Digital Insurance - 3 Myths

Hong Kong is one of the most sophisticated life insurance markets in the world, attracting thousands of customers from mainland China and many other places. In recent years, the emergence of digital-only insurers and tech giants has brought new elements to the fertile insurance landscape and challenges much old thinking. Let’s unveil three sacred myths in the market.Myth No. 1: Customers are skeptical about digital-only insurers and won’t consider switching now.

Reality: Even in Hong Kong, a very sophisticated life insurance market, digitally empowered customers with heightened digital expectations are likely to switch insurance carriers in the next 12 to 24 months. Some 18% of online adults in Hong Kong indicated that they will consider switching to a digital-only insurer within the next 24 months. This sentiment was particularly strong among the youngest age groups: 18 to 25 and 25 to 34. A message to traditional insurers: One of every five people is betraying you, even though the enemy is not approaching! What a thriller!

Myth No. 2: Digital-only insurers will soon steal significant market share from traditional life insurers.

Reality: Maintaining high growth rates is difficult, and digital-only insurers struggle to scale up. Blue's revenue from life insurance premiums not linked to an investment grew by 36% in its first two-quarters of operation. But it has only a 0.3% share of the Hong Kong market, and its quarter-on-quarter growth has slowed to 4% in its third quarter, suggesting that it is struggling to acquire new customers.

Earning and maintaining this trust will be particularly tricky for digital-only providers, as they are relatively new, lack a long track record of paying claims, and can’t offer the same human touch as a trusted agent.

Further, the approach of providing a few cheap products will not be enough to achieve growth in markets like Hong Kong, simply due to limited demand and scale compared with bigger markets such as India or mainland China. In other words, there’s only so much demand for digital-only insurers’ current product offerings; to grow, they need to expand their product portfolio.

Myth No. 3: It’s not necessary to keep an eye on younger customers for life insurance.

Reality: Given the increasingly aging population, younger customers are strategically important to drive revenue but are often underserved by insurers.

Customers aged 18 to 34 are generally healthier, lower-risk, and more valuable in the long run — but they’re more inclined to purchase their life insurance online and prefer to interact online using a computer, smartphone, or tablet. Significant portions of younger customers aren't satisfied with the quality of their current provider's digital capabilities.

Author: Meng Liu, an analyst at Forrester