French Tech Talk x InsurTech:
Can Technology Really Disrupt Insurance?
In this article, a series of top-notch InsurTech founders will share their views about the latest trends in the InsurTech sector and discuss whether technology was really able to disrupt the traditional ways of doing insurance.
– by Damien Kerneis
“Before we jump in, I have a few numbers to share with the audience. The global insurance market is 5.8 trillion US dollars, which is a great size for the market, and, the Global investment in InsurTech last year was 7.2 billion, so there is a lot of money going into digitising and bringing new solutions.
Thailand’s insurance market is 8 billion dollars, which is big, but small compared to some of the global markets – with most of them being in motor insurance, as well as non life, which is around 4 billion dollars.
Those are just a few numbers to give you a bit of an idea.”
First of all, how is the market when you look at consumers, penetration rates, and the readiness of customers to purchase insurance? How do you see that, is it advanced, and does it have a lot of growth perspective?
Thailand’s penetration of insurance is quite high already. Especially on the motor side, about 60% of the cars in Thailand are properly insured with the comprehensive type of cover, so that’s quite high for the region, and is probably the highest for the region.
On the health side, I think it’s starting to move quite quickly. It’s a market which, since COVID, has seen some acceleration where we’ve seen people looking more for health coverage – both online and offline.
For Sunday [Ins Ltd.], the product lines that we primarily play around with are: health insurance, electronic space, and motors across all bases.
So within the health space, there is still a very low penetration. When you look closely, it’s still mainly driven by corporate financing.
So, if you look at annual reports of providers, it’s mostly all financed by corporates. But I think now, what we see from post-COVID is that there’s a lot more increase in awareness.
You start with small-ticket items, but then you start seeing a lot of people buying larger ticket items.
So previously, we used to think that only if someone gets hospitalized, then you would think that people will want to consider buying health insurance. But after COVID, we saw it differently.
So that was one of the biggest things that we saw, and I guess another result from that is, during COVID-19, health insurance was one of the product lines that didn’t reverse in terms of penetration.
In actual fact, what we saw was an increase in premiums within the industry.
What do you see post-COVID? Looking at the way consumers purchase insurance, what do you see are the major pain points at the moment and how is your business addressing some of these pain points?
On the consumer side, how are you helping to grow this overall market to make it easier for the consumer to purchase insurance or to get insurance?
The first pain point is price. Insurance in Thailand is very expensive, for multiple reasons. One is it’s mainly distributed by agents and brokers who are taking a reasonably high commission.
Secondly, the industry is still reasonably outdated in terms of processes and efficiencies. So insurance companies will carry costs at around 20% of the premium – which makes up the sum of the two when you pay $100 of premium. $40 does appear in expense and commission and only $60 comes back to service your claim.
That’s a very high level for anywhere in the world. High interest countries will do that with only 15% as a cost, so I think that the prices are a big issue.
How we try to address that in the market is by setting price products, digitally removing the intermediary in the process, getting more efficient in the servicing of the business by automating tasks, and getting AI to help with the treatment of documentation to be able to reduce the cost that we bear on our colleagues.
Yes, price is one of the factors. I do think that there are other aspects that are also difficult to solve, one of them is distribution.
It could just be the distribution of it like the digitalization of the distribution, digitalization of the processes, digitalization of the claims, there are a lot of aspects to it.
So if you have to look at it as an overall, right in terms of what you can tackle in the insurance industry that I’ve seen, the easiest part is the distribution. The second part is the claims and processing.
The third part is the operations and back end. I think Nicholas is brave enough to try to tackle all three at the same time.
For me, I’m really focused on the front end, which is the distribution side of things because I feel that there has to be a better way for products to get to customers so that customers can see, compare, click, buy, as well as just understand everything that they’re doing.
A lot of that has to come from simplifying the product first. So distribution for me, it’s something that really matters. Yes, price is a contribution of it, but for me I try to digitize the entire process of distribution.
At Sunday [Ins Ltd.], we’re full-stacked – meaning that we also have an insurance company, and we somehow operate as an insurance company ourselves as well.
Therefore, we look at risk management and prediction a lot. I think there are two biggest pain points for consumers.
Definitely, pricing, there is a price war in the market for insurance no matter what product class.
Moreover, when you look at just global trends on how consumers buy any products, not just insurance, e-commerce customers just expect all types of prices to get cheaper, and less pressure on the insurance to make it more affordable.
In that case, how do you protect the margins?
Which is why I think insurers need to adopt a lot of data science to find how to produce a premium that is a lot cheaper and still maintains, for example, a 75% loss ratio.
So, definitely, that’s one area. The second one is that customers now find it hard to pay this kind of premium, but then what is your compelling service which is why there’s a price wall.
For example, at Sunday Ins Ltd., we are in the health space. In the health space globally, there’s a lot of pricing pressures, so we try to adopt a lot of risk prediction models and try to automate internally as well.
Therefore we can pass on the margins back to our users. Also, on the service side, we tried to embed different types of digital health care services within the insurance claims journey, because it’s going to happen.
