How the converge of digital platforms is redefining risks

Lay See Ong, Divisional Director - TMT Asia, Corporate Risk & Broking, Willis Towers Watson

With digital platform convergence trends accelerating, business enterprises and the insurance industry have become increasingly proficient at identifying, mitigating and transferring digital risks, including risks related to data protection and privacy issues.

Telecommunication companies are early adopters of digital platform convergence and the industry must remain vigilant to new risks that will continue to emerge with the growth of digital technology and e-commerce.

Insurance covering property, professional liability, errors &omissions (E&O) and other conventional exposures have proven flexible enough to accommodate certain digital risks. As new risks surface, coverages have also developed to include non-damage business interruption and cyber incidents. However, insurance coverage gaps remain, and these gaps may grow as digital platforms become more intertwined and complex.

Medical and healthcare

In recent years, the advancement in computing and telecommunications technology has led to the growth of a new wave of global digital health innovations. One key transformation in this instance is the growth of telemedicine when patients and doctors are geographically apart. With the arrival of the Internet and 4G/5G network provided by telecommunications companies, advances in telemedicine now include features such as audio and video consultation, real-time accessibility to medical records and in future, possibly Augmented Reality.

The current COVID-19crisis has accelerated the growth of telemedicine in Asia Pacific, according to a healthcare survey by Bain & Company. It is gaining further interest among beleaguered physicians and other medical professionals to discourage patients and others from further crowding medical facilities. In some Asian countries where full coverage of essential health services could not be extended to every community, telemedicine can help bring basic healthcare to rural communities and low resource regions.

Telemedicine is a game-changer, but the promise is not without risk. Cybersecurity is a huge concern in healthcare and telemedicine is no exception. Complex circumstances add challenges to risk managers and insurers alike in determining the liabilities of respective parties in the supply chain including professional liability and cyber liability.

Disruption to financial services

Digital platform convergence is also showing up in other industries, ranging from banking to driverless cars.

"The e-wallet isn’t just simply a way of transferring cash. It combines digital, biological, and technological innovations with its dependency on touch-or voice-enabled smartphones and the internet"

Potential disruption to the financial system seems highly likely as consumers in many countries, particularly in Africa and Asia, turn to their smartphones instead of walking into bank branches or drawing cash from an automated teller.

In Singapore, digital payments are rapidly growing in popularity, including use of e-wallet, as safe and efficient ways to pay for products and services or to transfer funds. Statista research projects mobile point-of-sale payments in Singapore at nearly US$1 billion in 2019 with a projected annual growth rate of 30.7%. Mobile payments throughout Asia are many multiples higher, with China leading the usage of mobile payments and the e-wallet.

PPRO, a London-based company specializing in cross-border payments, estimates online shopping in Asia at more than US$760 billion by e-wallet. This is more than the value of all European ecommerce. The company concludes that e-wallets are used in more than half of transactions in the region.

The e-wallet isn’t just simply a way of transferring cash. It combines digital, biological and technological innovations with its dependency on touch-or voice-enabled smartphones and the internet. Telecommunications players are also joining the race to grab a piece of the pie. The best examples of e-wallets in APAC owned by telecommunications giants are Singtel’s Dash, Globe’s GCash and Smart-PLDT’s Paymaya.

In Korea, the Ministry of Public Administration and Security in a government-led digitalization push, approved SK Telecom to deploy blockchain-powered wallet to store national documents. This is its first digital wallet for documenting resident registration cards, health insurance qualification certificates, immigration certificates and a range of others.

As a platform, the e-wallet and smartphone will store enormous amounts of personal data–bank and credit records, addresses and contact information, and so on. It is highly secure in point-of-sale transactions, generally regarded as safer than credit cards thanks to encryption, tokenisation and other security features. However, e-wallets are not risks-free. Some of the mobile payment security concerns include security and privacy issues involving the device (usually a smartphone) and so-called app “clones”.

Managing acomplex risk landscape

The dynamic nature of digital transformation is forcing risk managers and their advisors to move quickly as new digital risks emerge. Digital platform convergence will complicate their jobs even more with the wider introduction of AI and machine learning, the IoT and other innovations that will introduce new exposures.

In some coverage areas, insurance capacity is available for now, but pricing is an issue, varying among insurers and by the business profiles of their clients. As pricing tightens, insurers are getting more into exposure details, including aggregation risks. The COVID19 pandemic has also forced companies to change their business models and operations.

Although digital platform convergence has great growth potential for many businesses, companies still need to do a cost-and-benefit analysis to test whether continuous effort to implementing or augmenting digital platforms will deliver real value, especially in terms of business efficiency, customer satisfaction and revenue generation. Insurance brokers and risk advisors need to weigh in with the best possible analytics and modeling to support risk identification, quantification and mitigation efforts, and determine the optimal points for transferring the risk to insurer(s).

Risk managers also need more than ever to work closely with their finance counterparts and senior management to identify the risks that are most likely to impact revenue and the company’s ability to meet its strategic objectives. Mitigation will be a heightened priority, especially in areas where insurance pricing tightens, including cyber, business interruption and professional indemnity.