InsureTECH

The insurance industry, which has mainly used agents and banks to distribute its products for more than a century, is set to change in the next five years. The growing adoption of insurance technology (insurtech) will not only result in greater transparency for the industry but also better customer experience and more innovative products.

The growth of insurtech, a sub-sector of financial technology (fintech), has been made possible with the digital revolution. Start-ups are using the advancements in technology to change how consumers learn about and buy insurance.

Some players are establishing new insurance companies with radical and transparent pricing models so that consumers will have more options. Some have set up "aggregator" and comparison platforms to help consumers search for the best insurance plans while others have come out with educational websites that help consumers better understand what they are signing up for.

With insurtech, existing and prospective policyholders will benefit from the "commoditisation" of insurance products. Better claims and payout experience as well as rewards for healthy behaviors are some of the things policyholders can look forward to.

Policyholders will benefit from the transparency. The insurance industry has been quite opaque and insurtech will bring transparency to the table, which in turn will bring down the cost of general insurance products such as travel, home and personal accident. 

Technology will help commoditise products and make product comparison easier. It will also ensure a seamless customer experience through mobile or internet applications. Insurers will need to be competitive in terms of their services to retain clients.”

Insurtech will help expose the bad apples in the insurance industry, such as those that do not pay claims on time, forcing them to change their game. With insurtech, the commoditisation of consumer insurance products will be drastic as every player will be on aggregator sites and their pricing will no longer be a secret. Thus, service will become the main differentiator for insurers.

Consumers are looking for more customisable products, so innovative products may be developed to meet their needs. Some of the established insurers view insurtech as a means of improving their processes. However - industry players caution that - insurtech is seen as giving the industry a facelift rather than a complete makeover.

As for technology and innovation - online car insurance renewal platform - MotorTakaful.com, has been around for more than 10 years and has grown by leaps and bounds. Last year, it recorded RM115 million in sales.

There has already been a change in consumer attitude and expectations with the emergence of insurtech. This will continue over the next few years. Consumers and businesses will be very receptive to easier and faster ways of doing things, which presents insurers with the opportunity to drive the change that consumers seek. In short, there will be more needs-based insurance products, competitive pricing and faster claims payout, which will ultimately benefit consumers.

Malaysia’s insurance industry will be disrupted by technology at key pressure points across the value chain. For oroduct distribution, online aggregators that assist customers with comparisons of insurance coverage may displace traditional distribution channels, which are primarily manpower-focused (that is, through insurance agents and distributors).

With such information easily accessible through a ‘one-click solution’, there will be greater competition between insurers to leverage technology to modify their traditional processes and allow for a shorter time for the issuance of insurance policies while ensuring compliance with underwriting risks measures.

It adds that self-driving and pay-as-you-go rentals may affect traditional insurance underwriting models based on a single or paper ownership structure. “Risk determination for underwriting models may also shift towards the use of personalized statistical data through telematics. We expect insurance companies to vary their business models in the future, whereby they may choose to partner or acquire non-insurance technology players to incorporate business models that are more data intensive (and less manpower and capital intensive) and platform/infrastructure based. This could result in greater access to more innovative product offerings, with better value for end customers.”

Insurance companies have been simply marketing companies in the past 30 years because there has been no incentive for them to innovate. However, insurtech coupled with the liberalization of the insurance industry and support from Bank Negara Malaysia will allow them to start innovating. This is how insurtech will be a game changer for the industry.

Cross-industry technologies such as healthtech and automotive telematics are expected to transform the insurance landscape as well. Tons of data from healthtech and automotive telematics could help insurers with useful analytics. From there, premiums may be lowered and insurers need not suffer losses from a huge amount of claims each year.

Data analytics from telematics will help insurers develop a fair pricing model, where good driving behavior is rewarded with lower premiums while reckless driving will be punished with relatively higher premiums. Insurers choose to empower consumers instead of the insurers. Users take charge of their own data. If their driving scores are great, they may want to submit them to the insurers to enjoy lower premiums. Otherwise, they can choose to keep the data to themselves so they won’t be penalized by the insurers.

Making slow but steady strides - According to an article published by the Wharton School of the University of Pennsylvania in March, insurtech start-ups are already making their mark on the US insurance industry. For instance, Lemonade Insurance Agency LLC offers low-cost homeowners and renters insurance, with unused funds benefiting charities, while Friendsurance does peer-to-peer insurance that gives cashback bonuses to policyholders who do not file claims.

Metromile offers car insurance where the premiums are based on the mileage and Ladder uses data analytics to enhance the underwriting process for term life insurance products.

“Despite the emergence of such start-ups nipping at the insurance industry, incumbents have been slow to respond. After a slow beginning, the insurance industry is starting to look outwards and build relationships with fast-moving insurtech start-ups to accelerate their own digital transformation efforts,” says the article.

