Many in insurtech – the fintech companies that are trying to get onboarded by insurers, or to compete with them directly – believe the outbreak of coronavirus COVID-19 is their moment.
“We are playing offense right now,” said Fred Ngan, co-founder of Bowtie, an all-digital insurer in Hong Kong. “We’re educating people on the ease of buying insurance online.”
The COVID-19 epidemic is disrupting businesses around the world, particularly those that rely on face-to-face interactions – including insurance, whose biggest players rely on agent networks, brokers and banks to sell policies
Insurance is rarely “bought” but always “sold”, particularly more complex (and very personal) products like life insurance, especially when it’s wrapped with a savings and investment component.
But that “sale” has depended on close interaction with customers, as well as among insurers and their distribution channels. COVID-19 is forcing a halt to face-to-face meetings. The outbreak is turning into a pandemic, meaning it may impose itself on society for a while. Are insurance companies’ existing digital capabilities fit for purpose? Is the coronavirus going to change customer’s habits, making it easier to transact insurance remotely?
Incumbents testing the possible
“The coronavirus is a catalyst for agents and customers to adopt digital tools,” said Priscilla Ng, chief customer and marketing officer for Hong Kong at Prudential, which has the largest agency force in the city.
In addition to moving training and recruitment from meetings and events to Zoom and other communication platforms, Prudential is looking to do more selling online.
On February 21, the Insurance Authority announced Hong Kong insurers could sell two types of products remotely (without requiring a wet signature), deferred annuities and VHIS, a local government-backed health insurance scheme. Prudential was the first among traditional players to launch online sales using a digital signature.
We are playing offense
Fred Ngan, Bowtie
Ng says customers still want someone – from the insurer, or an agent – to talk them through a policy. The benefit of remote selling may not be about cutting a face-to-face meeting: it is the flexibility of letting customers buy a policy and go through the paperwork on their own time. “This is about more than replacing a wet signature with a digital one,” Ng said.
It’s too early to know whether Prudential or others’ sales efforts succeed. Ng acknowledges, for example, that Prudential’s own website and user interface haven’t been designed for selling products; the firm is preparing to roll out a health-oriented app, Pulse, to create a more encompassing digital experience.
Contradictions made clear
The numbers overall are likely to be modest, however. The I.A. selected two products for remote selling that are new and niche. “It was the right thing to do but very limited,” said Dustin Ball, Asia Pacific insurance transactions leader at consultancy EY. “It didn’t get into the real issues around agency selling.”
Some players believe that COVID-19 will force a conversation around such issues, like it or not.
Singapore-based George Kesselman, founder of insurtech Anapi, said, “The industry is still in a state of shock and denial about the virus,” responding more by work-at-home arrangements than rethinking its I.T. infrastructure. “I think this is a catalyst to fundamental change.”
This is a catalyst to fundamental change
George Kesselman, Anapi
Anapi offers a platform for businesses to manage the insurance policies they have bought, so Kesselman has a view of what corporate customers are demanding now. Many face plummeting sales because of the coronavirus, so their priority is to cut costs, including the premiums they pay.
Insurance companies on the other hand are trying to defray the pain of the pandemic by increasing premiums, while also trying to manage the operational inefficiencies of legacy systems – a situation made worse by the work-from-home mandates.
Reimagining the stack
Something has to give. Kesselman believes incumbents will be limited by their legacy infrastructure. Nimbler companies that have been investing heavily in a customer-focused tech stack have an opening. Companies like SingLife and FWD still rely on broker or bancassurance ties but are built on cutting-edge tech stacks.
“This is the opportunity for companies that have been pushing the digital agenda,” Kesselman said.
Incumbents tend to rely on outdated core systems based on mainframes, usually siloed around product or stages of policy lives, rather than around customers. In contrast, cutting-edge tech companies like China’s Zhong An can roll out a new product in a week, versus the months it would take a traditional player to assess and price the risk.
Insurance company apps are not agile
Sebastien Gaudin, CareVoice
To get around this, incumbents have built middleware, a tech layer that lets outside apps plug in via APIs.
