In Focus: James Tan, Friends Provident International

With a heritage dating back 200 years, Friends Provident International (FPI) has established a strong presence in the life insurance and wealth management market. Celebrating its 25th anniversary in Singapore, GM James Tan speaks to Vipanchi about the insurance industry and its changing dynamics.

By Vipanchi Dinavahi

The financial market suffered significantly in the last few years. What is the outlook for the insurance industry in the year ahead?
The insurance penetration rates are still low in some of the developing countries. So, I think the outlook for insurance companies is pretty positive, specifically for Asia, albeit challenging. People are flocking to Asia to tap on the opportunities themselves, but there is some level of competitiveness as well. The continuous improvement in the evolution of regulation in this industry is positive for the consumer as well as for insurance companies. What we find is that the clients in Asia tend to be a bit more tech-savvy, and investing in relevant technology has become a must. Overall, there is a growing demand, and access to information is changing the dynamics in policy-buying significantly. 
Asia has become the centre of future growth. What challenges does this present?
Asia is a big region with diverse cultures and different levels of maturity when it comes to one’s financial needs. Regulations are evolving, and you see the more developed countries like Hong Kong and Singapore taking the lead on that. The challenges for these countries are the rising cost of complying to regulations such as more disclosures, a lot more sales processes, etc, which are being scrutinised to make sure the end customer is purchasing the product that is based on their needs, rather than the traditional way of pushing. There is a wide variety of choice in terms of insurance products for customers, and we try to educate our customers, making sure they understand which specific products are appropriate for whatever life station they are in. So, that’s part of the challenge: trying to educate the end client as well as the intermediaries.
What are the potential vulnerabilities in Southeast Asia from the perspective of investors and that of an insurer?
The continuous evolution of regulation is key to opening up opportunities for people and companies coming to Asia. Subject to how these regulations are set up, insurance companies can formulate their market-entry strategies. Changing geopolitical environments could either be a deterrent or a positive sign for insurance companies coming in, and for us working as an industry. The region is also facing a challenge with the ageing population in Japan, Hong Kong, Singapore and Thailand. So, there is a need for insurance companies to come up with a solution that can complement the customer’s government pension, for example, to make sure they’re well prepared and financially secure for retirement. These are the few vulnerable areas that I believe are evolving.
Gen Y has easier access to information these days. What is the industry doing to target this market?
For the customer or potential client, the ideal situation is to have multiple touchpoints, so they can access information as and when they like. And you’re right—the younger generation is tech-savvy and they gather information easily. This is one of the key things we are focusing on: to invest substantially into our IT and technology to make sure we provide the right information for the young generation to access in the future—in essence, grooming the future client, if you will. I think it is fair to say that some of the other financial industries like banks are a little bit ahead of the game, but it is something on which the insurance industry is working very hard. From our perspective, a key focus for us is to grow in the region—in Asia, specifically.
In our recent survey, one of the questions asked was how customers would like to manage their investment, and whether they sit down with a professional advisor, discuss with their friends, or get information from the Internet. But surprisingly for Singapore as well as for Hong Kong—and I suppose for most of Southeast Asia—up to 40% of respondents said they just guessed it. It is interesting, but equally worrying! 
I think online information gives customers an idea of what the product is all about. But I’ll always recommend that one speaks with a financial advisor to really understand exactly what exposure there is, where their assets and liabilities are, and what their gaps are, so that we can get them to look into products that can protect themselves for now and the future. People who have been in this industry for a long time, like advisors, can really provide some value-added advice on how  one should plan.
What is your growth strategy given that there is so much competition, and yet your branding is minimal?
We operate in a slightly different market from the other insurance companies. We’ve been traditionally what we call a “B2B” (business-to-business) company. We don’t involve ourselves in the mass market; unlike AIA or Great Eastern Life, we work more in the expatriate, affluent spaces—that is where the slight difference lies. We work through third-party distributors, like independent financial advisors (IFAs) and banks. In terms of brand perspective, we’re a lot better known in the IFA space, especially in the expatriate community,  because we started our business in Asia about 25 years ago. We’re launching a new 25th anniversary campaign to raise  our brand awareness. 
As one of the very few players that provide thought leadership when it comes to expatriate financial planning, we’re working with the top partners and are always providing quality support—this is our core growth strategy, really.
One thing that is quite important for us is the commitment to Asia. Since 80% of our business comes from Asia and the Middle East, we are significantly investing in this region. We’re moving some of the functions and departments into Asia, primarily to be closer to the client, to be able to serve them better. We’re beginning to see the impact of having local management, in managing a local business, so we continue to invest in that. As I mentioned earlier, we’ve been in the expatriate space for a number of years, so we have developed expertise and products to cater for that specific segment. 
What kind of expatriates do you cater to?
The definition of “expatriate” has changed. An expat used to be a person who came from the West to the East; nowadays, however, people are becoming global citizens. There is a lot of inter-Asia movement as well. So, the advantage of our proposition is that we have a wide selection of funds with multiple currencies, with a range of four to 10 currencies that allow clients to invest.
You recently did a survey. What were the key findings?
Our surveys contribute knowledge to the  industry as well as help our clients plan for the future. We try to do this as sensibly as we can; we do this two to three times a year, enough for meaningful information to come in so that clients and the brokers who are using this will find it quite useful. Our “Investor Attitude” survey involves more of the affluent customer segment.
