations on the way. But we're also seeing the growth of private markets relative to more conventional markets. So there are some fabulous sort of changes taking place within the region and that are reshaping our financial sector and making us perhaps more inward focus rather than outward focus compared to previous years.

Speaker A: Yeah. And it's interesting because if I look at the insurance industry, these trends are certainly applicable. Right. And there's multiple strands from what you're saying, from uh, certainly more M and A activity that we're seeing in this Region, we're seeing M and A activity from players across the globe trying to get on the growth train in the region and then intra region as well. Uh, the Japanese players in the insurance industry have been doing a ton of acquisitions in the rest of the region. In Southeast Asia, for example, the private markets, uh, trend is certainly something we're seeing across the globe. Right. And that's happening here as well. I think, you know, if I, if I look at this particular trend compared to, to other parts of the world, I think it's, it's not as full steam as, as I would see it in other parts of the globe right now, but it certainly seems like Asia is going to get there pretty quickly as well.

Speaker B: And there's a recognition too, uh, within the region that our, uh, capital markets are smaller than they should be. As a. We saw a burst of activity post the Asian financial crisis in 1997. Capital markets as a share of GDP began, but it plateaued around 2010 and hasn't grown as much as we would have liked it. Debt markets are smaller than they should be. Security players, regulators are all realizing that more work needs to be done here, uh, to increase the share of capital markets and just reduce the region's reliance on non bank financing. Clients are always keen to talk about geopolitics. The world has certainly shifted over the last few years. And so I think there's a lot of, uh, resiliency work that's being done to think through sort of what the potential world look like in the coming years and how businesses need to be structured to prepare for that and capture opportunities that may arise out of that.

Speaker A: Yeah, and that links to the climate point that you were talking about as well, right?

Speaker B: It does to a degree that, you know, societies are going to be under more stress than in the past, whether because of political changes, but also climate changes. And so increasingly we're worried about the risks of, uh, population displacement, for instance, uh, as flood risks rise, as drought conditions worsen. Uh, so societies are facing, uh, a challenging few years, a challenging few decades ahead of them.

Speaker A: So as you ran these executive roundtables, as you had these conversations about these trends, what was maybe the most intriguing reaction or the most intriguing takeaway that your audiences took from these various scenarios and their implications?

Speaker B: I think one of the more interesting scenarios, and this came out of a conversation we had at our Singapore roundtable, was the speed of technological change, particularly in Southeast Asia and South Asia. There are a number of insurance players who are quite excited at the way the smartphone adoption rates among Young populations are providing, uh, a way for insurers to access new markets through digital solutions. But also perhaps a lack of recognition that as the region puts in the digital infrastructure to support that activity, change can happen very quickly once that infrastructure is in place. So the key is to remain on top of, or at least constantly scanning the horizon to understand where the infrastructure is going in when it's near completion and then moving quickly, uh, to make the most of it.

Speaker A: Let's shift gears maybe and talk a little bit more with an insurance lens about some of these things. And uh, I have a few thoughts on some of the big trends uh, that are going to impact the region that are particularly relevant for the insurance industry. I think the first one that I had on my list here is the rise and advent of new cities. Cities and how it's no longer just about a handful of big cities, especially in Asia, but a consortium of different cities with different purposes. And I know you've been digging a lot into this, so we'd love maybe for you to give us a bit of an overview and for us to talk about the implications for insurers.

Speaker B: It's a fascinating subject and a bit of obsession of mine as well. And partly having, uh, worked on China for 20 years, I had a chance to see the, the impact of the rise of mid tier cities. And those mid tier cities added GDP worth the size of France over a period of 10 years. So that is a huge market in its own right. No surprise. You had companies or brands such as Adidas who built out not just 10 or 100 extra stores, but thousands of extra stores. It was a very exciting stage in the world's economic development. We're now beginning to see echoes of that in Southeast Asia, in mhm, South Asia. Why? Well, supply chains have been shifting and they will continue to shift in spite of the recent introduction of higher tariffs, uh, new manufacturing hubs in smaller or mid tier cities, uh, means stronger employment growth, income growth in their cities and ultimately an uh, expansion in our potential market. So the Southeast Asia, South Asia region has near to 500 plus what we call mid tier cities. Not all of them will thrive, but many of them will. And so the question for companies is how do you identify where the next opportunity is? Where are the 10 or 20 that you should focus on, uh, as new potential markets?