As more companies adopt insurtech in this part of the world, the question is whether the distribution of products will completely shift from agents to online channels and whether consumers will enjoy lower premiums..

It is similar to fintech players saying they want to replace the banks — it just does not make business sense. You are trying to beat people that have been analysing risk for the entirety of their existence. Instead of trying to shoulder the risks alone, collaboration is the right thing to do.

It is very difficult to overhaul an established industry such as insurance. Changing the game completely is only possible if the start-ups get strong funding and firm backing and operate in a mature environment such as the US. In Asia, where the insurance penetration rate is relatively low and many consumers have a sense of loyalty to big names, it will be very challenging to persuade them to buy from a start-up simply because they do not have confidence in new players.

Lemonade in the US is an example of a successful start-up offering its own insurance. She thinks it is a game changer because the company built it from scratch and is operating with a new business model.

However, Lemonade is only offering fast and low-cost renter and homeowner insurance, which are rather simple products. It is not in the territory of general and life insurance, which are more complicated and opaque.

As for insurance agents, a hybrid model of artificial intelligence chat box and insurance agents. Consumers can speak to the chat box about their needs. Questions that the chat box cannot answer will be directed to agents or financial advisers.

For insurtech to be a game changer, we either need huge funding and strong confidence or an established insurer to abandon its business model and partner start-ups to do new things. If not, it will be very difficult to change the industry completely.

Singapore’s insurance industry is definitely growing and more insurers are opening up. There have been nine innovation hubs set up by insurance companies on the island republic. There is a lot of innovation hubs and is a positive indication that insurers are open to innovations as well as collaborations with start-ups such as ourselves. But it may not be an immediate signal of ‘Let’s work together’ as they will have to agree internally that it is worth investing time and resources before they collaborate with us.

Challenges ahead - Insurtech has its own set of challenges. Players need to be clear about whether they are insurance companies with a technology element or technology companies in the insurance business.

There is huge difference between the two. You need to know what differentiates you from everyone else. For example, as a technology company in the insurance business, we can do everything with 2,000 employees. But an insurance company with a technology element may need up to 60,000 employees.

Some of the tech players in Malaysia and Singapore - Here are a few start-ups providing insurance and health solutions in Malaysia and Singapore.

BookDoc - BookDoc is a mobile application that connects patients to medical professionals. The current healthcare system requires patients to make appointments in advance by contacting call centres that have a high dropped call rate and often put people on hold. This is a waste of time and energy and adds unnecessary pressure to patients.

With BookDoc, patients can make appointments online in a few minutes. They will select from a list of qualified doctors, know their availability and speciality, know how far the clinic or hospital is, and so on. The app will remind patients 24 hours and two hours prior to the appointment so that they do not miss it.

The company has already partnered other service providers, such as Google Maps, Waze, Grab, Uber, Tripadvisor and Agoda, to integrate information on directions, ride hailing, accommodation, restaurants and local attractions into the app. This will come in handy for its users.

 Pixelated Sdn Bhd - The company offers telematics and data analytics solutions that could offer insights into driver behaviour. The data could help insurance companies decide how much it should charge individuals for their premiums.

It recently launched a mobile application called DriveMark, which tracks drivers using their mobile phone’s global positioning system and assigns scores for their driving behaviour, using indicators such as braking, speed and driving hours.

 PolicyPal - PolicyPal is a Singapore-based digital insurance application that has entered the Monetary Authority of Singapore’s regulatory sandbox phase. The app helps people better understand their coverage and manage their policies. It offers needs analysis powered by an artificial intelligence-based chat box named Kate.

Kate will gather information on the user’s existing coverage, explain the details in layman’s terms and if there is a shortfall, suggest the need to purchase a new plan. Questions that it is unable to handle, such as complex questions involving financial needs and personal issues, will be sent to the back-end channel to be answered by financial advisers.

PolicyPal is only offering third-party products from existing insurers on its platform, such as direct purchase life insurance, personal mobility insurance, travel insurance, personal accident insurance and mosquito insurance from NTUC Income (an insurance cooperative) and Etiqa Insurance Pte Ltd.

Inzsure Pte Ltd  - Inzsure offers corporate insurance solutions via its platform powered by blockchain and ethereum, which are the technologies behind the bitcoin and ether cryptocurrencies.

The opaque commercial insurance landscape makes it hard to compare coverage and prices. By using Inzsure, companies can compare corporate insurance policies offered by 22 insurers on its platform. Once they have decided, they can select the plan that they want and a smart contract is activated, which will give the company coverage almost immediately. The company is expected to launch the platform in the third quarter of this year.