Last week, on December 5, London financier Michael Spencer announced he was buying a controlling stake in Singapore Life, paying $52.7 million for a 33.8% stake. This is on top of a previous stake through Spencer’s personal investment company, IPGL, that brings his total holding to 63.2%.
Spencer is group CEO of NEX, a U.K.-based electronic broker and vendor, formerly known as ICAP. He is well known in Britain as a philanthropist and backer of the Tory Party.
What is Singapore Life going to do with that $52.7 million?
Earlier this year, Singapore Life founder and CEO, Walter de Oude, had sat down with DigFin at his office, to explain the vision for the digital-based business.
At this point, de Oude was fresh off the success of having gone live the previous year, and acquiring the domestic life business of Zurich.
He noted with satisfaction that the wider insurance industry was beginning to take notice of Singapore Life, based on its strong growth. But raising money had been difficult.
Now that he was finding it easier to raise capital, de Oude said the next opportunity was wealth management.
Going after the HNW space
“We need to get things to market faster,” in order to serve customers with better investment and wealth solutions. “I’m not talking about robo advisory, but a more sophisticated I.Q.—a wealth proposition that’s personalized,” he said.
“We want to blend advice and robo, from both humans and A.I.”
That suggests Singapore Life will make a big push into investment-linked products, but not just to manufacture them. It is using technology to become a distributor of wealth products.
“Our future will be to optimize any kind of fund within the portfolio,” he said, noting Singapore Life can do so within its insurance license. “The lines between financial services are blurring. Banks no longer hold dominion over financial services.”
De Oude’s background includes consulting, actuarial work at Swiss Re, and running the Singapore arms of HSBC Life. He founded Singapore Life in 2014, but spent the first three years raising capital.
From the start, the aim was twofold: outcompete bigger incumbents on the strength of organizing the business around cutting-edge technology; and leveraging Singapore’s industry serving wealth-management services to global elites.
“It’s a very competitive high-net-worth market,” de Oude said, saying life insurance companies already write $6 billion per annum in premiums in Hong Kong and Singapore for wealthy individuals.
Developing private-bank like services are a business priority for the likes of AIA and Prudential. “But no one has done it digitally,” de Oude said.
What digitizing insurance means
The time between setting up the business with a cutting-edge tech stack in 2014, and getting the required capital to go live in 2017, saw incumbents wake up to the digital threat. They are also automating. But de Oude says there’s a difference between “slick front ends” and end-to-end automation. Singapore Life has 50 employees, a fraction of the big teams at incumbents, so it offers products more cheaply: 30% cheaper for term life, de Oude said.
He says that three of four years ago, the incumbents began dabbling in digital with self-service websites, allowing customers to, say, update their personal details without having to call a rep. Now incumbents are partnering with fintechs or buying new tech, but de Oude says he has yet to see any of this lead to product innovation.
That’s because of the underlying legacy platforms: “Digitization is a veneer on an older, manual, processing system.” He notes insurers can’t afford to get rid of their old core, mainframe-based systems, so they are creating integration layers with apps on top. (Incumbents’ tech people have told DigFin the same thing, although some are launching new, standalone platforms.)
“But customer data has a life of its own,” de Oude said. “In the old world, you add a customer to a product; today, you add products to a customer database.”
This difference means that new, nimble companies can put multiple core systems in place beneath an integration layer, specific to a given product, but all serving a single customer account. This gives Singapore Life and other digital insurers such as FWD (its closest competitor in Singapore) the ability to efficiently understand their customers in a way that incumbents struggle to achieve. Over time, these challengers will want to scale on that nimbler tech, while incumbents will find maintaining traditional core architecture a costly, increasingly frustrating exercise.
Challenges
But Singapore Life isn’t 100% automated, and as a small player without a brand name or easy access to capital, it has found the incumbents to be hardy competitors.
The one area that isn’t fully automated is claims (for life insurance; it is fully automated for critical illness and investments). And customer acquisition costs are high. Singapore Life went live with protection products, such as term life and critical illness. This summer, it added single-premium endowments, which are similar to three-year fixed deposits, which provided higher returns than a bank deposit.
As of this summer, the firm claimed 9,500 customers, but the majority of these came from the acquisition of the domestic business of Zurich.
De Oude declined to say how much came from Zurich, but insurance executives at other firms told DigFin they think the Zurich portfolio is the bulk of Sing Life’s business. The deal put Sing Life on the map in Singapore, giving it scale, revenues, and some cash—but de Oude didn’t take Zurich staff, other than some customer-service reps.
Now that the business has been injected with new capital, de Oude will invest in products that can be claimed automatically, which means keeping them simple and transparent. Singapore Life’s systems also validate statements customers make about their health. And, as mentioned at the start, he wants to grow the firm’s footprint in wealth products and distribution.
The next challenge? “The hard part used to be raising the money,” he told DigFin. “There’s no shortage of capital now. What’s going to be hard now will be remaining nimble – not to lose that culture – to avoid becoming a legacy player ourselves.” But he doesn’t see that as an immediate worry, thanks to the way Singapore Life’s technology is arranged. “We’re protective of our architecture and the authenticity of our own coding.”