Speaker A: If I look at the insurance industry, on the life insurance industry, which um, has been a growing industry in this part of the world for all the reasons we've been talking about for the last few minutes, there's an element about maybe. We've been focused quite a bit on these tier one cities. Right. How do we go after these tier two cities? But importantly, how do we engage with different, for lack of a better word, Personas of populations? Right. How do we evolve our offerings? How do we evolve the way we engage with them? We market to them as well. Are, uh, their needs different? Uh, right. So there's that element that I see quite a bit which represents a big opportunity. Right. But also may represent the need to drastically shift the way you currently engage, the way you design your products, et cetera.

Speaker B: Yeah. So one of the challenges we find with companies, and not just specific to the insurance sector, but all types of uh, companies, whether it's luxury good brands or FMCG groups, is to date they're primarily using just GDP and population to benchmark these cities. We know that's not enough. What we need to understand is what are the industries that are driving growth or attracting population. So let's take some of these satellite cities around Ho Chi Minh as an example. These are big manufacturing hubs, uh, some of the world's largest, and they're attracting migrant labor, uh, from across the country. Uh, but equally we're seeing the emergence of a moneyed middle class who are typically factory owners. So already you can begin to see two types of Personas emerging. You've then got other C around the region who are primarily beneficiaries of national growth policies, increased infrastructure investment, uh, whether it's into markets such as uh, Surabaya or Yogyakarta. And here again, the Personas are different once more. So it might be more classes related to government functions, um, uh, it might be classes related to more domestic demand driven manufacturing or even agricultural production. But again, the Personas can be quite different.

Speaker A: Recently we published uh, our 2025 vintage of the 10 to DOS for insurance CEOs. And one interesting thing is we had organized customer back for transformative growth with the idea that many times in the insurance industry, and not only as you're defining it, there is a product first approach to things. To your point, where is the gdp? Where's the growth? Let's sell our products, right? And there's almost a need to shift this and start from the customer needs back and think, okay, exactly what you were saying, right? What are the different Personas? What are these populations? What are their needs? Okay, now how can we evolve the way we serve them? Right? And so that's something where I think there is a massive opportunity for life. Insurers, for example but also if we go to property and casualty insurers, what I find super interesting in what you're sharing is you now have manufacturing hubs, service hubs, big talent pools that have different types of talents. So it's different people, different needs. A lot of small businesses as well that are now coming to life with also different needs, insurance needs, and frankly broad financial security needs that I think represent a, uh, totally untapped opportunity. And I find this interesting because oftentimes the small business world represents that next frontier for insurers to go after. And you were talking earlier about the digital frontiers being crossed. Right. There's an element where that model can be evolved. You can really think customer back and you can use digital to gain scale and go after these SME players in a way you haven't been uh, before.

Speaker B: And scale is everything, right? Because, uh, part of the world, Asia, has 3x the number of mid sized cities as you get in Europe, the United States. So the question of scale is a complete, completely different one. And the problem that companies are trying to solve for is, uh, how do we access so many consumers. We can't build out brick and mortar stores, of course. Ah, these markets are changing rapidly, so investments we make today may not make sense in a few years time. So it's the ability to move it at scale, to move at speed and then to be able to pivot those business models. Ah, and that's the challenge many are facing.

Speaker A: And I think that's a lot of what we do day to day with our clients as well. There's an element, of course you can, and you should look backward at how other players have developed themselves, uh, have gained their market share and so on and so forth. But with everything moving so fast, there's an element of how can I take advantage of these trends, of these technology disruption trends, for example, and serve my customers, serve my markets better and in a much more efficient way. And that's something that I found fascinating. Having been in this part of the world for about a year now, is there is almost an element of chasing growth, but looking to do it at scale and efficiently as a result. Right to your point, if you just chase growth and open brick and mortar stores, agencies, et cetera in every corner, you're going to very quickly collapse under your weight. So constantly reinventing yourself is part of the game in this part of the world.

