Insurtech

Are insurers incompatible with digital ecosystems across Asia?

Business-to-consumer ecosystems could turbo-charge the growth of insurance in Asia. Trouble is, partnerships often fizzle out due to insurers’ old-fashioned wiring and inflexible cultures. Time for a reboot.

Century-old insurance companies and digital startups are teaming up across Asia: the results can sometimes be awkward.

Insurance companies want to sell policies over burgeoning ecosystem platforms. These, in turn, want to add another product to embed themselves deeper into the lives of consumers.

Tie-ups are proliferating across Asia. China’s Tencent said its insurance platform Wesure has partnered with over 20 insurance companies. Ride-hailing app Grab has teamed up with Chubb Insurance and NTUC Income Insurance Co-operative. Meanwhile, its Jakarta-based rival Gojek works with Allianz, Gigacover and PasarPolis.

“Partnering with someone who is in our customers’ lives every day is the way forward, from buying a coffee, hailing a cab, to buying groceries,” Sushmita Munshi at Toronto-headquartered Manulife Financial told FinanceAsia.

However, such partnerships don’t always get off the ground or run smoothly as Thomas Holub, the founder of Covergo, recently found out to his cost.

Covergo was engaged by a digital Asian travel platform to source insurance tailored for its users’ needs. Underwriters took so long to design the product that the unicorn got frustrated and walked. “Online platforms cannot wait,” said Holub.

Ecosystems like Holub’s unicorn base their success on providing slick and convenient services to consumers whereas insurance companies move at a far slower pace, hampered by their long history, need for regulatory compliance and decades’ old technology stacks.

It’s a similar story across Asia. 

“In India, if you want to get a refund and not go through with your policy, an insurance company would normally take six to eight weeks – an ecosystem like Alibaba will not allow that,” Alok Bansal, co-founder of India's largest insurance aggregator PolicyBazaar.com, said.

Only a handful of insurers are nimble enough to make good ecosystem partners, consultancy Accenture concluded in a report last month, based on a global study of more than 1,250 business leaders, including 106 insurance executives. 

Accenture found that 54% of respondents from the insurance industry are actively seeking to partner with or become an ecosystem themselves, but less than 5% of them have the right attributes to excel at ecosystems, including technology, corporate culture and talent. 

 

Mostly, partnerships involve a “thin layer” of digital interaction, which quickly devolves into paperwork and phone calls when it comes down to writing and issuing policies, Francois Metzler, head of Asean insurance at Accenture, told FinanceAsia.

“Most of these partnerships don’t go very far beyond the hype,” and many will wither away and quietly die, said Metzler.

To get up-to-speed the insurance sector needs a complete overhaul.

“It’s a lot tougher than buying the best tech or getting the right partner on board; it’s about our people. It really goes to the belly of the organisation, the way we approve programmes, who decides on what we’re doing – it changes the fabric of the organisation,” Manulife’s Munshi said.

So what’s the recipe for a successful partnership?

MAKING A CONNECTION
Metzler suggests that insurance companies should start by measuring customers’ satisfaction with simple questionnaires and then acting upon responses. That at least would give them a clearer picture of what they are doing right or wrong.

“The whole industry has not been customer-centric,” agreed PolicyBazaar.com’s Bansal. 

Then they should take stock of where their growth is generated. Many of the insurance companies that Metzler has spoken to don’t know which method of distributing products works best; online channels get lumped in with the more traditional avenues in the back office.

The challenge for insurance companies has always been to connect with reluctant customers and persuade them to spend time talking about the unpopular but important subject of health and life policies. 

“No one really wants to buy insurance,” Manulife’s Munshi said.

Manulife, PolicyBazaar.com and PolicyPal discussing the future of insurtech with FinanceAsia at startup conference Rise in Hong Kong during July

 

Traditionally, insurance companies have deployed door-to-door salesmen who use their friends’ and families’ networks as a way into people’s lives. Other pathways include selling policies via bank branches or tasking independent financial advisers (IFAs).

But these models look increasingly old fashioned as consumers’ buying habits evolve. People are starting to buy small-ticket policies bundled with other products, such as auto insurance, whilst buying a car or travel insurance in conjunction with an air ticket. Australian airline Qantas Airways, for one, has jumped on this trend to set up Qantas Assure, which sells travel, health and life insurance. 

“A lot of the younger customers don’t like going to agents, they don’t trust banks, and most kids don’t know what an IFA is,” Munshi said.

They do, however, understand digital ecosystems and are flocking to them in droves.

The giant in the room, Alibaba, had 721 million monthly active users (MAU) at the end of 2018. Southeast Asian platforms are smaller but still command significant reach, even covering people who have never bought an insurance policy in their lives: Gojek’s MAU was 27 million as of July 2019, according to mobile analytics platform App Annie.

They are also starting to successfully channel this traffic to insurance platforms. Tencent’s WeSure hit 20 million MAU within just one year of launch.

Manulife works with Grab in the Philippines and Malaysia. Passengers can watch videos about insurance on a tablet installed in Manulife-branded GrabCars. After each video, they can opt to schedule an appointment with a financial adviser by filling up an online form.

“Plugging into a digital ecosystem is critical,” Munshi said.

Digital platforms are also generally a cheaper route for insurance companies to attract new clients. Holub estimates that insurers pay about 30% in commission to their salespeople in Hong Kong whereas platforms charge an advertising or referral fee of around 15% to 20%. He said that some platforms even distribute products as a bolt-on service to their clients.

FRIEND OR FOE?
Relationships can turn sour for many reasons.

Digital platforms, as with bancassurance partners over the past decade, hold the upper hand in partnership negotiations because they have forged and control that vital link with the customer. They could become more aggressive over fees and more demanding with regards to product tailoring. 

“This is the biggest threat to insurance companies – ownership of the customer – they will become disintermediated processing factories for others and the value will sit in the ecosystem,” Accenture’s Metzler said.

Some ecosystem platforms have become so frustrated with insurance companies that they are cutting them out of the loop. The chief strategy officer of Alibaba’s financial services platform Ant Financial, Chen Long, told FinanceAsia back in 2017 that insurance was the area he felt most needed disrupting. “We think it has to be broken,” he said at the time.

Since then its plans have progressed. Ant Financial said in April that it aims to provide basic health insurance to 300 million people in the next two years. The service, called Xiang Hu Bao, which means “mutual aid”, attracted 50 million participants in the first six months after its launch in October.

Accenture estimates that by 2022, insurance companies that are slow to respond to changes by such agile competitors could lose market share worth as much as $198 billion.

To be sure, ecosystems also face their own challenges selling insurance products at the more complex end of the spectrum. On India’s PolicyBazaar, for example, health and life insurance customers talk with a sales agent for an average of 90 minutes per transaction. “It’s not a very casual transaction,” PolicyBazaar.com’s Bansal told FinanceAsia, clients are making a commitment that can last decades “If they [platforms] are doing it along with many other activities, it could be very challenging,” he said.

Conservative insurance regulators are also evolving as digital platforms innovate to make sure consumers fully understand the commitments they are making. In China, for example, regulators are moving towards capping the amount of capital each member of a mutual insurance scheme puts into the pool, said Metzler, meaning the platform could be held liable if there is a sudden surge in claims.

And those few insurers that can are trying to become ecosystems themselves.

Munshi heads Manulife’s cutting-edge behavioural insurance programme in Asia called Move. The firm has been working with Apple watch and smaller digital startups, including Zurich-based Dacadoo, to help customers improve their health, which also help keep Manulife’s payouts down. 

The rest will have to strive to improve their uneasy co-existence with digital platforms.

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