This arrangement can extend the life of a legacy system, in particular if the insurer works more with insurtechs that have the talent, the customer interfaces, and the innovative ideas. Working with insurtechs can speed up the usual months-long internal processes to, say, develop a new product.
Reacting at virus speed
Shanghai-based CareVoice, for example, is working with insurers such as Generali to provide healthcare-related services to policyholders. It responded to COVID-19 by creating products such as giving users a guide to finding doctors to get tested.
“It took us three days,” said Sebastien Gaudin, CareVoice’s founder. “If you want to look at a new population or a new benefit, we can have a product validated within four weeks.”
He says the difference in speed and nimbleness is now becoming obvious. “With the virus, agents are staying at home. Can their customers subscribe to a product online, can the company assess their risk?…Insurance company apps are not agile. They can extend existing policies but they can’t incorporate new ones.”
The virus is making insurers see how slow they are
Romain Di Meglio, APRIL
He says the only insurance company in the world that can act as quickly as an insurtech is Ping An Health. “All we see with how the others are responding to the coronavirus is just marketing,” he said. “The industry needs to adopt solutions for fast product innovation and digitalizing everything.”
Romain Di Meglio, Asia CEO at APRIL, a managing general underwriter (a specialist that does everything an insurer does except carry the risk, which it outsources to an insurer), agrees the trend of API upgrades will accelerate. “The virus is making insurers realize how slow they are when it comes to adapting to a less physical world.”
A slow transformation
The API build began a few years ago with the rise of comparison sites such as MoneyHero and GoBear. Insurers initially treated these as lead-generation partners but a few are now connecting digitally to enable actual transactions.
From there incumbents and brokers began to work with insurtechs to enable more digital transactions. CoverGo, Galileo, 10Life and PolicyPal have all worked to plug insurers into direct sales, partnerships, or broader ecosystems. The numbers in Asia are still small: league tables kept by local regulators show digital sales remain tiny. But in the U.S., companies like Bolt Solutions are now selling over $2 billion of P&C premiums in a single quarter.
The coronavirus is a catalyst for customers and agents to adopt digital tools
Priscilla Ng, Prudential
“Incumbents are excited by the potential of digital,” said Jacob Sacuto, co-chair of the insurtech committee at the Hong Kong Fintech Association and founder of a digital claims business, claim5D. “But how to get there is the complicated part.” Incumbents recognize the need to partner with insurtechs or Big Tech players but face some challenges. First is the desire to control the data. Longer term, it’s how to do what Ping An did a decade ago: shift entirely to an infrastructure based on customer data, that could later migrate easily to cloud and microservices.
“The incumbents have to revamp everything,” Sacuto said. “It’s the only way they can be more efficient and allow for new business models and partnerships.”
Sacuto’s not sure if the coronavirus will speed this up. “So far all I’ve heard from the insurers is marketing noise,” he said. That’s because such a migration is very hard. Even the opening of APIs to handle digital transactions is being done in baby steps, he says.
The ultimate product
There are alternatives to digital transformation. Consolidation is one. Another is to grow new markets in a traditional manner. The collapse of the lucrative business of selling life-insurance policies to mainland Chinese in Hong Kong (due more to political unrest than the virus) has increased appetite among multinationals to grow in Southeast Asia.
But does it make sense to build a Southeast Asia franchise with agents and brokers, competing with entrenched players that already command large sales forces?
The incumbents have to revamp everything
Jacob Sacuto, claim5D
EY’s Ball says insurers that already have clear digital strategies will simply keep going. But for those yet to move, the coronavirus is spurring a rethink about agency distribution. This would have begun in the China market, where Zhong An, Ping An, Ant Financial and Tencent’s WeSure are already revolutionizing the industry. But now operations across Asia are under review.
Ball says however he has yet to see anyone crack the creation of a true digital product. Incumbents want to keep selling products that were made for face-to-face sales, so that’s what they digitize, but these don’t work as well online. Commoditized products like auto insurance are easy to digitalize, but complex products still need handholding. “There’s no corollary on the life side that is aligned with what people do online,” Ball said.
If the coronavirus is a catalyst for incumbents to speed up digitalization, it’s also a challenge for insurtechs and digital insurers to deliver the product that sells online. The holy grail awaits.