Speaker B: So this part of the world, whether it's the sheer number of cities, it's the breadth of Personas, everything from a small SME owner in yogyakarta to a, uh, wealthy factory owner in Ho Chi Minh. Uh, just that scale and breadth means we really need to reinvent the way that we do business out here. Uh, and equally, uh, we can learn from the lessons of selling the mid tier cities in Vietnam, but those lessons don't necessarily apply to mid tier cities in Indonesia.

Speaker A: Every country is different, has its own set of regulations, has its own populations, and every city has its own Personas, to your point. Right. So there's an element of how do you balance really? Uh, yes, having the right approach, the right mindset, but making it adapted. Not even every country, but now every city, which I think you have 1500 of these in the report you recently published.

Speaker B: Exactly. I'm reminded of the E commerce players who, even though they had regional platforms up until recently at least, uh, every market had a different payment system. Some were cash on delivery, some were using QR codes, but it was a fiendishly complex scenario for them to work through.

Speaker A: So another thing I wanted to talk about is we touched on this earlier on this podcast is, um, the big theme of longevity. And you were talking earlier how the population in Thailand, for example, is 10 years older than in many other parts of, uh, Southeast Asia, on average, the world overall, but Asia in particular moving towards being older. Right. Sicker on average, because people are getting older and de facto health is impacting along the way. And that leads to a range of needs from a health standpoint, from an insurance standpoint, et cetera. Now what is interesting is I'm sure if we were sitting down 10 years ago and having this podcast 10 years ago, we would have also said that longevity is a trend and there's a lot of, of undercurrents, uh, that are, that are driving it. What in your view has changed in the last few years from that front?

Speaker B: So the labor shortages have perhaps drilled that point home. Right. So 10 years ago we would all happily talk about aging populations, but, uh, it didn't feel real. Today it feels real. Hong Kong, as an example, if you're trying to find a truck driver who can, uh, help, uh, with uh, sort of E commerce distribution, it's very, very tough. Uh, and so companies are finally having to think through ways that they can automate, uh, in order to replace labor, but equally and more importantly, uh, having to tailor, uh, their propositions, whether it's their goods or services that they're looking to sell into this market. When I first arrived in Hong Kong, the average age was early 30s. Today it's nearly 47. That's an entirely different market that we're selling into. And it's one that shapes everything from obviously medical, uh, but equally even just risk taking. In my view, there's potentially dampened entrepreneurial spirit here. As people are thinking now about, uh, entering that decumulation phase of their lives. It's a very different outlook.

Speaker A: So you were talking about decumulation. Right. There's an element about how do you better serve as an insurer, uh, these populations that are pre retirement, very close to retirement. Uh, right. And not only help them, again, taking a customer back lens. Right. Not only help them with their insurance needs, but all sorts of assistance services, uh, that go around this. Right. And so there's an element which I think is very, very interesting of what's the right ecosystem that would go after these kind of needs. But if you work back from this, there is actually a broader challenge, which is broadly, if you think about financial wellness more holistically, which is really at the intersection not only of insurance, but asset management, wealth management, banking, for many people, there is not a very clear path here. And as people are aging, that also means that there's individuals who are to look after these aging individuals. And how is all of this connected and who is helping these individuals make progress on their financial journey, feel more secure is still a very big unaddressed gap. This is not an easy problem to solve. It is a problem that hasn't really been solved anywhere else in the world. And in a way, I think Asia is the place where that problem has to be solved first because it's probably where it's the most prominent, uh, around the world.

Speaker B: So I want to draw an analogy here with manufacturing. So China has an AI plus strategy that is looking to wire artificial intelligence through its manufacturing sector, in part to deal with these labor shortage challenges in the aging of the population there. The problem is solvable, uh, because we're talking factories. But back to your point, uh, when we're talking about advisors, uh, to these, uh, sort of aging populations, I guess the question for me is can it be solved through artificial intelligence? Uh, and will, will chatbots, for instance, uh, serve as a solution, uh, to answering the needs of some of these, um, senior citizens. And it's not obviously clear yet. I would like to think China will be leading the charge because the country, uh, has obviously invested in the infrastructure to support this transition. But the POP generally seems to be, uh, fast adopters to these new technologies. But I don't think the outcome is certain. And it is a concern for me, uh, as population that Population hierarchy is being turned upside down with uh, more retirees than there are, uh, young.