One interesting evolution of our business in Asia was that we started off working with the expats. Because of the features of our products, different underlying investment options, different currency options, the non-expats, the local affluent customers, take an interest into that. They feel they want more diversification in their portfolio. They could be sending their kids to the UK for education, so they want to create something for them as a savings plan, they want to invest in Sterling-based products. These are the things that are very different, and this is an interesting survey is because it focuses on that part of the segment where there are interesting changes being made, in terms of decisions and how they actually utilise these products to meet their specific needs.
In terms of the overall attitude of investors, there are three key objectives: saving for emergency, retirement and education. We looked at some of the numbers, and most of the customers who are investors in Hong Kong, Singapore and the UAE, are still quite optimistic about the market. In terms of the overall outlook of the market, people in Hong Kong are the least optimistic of the three, which then led to another interesting finding: When saving for retirement or a rainy day, the people in Hong Kong tend to feel they need to save a lot more—in fact, they think they need to save 60% more than what they have today—as compared to Singapore where the equivalent figure is 20–40%. That’s interesting, as attitudes change for various reasons and we want to capture some of the ongoing key trends. When you  look at some of the prices of property, for example, it is down in  Asia, more so in Hong Kong than in Singapore—and gold. 
Even though that’s the case, these two are still the asset classes in which investors will want to invest. Gold has always topped the list. Through the survey, we found that people in the UAE love investing in gold and property. There was an increase in investor attitudes index in the UAE back in February when we did the survey—bear in mind, though, that was before the price of gold went down.
Despite all the property cooling measures in Hong Kong and Singapore, prices are still high. People see that these two markets offer long-term play. For Hong Kong, a lot of mainland investors come in and buy up  properties, and the Government is putting some measures in place to try to slow that down; Singapore, with an increasing population, sees a lot of foreign investors coming in as well.
Is it a global trend that people prefer gold and property, or is it an Asian trend, which is more towards traditional thinking?
Our survey is limited to Asia and the Middle East, and every market will have different characteristics. In the UAE, gold is one of the favourite assets. There are a lot of affluent non-resident Indians working there; gold is important for them and we see that they are keen to save for education, for weddings. Every individual will have their own investment objectives and risk appetite.
For example, on saving for retirement, everyone goes through the same life stage and it is an important agenda for all of us. Even though we see a lot of people gather their own information and try to ‘DIY’ their own investment plans, it is always worth it to get a second opinion from a professional investment advisor to walk you through what the other objectives are, the ways in which you can maximise and make your money work for you.
Do you conduct surveys for the mass market as well?
For the past two years, our surveys were focussed on the mass market, but after our  strategic review, we enhanced the report by targeting more towards the affluent market to fit our proposition strategy.
How has the insurance industry transformed in the recent years?
I’ve been in Asia for a long time—I was born and raised here. I was working in the US for quite a number of years in the financial services industry, in banks, insurance companies. I came back to Singapore as the global head of bancassurance for Standard Chartered Bank, overseeing markets in Asia, the Middle East and Africa, which is pretty much what I’m looking after today. I think the evolution of how products are being offered to the customers has changed substantially for the last 10 to 15 years. The traditional agency model is being challenged by the bancassurance model, which is in turn being challenged by the IFA model. What’s yet to be seen is the next generation of technology and social media—how they react to insurance, and how that actually comes into play. That, for me, is an interesting evolution of how people purchase solutions and products for their needs. It’s quite interesting to see how this is going to end up. We’re definitely keeping a very close eye on it.
Please share your experience in Hong Kong, Singapore and the Middle East markets over the years, and how these markets reacted differently.
One thing I find quite interesting is that the way people purchase insurance has changed. Different channels are available, and I see a lot of different insurance companies adopting a multichannel strategy. Some give up and say, “Let’s focus on one or two.” I think it really depends on how one would like to operate in the long term, and what is it that they’re good at, leveraging on their strength. In Hong Kong, Singapore and the UAE, we do see an increase in distribution from the bancassurance side, which is an additional access point for the customer. What it means is, the banks will have to increase their level of knowledge and expertise on insurance to be able to provide the right advice and service. And this is where the partnership between banks and insurance companies comes in—each uses a different model.
In Standard Chartered Bank, for example, working for and supporting the bancassurance business globally is actually eight to nine models added up, depending on market needs, expertise and different factors—it’s trying to understand a combination of capabilities of financial institutions, and the type of customer, specifically. As I mentioned earlier, it is important to expand on educating the market and our clients so they know exactly how these products work, and what it does to meet their specific needs. And often, over the years, it became more of a product-push-type approach, which I thought was not the most appropriate way to offer a product. Now, it is evolving into a needs analysis, which I think is the right direction.
Over the next year or so, I would expect companies to cut costs because of the regulations coming into play. Service would be the next differentiating factor in terms of client retention and overall customer satisfaction; customer experience would be a key factor for others, and for us, to compete in this space. I have seen that sort of evolution over the past couple of years. Again, it is going to be interesting with the economic conditions we are facing right now in certain regions.