The insurance sector in ASEAN has shown remarkable resilience and growth over the past few years. With 635 insurance companies operating across the region's 10 countries, both life and non-life segments have witnessed significant expansion. In a discussion with Trends and Insights, Srinivasan Varadharajan, Senior Sales Director at HCLTech, points out that this growth is shaped by country-specific nuances and evolving challenges that demand strategic responses from insurers.
"The non-life insurance industry has demonstrated robust demand, supported by increasing premium rates," explains Varadharajans. Life insurance companies, too, have benefited from strong investment returns, contributing to overall profitability. However, the ASEAN region is far from uniform. "For instance, Singapore differs significantly from other ASEAN countries in terms of GDP and capital growth rates. In Indonesia, microinsurance is a thriving business due to its affordability and niche SME-targeted products," he adds.
Despite these variations, the correlation between economic performance and insurance growth remains evident. "Insurance growth correlates positively with GDP expansion, as economic activity generates demand for insurance products," he notes. Countries like Malaysia, the Philippines and Vietnam are poised for strong non-life insurance growth, while Thailand and Vietnam, with low unemployment and high GDP growth, are expected to see an uptick in life insurance demand.
Key challenges shaping the industry
While growth opportunities abound, insurers are grappling with pressing challenges. "In the life insurance sector, distribution efficiency is a major concern," highlights Varadharajan. "The effectiveness of tied agents — historically a dominant sales channel — is declining, and fewer people are willing to take up agency roles." This trend threatens top-line revenue, compelling insurers to explore new distribution strategies.
For non-life and health insurance, rising medical costs present another hurdle. "Medical cost inflation is skyrocketing," he explains. "In Malaysia, for example, insurers have had to increase health insurance premiums by up to 70%. However, such sharp hikes may lead customers to abandon their policies altogether."
Competition is also intensifying, with insurtech startups disrupting traditional players. "These newer companies don’t have the burden of legacy technology and can innovate faster," he confirms. Additionally, insurers must navigate economic uncertainties. "A downturn in investment returns could significantly impact insurers’ profitability, making risk hedging essential."
Climate change is another pressing issue. "Natural catastrophes can severely impact balance sheets. A single extreme weather event can lead to a surge in claims, putting insurers under financial strain," he warns.
The shift toward AI and digital transformation
In response to these challenges, insurers are overhauling their operating models. "Traditional rule-based processing is giving way to AI-driven models," notes Varadharajan. "Non-life insurers are increasingly using IoT and satellite data for better risk assessment and claims management."
AI’s rapid advancement is causing both excitement and concern among industry leaders. "Every insurance executive today is focused on AI and GenAI. "The pace of AI evolution is so high that companies are struggling to understand its full impact and determine how best to integrate it into their operations."
However, legacy systems remain a stumbling block. "Quality of data is a major issue for AI adoption," he explains. "Insurers recognize that embracing AI is inevitable, but they must first clean up and modernize their data infrastructure." Many firms are now heavily investing in data engineering and IT upgrades to facilitate AI deployment.
AI-driven solutions are enabling firms to enhance underwriting processes, improve fraud detection and streamline customer experiences. For instance, predictive analytics is being used to assess risk profiles more accurately, ensuring that premiums are calculated based on real-time data rather than historical assumptions. Plus, chatbots and AI-driven customer service models are improving engagement and reducing turnaround times for claims processing.
Another technological shift involves GenAI. "Initially, insurers were experimenting with GenAI through proof-of-concepts. Now, they are moving towards integrating it into core business processes. In the coming year, we will see GenAI being deployed at scale," he predicts. Through advanced data analytics, insurers can offer hyper-personalized coverage, eliminating the one-size-fits-all approach.
Moreover, AI-powered automation is reducing administrative overhead, allowing companies to allocate resources to high-impact initiatives such as product development and strategic growth. AI is also fostering a culture of proactive risk management. By analyzing vast datasets, insurers can detect potential fraud patterns and mitigate risks before they escalate. This predictive capability not only reduces financial losses but also strengthens trust between insurers and policyholders.