Speaker A: On a previous episode, we dug quite deeply into health insurance, uh, more holistically and there's an element around as many insurers also have, have gone a lot more into health in this part of the world for a range of reasons. Fraud, waste, abuse is a challenge. And again having scale is difficult. Uh, how do you provide really the right level of care, uh to everybody, the right service, et cetera. And that's where AI augmenting uh, individuals can be very interesting. So yeah, hopefully a range of positive uh, trends, uh helping on that front.

Speaker B: Well it is. And I've just come back from the Boao Forum, so China's flagship events, bringing together policymakers, business leaders from around the region. And one of the areas that shows the greatest excitement is, is the health sector. Yeah, there are a number of reasons for that. Right. The, the first is that the, the sector is being um, enjoyed, uh, some measures that have opened it up to greater foreign investment. But uh, equally excitement around the way artificial intelligence is being applied to such things as personalized medicine, cancer treatment or so forth. There are AI enabled uh, medical equipment that can uh, ideally provide solutions at scale. And so ultimately there was very good reason that the CEOs of most of the global pharmaceutical companies were all recently in Beijing and were all meeting Xi Jinping because uh, they see opportunity shifting

Speaker A: to another topic which is somewhat adjacent but different is wealth. And wealth is obviously an important theme uh as well in Asia Pacific. And we also are seeing growing wealth hubs, wealth corridors, uh, between different parts of uh, Asia. So first of all, anything you'd like to share on this trend from your standpoint?

Speaker B: So the wealth corridor is exciting and flows used to be in a way, one way, uh, often into US markets. That's obviously still very important. But increasingly we're seeing flow, uh being retained in the region and being diversified across the region. Region we're seeing flows from China of course out into uh, into Southeast Asia, uh with Singapore of course acting as a hub. But uh, the Middle east is also uh obviously a place that I am very familiar with, having worked in the region back in the 90s and retained or continued to do work there. And just recently been in Dubai speaking with wealth managers quite often we heard comments that Middle uh, East investors are themselves looking to de risk and in part by bringing money into Singapore, bringing money into Hong Kong. So again it echoes that interregional or greater reliance on interregional capital. But in this case uh, wealth and those corridors could be quite impactful for companies going forward.

Speaker A: Yeah, and certainly something where we're seeing a lot of um, activity uh, across the value chain in the insurance industry just like in the broader financial services industry. So certainly an exciting one. The other one is actually the younger populations and Gen Z in particular. And I know we've looked a lot into this as a firm. I'll tell you my quick take and I would be interested in what you have to say. Talking about Gen Z is one thing, but I think that there's a few underpinning elements. The first one is talking about Gen Z is really talking about how do I engage with customers early in their lives, build a relationship, build trust the right way and stay with them for life. And almost how do I switch from in the case of an insurance company in year premium for example or a one off sale towards really the customer lifetime value of that individual, how much value can I bring? Uh, and obviously how mutually beneficial that relationship can be. So that's one element. The other element is again the opposite of what I was talking about in longevity, which is how do I build a relationship with an entire household from the youngest to the sandwich generation to the elderly parents and how can I almost become a multi generational problem solver of financial needs for example and just continue building on that relationship and again make it mutually beneficial. So that's my take on what's underpinning and what for insurers in particular are the, the golden pieces to go after.

Speaker B: So it's a fascinating question. If I could take a step back and say that the speed of change is perhaps the biggest challenge you're dealing with. What are a number of converging trends? So whether it's the fact that many of these markets are still developing and so what households are prepared to spend on, even how households are set up economically can look very different year to year. At the same time you have demographic change that is far outstripping what we saw in the rest of the world. The region is aging at twice if not three times the rate of what we saw in Europe as an example. And then of course you throw in the Gen Z factor, uh, which uh, while there are similarities to Gen Zs around the world, there are also obviously clear differences. Uh, and so I think trying to get a handle on this is perhaps one of uh, the challenges that many companies, insurers included, face in this region. It's not an easy one but my view would be really there need to be teams set up, there need to be dedicated efforts set up in terms of really trying to understand what these changes mean. It can't be a part time initiative.

