Innovating the insurance industry in Asia

While Fintech has been making waves in Asia for some time – Singapore is in fact ranked one of the top Fintech hubs in the world – the insurance industry has been slower to innovate.

Insurtech refers to the use of technology to address existing problems and opportunities within insurance.

The industry is identifying opportunities to design new products and services, facilitated by the use of digital platforms and leveraging data and information collected from the Internet of Things to generate risk insights for underwriting.

In Asia, we’ve noticed a few Insurtech players that provide promising examples of what innovation can bring to the table. What makes them stand out against their counterparts is their ability to capitalise on technology as an enabler instead of using it for novelty’s sake. These companies have demonstrated ways to use technology to offer a better user experience and build a stronger business proposition.

The aggregators

In the West aggregators are common-place but less so in Asia. At the more evolutionary end, India’s PolicyBazaar, CoverFox, and Singapore’s GoBear are comparison portals that help customers easily find the perfect insurance policy that best fits their needs and purchasing power.

These aggregators support the research stage of the customer journey. Instead of having lengthy meetings with agents from various insurance companies to find the best product offering - or skipping this stage entirely - consumers can make an informed decision with the help of these sites. By identifying a gap in the existing customer journey, these Insurtech start-ups have identified a business opportunity to provide customers with tools to facilitate research for insurance-related products.

The online-only insurer

China’s first online-only insurance provider Zhong An insurance is entering the limelight as an Insurtech powerhouse. Going digital would be a common next step even for traditional insurers, but Zhong An stands out with their ability to capitalise on the advantages that online direct sales has to offer.

Founded by Chinese Internet giants Alibaba Group, Tencent Holdings and Ping An insurance, Zhong An has underwritten more than 4 billion insurance policies since its establishment in 2013. Instead of having agents relentlessly arranging unproductive meetings, the insurer uses big data to find under-served needs then swoops in at the right time and at the right place to offer customers product propositions.

Zhong An scores more hits than misses by working with diverse distribution partners to pull customers in at crucial inflection points e.g. product return insurance offered through giant eCommerce platforms like Taobao and T-mall to assure eCommerce product satisfaction; mobile phone repair insurance tie-ups with smartphone maker Xiaomi; a variety of travel related insurance via travel service providers Ctrip and Qunar.

Zhong An places the customer right at the centre of its strategy - through understanding customers’ needs, demands for new products unique to the digital economy and customers’ key decision-making points, Zhong An is able to design relevant products and also cast a more effective net to generate leads.

Challenging the conventional insurance model

Finally, we also have some disruptors who are challenging our understanding of how insurance works. Tongjubao, China’s leading peer-to-peer insurer, borrows from the concept of mutual insurance which involves gathering people who share an affinity to pool their capital into a group fund. Offering its services via the digital platform helps to facilitate the process of fund pooling by members who might be separated geographically.

This fund would be used to protect members from loss and at the end of the coverage period, unclaimed funds would be returned to members. This structure aims to mitigate the inherent conflict of interest present between the insured and insurer - where insurers stand to gain through premiums not paid out in claims. The peer-to-peer model also tackles fraud with the assumption that policy holders would be less likely to commit fraud since it would their peers that they are ripping off.

The concept of peer-to-peer insurance can be challenging for consumers to understand but Tongjubao markets it effectively by tying the concept seamlessly with exclusive policies that insures against social risks. For example, the insurer provides marriage protection products that cover financial support for newlyweds who face financial difficulties in their first year of marriage. In these cases, members of the pooled fund are commonly the couple’s family and friends who pool in money as a well-wishing gesture. This proposition easily gains buy-in within the Chinese community that values collectivism and mutual support. Interestingly, it’s also starting to be viewed as a more meaningful alternative to Chinese red packets (red envelopes with money) given out during weddings as gift. Tongjubao is able to capitalise on its knowledge of the market’s culture to find a vantage point to introduce and sell its unconventional model of insurance.

Learning points

Technology affords the insurance industry unprecedented opportunities to innovate in terms of distribution strategy, product offerings and business structure. And it’s not just the start-ups - like their retail banking counterparts, traditional insurance companies like Aviva are also building incubators and accelerator programmes to promote innovation in the industry.

While it’s easy to push for more innovation, the greater challenge lies in identifying the problem and opportunity that technology brings to create meaningful change. The Asian Insurtech players mentioned here stood out to us because their business strategies are built upon a deep understanding of their target customers and industry processes. By paying attention to existing pain points, behaviours and sentiments of their users, as well as gaps in outdated policies and inefficiencies in current processes, these companies are able to build an effective formula that’s both a win for the business and customers.

Insurtech start-ups do more than merely move existing services to digital platforms. They aim to transform the customer journey by using data to add value and even to challenge the fundamental logic that runs insurance.