For Innovation In Insurtech, Look to Asia
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Insurance, an industry as old as banking, is undergoing an extreme makeover. The mobile Web and modern data science are changing every aspect of the game. Startup insurtech (insurance technology) companies can offer targeted micro-policies priced in pennies. They are quickly turning everyday citizens into part-time brokers, selling new forms of insurance for the gig economy, and even registering cats and dogs for pet insurance with noseprint recognition software.
All this and more is happening right now in Asia. As a former Silicon Valley entrepreneur who runs a venture capital firm based in Singapore, I’ve been watching Asian insurtech take off. I think my fellow Americans back home could learn a great deal by studying the firms here.
Several factors make Asian markets a prime breeding ground for new insurtech products and business models. For openers, the markets are huge. China’s and India’s 1.3 billion people each, together with 622 million in the 10-country ASEAN region, add up to over 40 per cent of the world’s population.
And though these people can be broken into diverse regional submarkets—from hypermodern urban dwellers to rural rice farmers—vast numbers everywhere stand at a crucial inflection point on the development curve. They are under-insured but highly adept at using their mobile phones.
Unlike in the US, relatively few are locked into buying traditional insurance from the same legacy companies that their parents did. Such companies were never as dominant in Asia. This leaves the terrain open to newcomers. Further, despite rising prosperity, most Asians can’t afford the premiums that Americans are charged for standard insurance. Like debt-strapped college graduates or lower-income families in the US, they need suitable coverages at cheaper price points. This constraint drives innovation.
Let’s see how insurtech firms are taking various approaches to answer the call.
Direct sales to consumers
Traditionally, insurance has been sold through agents or brokers who earn commissions on each policy. One way insurtech can cut costs is by eliminating these middlemen. It’s by no means the only way. Insurtech startups design sophisticated ‘technology layers’ that speed and refine the processing of applications and claims—which, in turn, can make new kinds of policies cost-effective. But enabling the customer to buy direct, with a few taps on the phone screen, is both a money-saver and a marketing attraction.
Two Asian pioneers in online direct insurance were started by big backers. FWD, which has expanded into eight Asian countries since its founding in 2013, is an offshoot of Hong Kong-based Pacific Century Group. The Chinese firm ZhongAn was started the same year by a consortium including Alibaba founder Jack Ma and Tencent’s Pony Ma.
ZhongAn innovates on a wide array of low-cost, short-term and niche policies. Some are eminently practical, such as renter’s insurance for sharing-economy hosts, or buyer’s insurance for online purchases of goods, while others push the envelope. In 2014 ZhongAn offered ‘over-drinking insurance’ to hyped-up soccer fans watching FIFA World Cup matches on TV, and it is the company now reading noseprints for pet insurance.
Meanwhile, newer entrants are expanding the range of direct online offerings.
New Products for Today’s Needs
Gigacover, based in Singapore, serves independent contract workers in the gig economy. Customers include software engineers and Web designers as well as delivery drivers and maids. By buying from major insurers in bulk and processing policies with state-of-the-art tech, Gigacover can sell health insurance at low rates on a month-to-month basis. And its popular FLIP—freelancer income protection—can be bought on a weekly basis, at rates starting around Singapore $0.50 (under 40 US cents) per day.
PasarPolis, in Indonesia, sells micropolicies priced as low as under US$2 total. The company boasts an ‘instant claim’ feature which in some cases doesn’t even require a claim: If you buy travel insurance on certain airlines and your flight is delayed, you’re paid automatically. But PasarPolis is more than an odd niche firm. Founder Cleosent Randing has said he’s on a mission to make insurance affordable to the masses, and he’s gaining powerful market reach. Drivers for the big Indonesian ride-hailing company GoJek can buy policies with rates adjusted to their safety records and customer ratings.
Not all of this is brand-new or unique to Asia. The US insurtech firm Root, for instance, sells auto insurance tailored to your driving habits. Germany’s Friendsurance popularized cash-back rebates to drivers who stay claim-free, which FairDee has offered in Thailand, aiming to reduce high claims loads there. But in today’s world, most new things are multiply invented and few stay unique. What’s striking in Asia is the sheer scope of newness across all forms of insurance.
Agent-Centered Business Models
Many people in Asian countries still like to buy from local agents. They especially prefer personal advice to chatbot assistance for major items such as life or health insurance. And insurtech firms are responding with products that amplify the power and reach of agents.
MintPro, developed by the Indian firm Turtlemint, sits on the agent’s phone. Customers never see it. They do see an agent who can rapidly search and explain policies from an assortment of providers, without having to thumb through possibly outdated paper manuals. The sale can also be executed quickly online. And to grow the company’s presence, MintPro breeds new agents by helping people get India’s certification as a point-of-sale insurance advisor.
Fuse Pro, launched by the multifaceted insurtech Fuse of Indonesia, does much the same. The Fuse webpage features testimonials from Indonesians who’ve augmented their income by learning to be part-time, smartphone-driven sellers of insurance. (“Since joining Fuse Pro, I have been able to pay off my tuition and graduation fees,” one young man reported.)
Mutual Aid and Crowdfunding Models
Finally, some Asian insurtechs are returning insurance to its ancient roots. The industry began with groups of persons, typically merchants or shippers, pooling funds to protect any member against losses. Modern startups use online media and tech for similar purposes. Waterdrop in China and Kitabisa (“We can”) in Indonesia specialize in critical illness insurance, often needed in countries where the public health service doesn’t cover all costs for all people.
Kitabisa takes a crowdfunding approach—somewhat like GoFundMe, except focused on intensive medical care—while Waterdrop uses a mixture of models, one of which invites customers to make periodic contributions to a mutual-aid pool. Tap the pool once for a critical expense and you’re out … but the good news is, you are covered.
Other new models are proliferating across Asia, too. Space only permits a brief mention of aggregator websites like India’s Policybazaar, where you can compare and buy policies ranging from auto insurance to Covid-19 coverage.Everything I’ve described here adds up to a teeming ecosystem of innovation. And the bottom line is: If you want to see what the future of insurance may look like, look to Asia.