Speaker A: I think linking this up to the, the bigger objective. If I'm just going to go after this population at this point in time, is it worth it? And in some industries it might very well be worth it from the outset. In the insurance industry it might not necessarily be worth it from the outset, just year in, year out. But if you think about more holistic solutions, if you think about this in a longer term horizon, that becomes a very different type of business. But I agree with you and I think that's what I'm seeing as well. There is this shift towards let's actually spend time understanding these younger populations that are fast evolving. To your point, the pace of change is also increasing. These populations can oftentimes be the trendsetters as well in terms of media consumptions and other things. So I see that focus on younger generations happening more and more.

Speaker B: The Chinese consumer goods companies and uh, their behaviors are quite instructive at this point. So they tend to throw out a large number of products over a short period of time. Twelve months later, maybe only a handful of those products still exist. But it's trial and error, trial and error, trial and error. And their global peers, whether in Europe or the US have really struggled uh, to replicate this because it's an entirely different approach to strategy. Right. They see it as a cost, uh, how could you afford to invest in so many products? But the Chinese consumer products companies, their response is well it's the only way we can test what is a fast moving market market. It's the only way we can identify uh, where we really need to double down because otherwise we're just guessing.

Speaker A: I'm just ah, picturing um, that uh, famous influencer on what uh, we would call TikTok outside of China that you know, in line with your trend, would literally show a product for five seconds, then move on to the next one, then move on to the next one and everybody can just click and figure out what they're going to buy on the back of this. So yeah, these are some of the trends that I'm seeing in the insurance industry linked to some of the megatrends you were saying, uh, some of the megatrends you were talking about, what role will regulation play, ah, in that world. Right. And how much of it, when you think about climate change, how much of this is focused on the assist and support versus on the predict and prevent, uh, as well, which I think is an Age old debate, uh, in the insurance industry as well. And something that, for example in the US we're seeing a lot of that happening right now.

Speaker B: Government debt levels across the region rose quite sharply because of the pandemic and the amount of funds uh, that needed to be spent. And so government finances are relatively constrained at the moment. And that's at a point where they're going to have to invest more into resilience, more into health and age populations and it won't be possible to, for them to find sufficient funds. And so there will be gaps and uh, they may well be looking for the private sector to fill some of those gaps. Whether it's specific to climate, uh, resilience or whether it's uh, specific to insurance coverage. It's got to be perhaps one of the big challenges for governments, especially in Southeast Asia over the coming decade.

Speaker A: Yeah. If I think about the transition as well to green energies. Right. Uh, alongside this climate change trend, what is interesting is ensuring green projects can be very difficult. Right. One of my favorite examples is if you're going to be insuring wind, uh, farms, they're usually in highly catastrophe prone areas, which means that if you're the insurer of this project, it carries quite a bit of risk and uh, uncertainty. And so how do you actually accompany these projects and how do you do this in a sustainable way is certainly a challenge that the insurance industry is grappling with globally, uh, and certainly in this region as well.

Speaker B: Yeah. Not just the insurance sector. So there are a range of uh, multilateral banks out there all trying to solve the same problem, uh, particularly around the greenfield financing, sort of the first few million dollars. Uh, but to your point as well, ensuring those projects to crowd in private sector capital, uh, it is not easy and governments can't be expected to fill that gap given the constraints that they currently face.

Speaker A: Yeah. Moving us on and maybe taking a little bit of a step back to look globally. Would love to get your take on some of the more global trends. Let's step out of Asia for a second while keeping a close eye. What are some of the global trends that you're currently very curious about or watching out for?

Speaker B: To some degree the global trends uh, reflect what we're seeing here in the region because of the importance of the region. So again we're looking at supply chain shifts and what that means for the rest of the world. I was only recently in um, in, in uh, Turkey, uh, as well as Morocco, seen the impact that the shifts in manufacturing have on local populations in those markets. Again It's a story of employment and income. So it really is a region wide ah, effect and at the same time just generally um, China to the Middle east, uh, and that trade corridor. So I've been repeatedly back to the Middle east over the last few years.

