Panel Information
Speakers:
- Sherry Du – Managing Director at RGAX APAC
- Cindy Kua – CEO & Co-Founder at Sunday Ins.
- Anand Prabhudesai – Co-Founder at Turtlemint
Moderator: Ajit Rochlani – Principal at Oliver Wyman
Insurtech opportunities are abundant in markets like Southeast Asia, where insurance penetration is less than 1% of GDP. It’s an emerging market where insurtechs can play a significant role in speeding up the penetration rate and reaching consumers who were previously unreachable. With the growing economy and rapid development of new services in the region, insurers can target not only people who can afford insurance but also anyone who uses mobile apps. This opens numerous possibilities for both insurance companies and insurtechs to collaborate on innovative product and service offerings.
Role of Insurtechs
Insurance companies can reap significant benefits by partnering with insurtechs in ways such as:
- Omni-channel distribution – Insurtechs can enable an omnichannel customer experience by treating insurance as a “mass product” that customers are able to purchase through multiple channels such as agent, direct, telco, and so on.
- E-commerce-like buying experience – Unlike e-commerce sites where people shop for products on their own (direct-to-consumer), people are not internally motivated to buy insurance because it’s complex. But insurtechs can help insurers build products that are easy and simple to understand, giving people the confidence to buy on their own.
- Seamless interactions – Insurtechs provide a frictionless and simple customer experience for insurers, solving many of the direct-to-consumer problems they had before. With cloud-based solutions and AI-powered automation, the end-to-end insurance customer experience can be streamlined and made more seamless.
- Empowered agents and advisors – Insurance advisors often need tools for lead management, customer engagement, marketing, process management, claims management, etc., and insurtechs can equip them with this. They can also help create new agents (ex., via e-learning platforms), which is a huge undertaking for most of the sector today.
- Embedded insurance – Product innovation is a challenge for insurers when it comes to embedded insurance. There are so many areas where insurance is still not embedded. This presents opportunities for insurtechs to apply their technological knowledge, particularly APIs, to help insurers create products that embed insurance in people’s lives.
- Speed – Insurtech partnerships allow insurers to accomplish things more quickly than they would be able to do on their own. And insurers can learn a great deal from insurtechs when they partner.
- Chatbots and voice bots – Using chatbots and voice bots offered by insurtechs to contact their insureds, insurers can engage customers better and make more calls at a minimal cost.
Risk and Profit
Profits are often based on the risks taken. Yet, it’s not always possible to make a profit based on risk, where the risk cannot be priced. Striking a balance between the two is the way forward in such cases.
Today, the insurance industry is increasingly benefiting from innovation, big data, and the fast-growing ecosystem. There’s a lot of value to be gained for reinsurers or insurers working with players in a larger ecosystem, from giant technology companies to start-ups, in terms of distribution, house services partners, or data sources. Combining insurance and reinsurance knowledge of risks enables them to offer broader solutions and offer better products and services to their customers.
Here’s an example: In China, a medical insurance program was introduced to cover the traditionally underserved elderly population. Despite the increased risks associated with age, the insurer partnered with digital distribution channel partners, health service providers, and tech companies to launch the product. They leveraged artificial intelligence (AI), machine learning (ML), optical character recognition (OCR), natural language processing (NLP), and other technologies to provide information for underwriting. And they took advantage of the digitization of data to ensure innovative product design and development. This was a win-win situation for both the insured and the insurer because the underserved segment received insurance protection while the insurer had risk mitigation measures in place to ensure profitability when insuring this high-risk segment.
Scaling
Challenges remain when it comes to doing things at scale. And as important as technology is to scale, it is also crucial to ensure the technology addresses the concerns of various ecosystem players.
Because when an insurer looks for a distribution partner, they look for someone who understands the risks they will face before onboarding customers, not just whether the partner attracts high-quality customers.
That said, there is more to this than just distributors alone solving these problems. Insurers need to do better underwriting too. And for this, distribution partners must support them with better data collection, customer assessment, leveraging different technologies like image processing, and so on.
For example, insurance companies can integrate with the healthcare ecosystem to help underwrite risk and solve customers’ problems in terms of need analysis, being able to recommend products, etc., wherein technology can play a role.
Some of the other factors to consider when scaling include:
- Execution
- Speed and quality of service are critical, especially when legacy systems are involved.
- People
- Educate people (agents and customers) about the product, including how to buy it and how to handle claims.
- Make technology work for people and organizations. For instance, large corporations have existing procedures and processes in place, and people are used to them. In such cases, a mindset change, people, and cultural transformation are required alongside technology integrations.
Why do traditional distribution channels still hold sway?
People still rely on traditional distribution channels because, by paying premiums, they are assured of insurance protection. They carry the expectation that insurers will disburse big payouts in the event of a claim. But usually, that payout comes with several terms and conditions. This creates uncertainty, and some customers start to worry if they truly understand the terms and conditions.
However, from an insurer’s perspective, simplifying the product and forgoing the terms and conditions might open the funnel wider to all kinds of risks, amplifying their risk exposure. To navigate this challenge, experts will be needed to guide customers through their insurance purchase journey as long as the insurance product becomes less complex without increasing the risk for the insurer. Additionally, this expert can also assist with claims. It is why, in countries like India, even if people want to try and understand insurance, they feel safer turning to an expert who can be there at their beck and call at the time of a claim. They simply find it more reliable to outsource the decision to an expert.
Creating a simple product with simple pricing alone can solve this challenge, especially since people don’t like to deal with too many questions.
Insurtech going full stack
With partnerships, insurers can avoid spending a lot of money while improving their speed to market. Going full stack allows both the insurers and insurtechs to play to their strengths, improving the product, service, and overall profitability. Insurtechs can also support insurers in paying the small claims that create a lot of frustration because the claim value and the time spent on it are often disproportionate.
For complex claims, the process is long and cumbersome, with the claims process happening late in the journey. But sometimes, when the claims behavior fails to meet expectations, it causes the insurer further problems. Here, insurtechs can value add in the claims process by leveraging on data to better understand and predict the future for improvements in the claim experience. However, for this to happen, it requires customer consent in sharing of data with third party ecosystem partners.
While increasingly there are competition between insurers and insurtechs, the most important thing is still collaboration between the parties. This is especially relevant for insurers aiming to focus on specific verticals because the risk is so abstract that it takes years to build expertise for just one type of product. Therefore, insurers are better off focusing on one type of risk and collaborating on everything else. They also stand to benefit from collaborating with startups on innovation since startups have the freedom to iterate until they find what works.
Looking ahead: What’s next for the insurance industry?
- Insurtechs and insurance-as-a-product will be championed and promoted to everyone.
- With every industry (healthcare, automotive, telco, e-commerce, ride-hailing apps, and wallets) trying to create their own ecosystem value for their customer base, insurance will become a key piece of their plans.
- Embedded insurance will emerge as a new type of distribution channel.
- Simplifying the customer’s journey—so it becomes contextual (almost brainless for the customer) and more easily consumable—will take precedence over other considerations.