Cost optimization and regulatory compliance trends
Beyond technology, insurers are also refining their cost structures. "There is a growing trend of establishing offshore delivery centers (ODCs) to reduce operational expenses," he observes. Companies are looking to leverage technology in ways that would be difficult with in-house teams.
Regulatory compliance is another area under scrutiny. "Previously, regulatory costs were seen as unavoidable, but now insurers are actively exploring ways to reduce these expenses," he says. "One approach is outsourcing compliance-related functions through 'regulatory compliance as a service' models, helping companies manage costs more effectively."
The convergence of AI, cloud computing and blockchain technology is reshaping the industry's operational framework. Cloud-based infrastructure is enabling insurers to scale rapidly, ensuring seamless data accessibility and collaboration across global teams. Blockchain is enhancing transparency in policy management and claims processing, reducing fraudulent activities and increasing trust among stakeholders.
To stay competitive, ASEAN insurers must prioritize continuous learning and workforce upskilling. As AI-driven automation takes center stage, human expertise will play a crucial role in guiding ethical AI deployment and decision-making. Companies investing in AI literacy programs and driving a culture of innovation will be better positioned to lead the industry forward.
HCLTech: Accelerating AI adoption in insurance
Recognizing the diverse needs of insurers across the ASEAN region, HCLTech tailored its engagement strategies, employing multiple models within the same organization to address distinct projects effectively. The company’s expertise spans the entire spectrum of technology management, from maintaining legacy systems cost-effectively to implementing cutting-edge digital solutions.
Insurers are increasingly relying on technology partners to accelerate experimentation and implement new solutions without overburdening internal teams. HCLTech supports insurers by enabling innovation in two primary ways: first, by supplementing in-house innovation labs with niche skill sets and technical expertise; and second, by providing access to its digital innovation labs, where insurers can test new ideas in a sandbox environment before full deployment. This fail-fast approach allows companies to assess viability without significant financial risk.
One of HCLTech’s most significant contributions to the insurance industry is its AI Force framework, which serves as a comprehensive solution for AI-driven transformation. AI Force is more than just a single tool — it is an ecosystem of AI-powered accelerators, frameworks and methodologies designed to enhance efficiency across insurance processes. By leveraging AI Force, insurers can improve the entire SDLC, automating processes such as business requirement generation, test case creation and application-specific documentation.
For example, if an insurer wants to introduce a new product, AI Force can generate essential documentation and process workflows based on predefined parameters, significantly reducing the time and effort required for product launches. This framework also integrates seamlessly with existing systems, ensuring insurers can maximize AI adoption without overhauling their core infrastructure. Beyond automation, HCLTech has proactively developed an insurance-specific GenAI use case catalog, equipping insurers with ready-to-deploy AI solutions tailored to industry needs. Rather than waiting for insurers to conceptualize use cases, HCLTech presents pre-built solutions, facilitating faster decision-making and implementation.
HCLTech is also a strong advocate for responsible AI. An insurer should manage the benefits of the AI adoption along with the explainability of the outcomes of AI infused business processes. Moreover, regulation compliance, including personal data protection requirements, should be paramount, and any reengineered process augmented with AI should not increase the risk in an unacceptable manner. HCLTech's key capabilities include Responsible AI consulting and risk assessment, RAIpilot for impact assessment documentation, Content safety moderation, TrustifAI framework and the ORA toolbox with over 30 responsible AI tools.
The road ahead for ASEAN insurers
Despite economic uncertainties and operational hurdles, ASEAN’s insurance sector remains on a growth trajectory. Insurers are proactively adapting to market shifts, leveraging AI and refining business models to stay competitive.
Regulatory alignment will be a key factor in ensuring AI adoption remains ethical and compliant. ASEAN insurers must collaborate with regulatory bodies to establish standardized frameworks that protect consumer interests while fostering technological advancement. Balancing innovation with responsible governance will be critical in achieving sustainable growth.
As the industry evolves, insurers must strike a balance between innovation, cost efficiency and regulatory adherence. Those who navigate these dynamics successfully will be best positioned to thrive in an increasingly complex environment. "The ability to realign operating models and integrate advanced technology will define the success of insurers in the coming years," concludes Varadharajan.