Speaker A: Some of the new Silk Road.

Speaker B: Exactly. The new Silk resurrection of that historic trading corridor. Some of the changes we're seeing out the UAE and Saudi Arabia at the moment are particularly exciting. The uh, speed at which governments are investing into their non oil sectors and more advanced sectors including artificial intelligence to try and uh, future proof their own economies. Um, so far insurance has been uh, perhaps less on the radar than it could have been as they focus more on industrial strategy. But inevitably that will become a hot topic not just for the Gulf, the broader region.

Speaker A: Anything to share about the US and what's happening there.

Speaker B: The US is certainly in a, in a state of change. We're witnessing of course is an attempt to re. Industrialize uh, the country. The concern for those of us out here in Asia of course, uh, is that we have benefited enormously and continue to rely on globalization and the free movement of capital uh, and goods. And so the, the question for us is how we, how we can stay integrated with the US Economy uh, because we clearly want to. It's a long time ally for many of us. And so we're still puzzling, puzzling over that question to a, to a degree. But equally I, you know, emphasize that the US is, is important to, to the region and to the world. But we, we have a growing number of trading partners, especially the emerging markets who are uh, important sources of demand for us.

Speaker A: Another point in the chase for growth and for resilience. We're seeing an increasing amount of m. And so in the insurance industry, especially if I think about the property and casualty industry, there are periods where prices are increasing and prices are decreasing based on what we're seeing happening around the world. And right now we're around a period where prices are decreasing. So organic growth becomes harder to achieve and therefore inorganic growth becomes a lever especially for the property and casualty players. And so again I think that's something that we're seeing globally. Globally, but we're seeing in this part of the world both to chase growth but also to increase resilience. Is that something that you're seeing more broadly?

Speaker B: Yeah, it is. There's a growing recognition that the conglomerate model maybe doesn't work as well as it did in the past, uh largely because uh, their region is increasingly fragmented. So in the face of geopolitics supply chain shifts, nationalist, uh, growth policies. Conglomerates don't quite have the same edge they used to. And so there's a need to spin off and extract value equally. Shareholders, uh, are more, um, demanding than they were in the past. Regulators are perhaps, uh, recognizing that they need to relax regulations to assist some of those spinoffs or divestitures. So I definitely see that as an opportunity going forward.

Speaker A: Linked to this, another point, uh, that we were seeing quite a bit in the insurance industry is partnerships are critical between, between insurers and other players across the value chain in this part of the world. In Asia Pacific Bank Assurance, for example, is a very important way for insurers to reach customers. And that's really about how do you bring together, uh, the strengths of the bank, the strengths of the insurer together in, uh, a value proposition for customers. I think more broadly there's value in building these ecosystems, but a lot of challenges come with this. Incentives need to be aligned, which is difficult to achieve. They need to be aligned in the long term. It's like a marriage, right? It's great. Everything looks great the day of the wedding. But one year, two years, seven years later, it can become more challenging. So true. And so, uh, we're seeing a quest for these partnerships to be successful, which at times can be difficult. And I think that's also linked to a lot of the trends we talked about happening in the region. Again, curious what you're seeing across industries on that front.

Speaker B: So across industries, partnerships have become more and more important. Back to our earlier conversation around scale. Very difficult to achieve that organically. Partnerships are often the only way to go in a world of, uh, technological disruption. Partners bring, uh, unique competitive advantages. So partnerships are, uh, perhaps more important in our part of the world here in Asia than they might be in other parts of the world where markets tend to be more stable, uh, tend to be more unified and more predictable. Uh, so across industries, uh, we are seeing partnerships, uh, being prioritized by the big corporates. I'd also say, too, as we move into a more unpredictable world of, um, heightened geopolitical tensions. Partnerships are a way to de. Risk, uh, some of those tensions and to ensure, uh, that you continue to sell and access as many markets as possible, while also protecting yourself from potential disruption further down the line. I would suggest those rules are no different for the insurance sector.

Speaker A: Yeah, companies and insurance in particular, needing to spend more time building their equity narrative addressed at shareholders, but frankly a broader group of stakeholders as well, uh, from internally driving alignments, uh, within the organization on what are we doing and why we're doing this, to engaging with a broad group of shareholders that can range from activists to the everyday investor. And we've done some work as Oliver Wyman, where we found that if you take CFOs, 100% will tell them that a good equity story is important, but about 50% will tell you that they actually have a good hold, uh, of the equity story. What do you see broadly? How have you seen this evolving, especially in this part of the world?

Speaker B: I was chatting with the uh, apac, CEO of a chemical, big chemical company just the other day who made that point, who said in order to uh, thrive, uh, increasingly they're having to build out their relationships with the local governments, uh, that can include their core businesses right through to their recycling businesses. So it is more important than ever. Uh, at the same time, in a world where governments are increasingly populist or taking more nationalist approaches, uh, some of our roundtables have hinted to the fact that the equity story is perhaps a little bit more difficult than in the past because there having to sell or to work with stakeholders in uh, different markets, often competing markets, and try to keep uh, everyone happy. You asked earlier about uh, what's happening in the U.S. implications for us out in this part of the world. You only have to talk about diversity policies. And obviously the shifts uh, that we've seen in the US and here in Asia, uh, have been conflicting or diverging at times and how you manage that story will become harder than ever.

Speaker A: I kept AI for last. We uh, talked about this briefly. Briefly. I think the stance that I've shared has been for a long time that you should not start with AI for the sake of AI, but start with the bigger transformation objective and work back from this and use AI as one tool, one beautiful tool, a rapidly evolving tool, but one of many that is available to that transformation. And if I look at the insurance industry, it's fascinating that out of all the regions, insurers in Asia are uh, the ones who have most, most rapidly adopted AI solutions and implemented this inside their walls. Having said that, we still need to make the shift away from many POCs that oftentimes don't bring a lot of value to truly again a transformation led use, uh, of AI. You were sharing a little bit earlier about what you've seen in China and coming from China, this is obviously almost becoming a big geopolitical debate too. Right? Because there's companies from the us, from China, et cetera. What's your broader perspective on AI, uh, in this day and age.

Speaker B: So I think the sector could draw lessons from the manufacturing industry and the challenges around automation. There's this sense that uh, you just buy a few robots, stick them on your production line and productivity rises. And it never works out that way because what you find is all of a sudden the robots are working twice as fast as uh, the rest of your factory line and you end up with, with this huge stock of unfinished goods. So the real skill is how do you apply technology to a specific part of the line where it improves overall productivity and doesn't create bottlenecks. And the same is for artificial intelligence as it's being rolled out. And so, uh, the question for me around artificial intelligence is not rethinking your entire business, but how can you apply it surgically in a way that improves uh, overall productivity but isn't wholly disruptive, uh, to your business? And I think those small proof of uh, concept projects become very important at this proof of concept, not just in a single market, but in multiple markets around the region. Uh, and then uh, learning through trial and error.

Speaker A: Yeah. So I really like how we really observed an entire collision of megatrends, uh, starting from what you were seeing with Asia going into 2030 onwards, the major shifts we're seeing in the insurance industry and looking at these more global trends. So thank you for your time. That has been really, uh, fascinating. And as you know, I always like to ask what are some final words of wisdom you would have for our audience? So what would these be?

Speaker B: Get prepared for more disruption. I think, uh, horizon, uh, scanning is more important than ever. And learning the skill to be able to focus both on short term objectives which are important for all of us, but to keep an eye out for some of the long term shifts in the market will be more important than ever. And that's going to require building new skill sets, developing new muscles. It's not straightforward.

Speaker A: Well, thank you so much Ben. It was great having you here today in Hong Kong.

Speaker B: It was a pleasure. Thank you.

Speaker A: Terrific. Uh, well, thank you everyone. That was, uh, Ben Simfendorfer who's the APAC lead for the Oliver Weidman Forum. I am Paul Ricard. Thanks for listening and I'll talk to you next time. For more information about our Reinventing Insurance series, you can find everything on our website@OliverWeidman.com Reinventing Insurance. Thanks for listening and I'll see you next time.