I think the business model of insurers, especially those playing in health insurance, will start encroaching into the provider space to allow you to get more control and to promote patient independence, and try to reduce your frequency and severity of your risk occurrence.
In that way, hopefully, that translates to lower loss costs, which is typically the largest cost structure of any premium. Hence, I think service differentiation for a consumer is super important.
Talking about creating new products that you design based on the needs, how difficult is it to create a new product from a regulatory perspective, and how critical is the government in the success of your business in general and in letting products out?
I mean, it certainly could be easier. But, it’s not impossible. I think, to be fair, the Thai regulator has been very forward-looking, and to a certain extent, quite positive in letting innovation come to the industry.
It is still regulation, we need to file your product before selling them, which to a certain extent, it will be backward but the USA they’re doing the same thing, so it’s nothing to do with development.
However, there are other jurisdictions, which are a bit more forward-looking where they will let the insurer launch their product, but put the onus on the insurer to make sure that the product delivers the service.
Therefore, if consumers complain that they will have to face the story. For this reason, I think I’ll prefer regulation, in saying that it is still quite possible to create new products in Thailand.
Yeah, definitely. Product approval is one of the biggest pain points for any insurance.
In a way, I’m thankful that this is not the USA where in every state you go you need to file a different product.
But again, sometimes it takes like two to six years to get your product approved and by then it’s changed, so that has been our experience in the past.
While it does have a fast track process, it’s not really fast track as well because they [the regulators] have so many questions to ask.
Hence that has been our biggest pain point on how to manage, but we do understand the regulator’s concerns. The other point is the digital insurance license.
After the digital banking license, insurance was always going to the next step.
However, I think that when you have a license, you have to think about solvency ratios and risk-based capital.
Plus, when you are a startup company, typically the regulators are not very familiar with the type of financials which is why you need to really engage the regulator, from my perspective, you need to really explain to them what’s your strategy for growth for scale, and also long term profitability.
Therefore, even when digital insurance licenses do come in, how would that match for you and other users?
For example, some of us already have a vanilla license, but would you consider the general insurance license where some regulators actually come to you and ask you to convert?
Also, how does that meet, and how does that impact your business model as well? So I think that will be the next big thing that a lot of insurance would have to think about when they think about their digital strategy.
Also, new competition coming in. I think there are many other non insurance companies who would get a license as well.
For this reason, I think those are all the things that I see from a regulator’s perspective, trying to also promote fair competition and really promote innovation, in a sense.
I mean, if you put device-based solutions, for example, you can put a device in your car that monitors your driving behavior, those devices tend to have SIM cards or Bluetooth communication in them.
And there’s a process to register that with the NBTC the broadcasting government because they don’t want people just deploying random devices that interfere with other telecom systems, for example, the BTS or military systems.
So I understand why those are there, it’s just that that process could be a lot better.
There are hundreds of pages of paperwork that need to be submitted. But in terms of regulation overall, I think the regulators here are one of the reasons both in banking and insurance, why Thailand doesn’t have a unicorn. And I’m not gonna say they’re the sole cause of that.
However, in other countries like Vietnam, Indonesia, Singapore, you see new unicorns emerge in the FinTech sector.
And that hasn’t happened in Thailand, because things like getting insurance licenses, banking licenses, this kind of launching products quickly, is virtually impossible.
Vietnam, on the other hand, is more open to that as are other players.
Though, I’m not gonna say it’s absolutely impossible. Obviously, the panelists here have launched, and they have products in the field, but it could be a lot easier than it is.
You mentioned some other countries may be a bit more friendly, or things can move faster, do you see your business more focused on Thailand or is it possible to be original in this space? What’s your view on that?
Definitely regional. We started off Sunday [Ins Ltd.], not just for Thailand, we want to have the whole ASEAN market but we started in Thailand because there’s just so much talent here.
We had a license in the first place, and I think Thailand is definitely one of the leading economies when you look at the growth rate and premium size of the industry.
We just opened an office in Jakarta, our second marketing, quarter four.
Actually, we were supposed to do it in quarter two but COVID happened, so we decided to set it up virtually and do it during quarter four. So definitely, ASEAN.
We’re also trying to grow in ASEAN, but the good thing about being a part of the bolttech group, it’s the instant and essentially launched in eight different countries.
Essentially, after bolttech acquired us, they took our platform and launched it now in Indonesia, Vietnam, Hong Kong, and Singapore with Korea and Malaysia coming up soon.
So you know, mass expansion instantly because of the resources available. The reason we started this platform as well was never to just focus on Thailand.
That’s one thing that I always wanted to be very clear is that yes, we are a broker in Thailand selling insurance, but the product that we’re building in the backend is not the actual brokerage, that is the vehicle of how to sell the insurance.
The platform itself is what we had built and that’s what we’re scaling across the region because that’s the scalable part, the website, the UI UX, the recommendation engine, the CRM system, the way that customers can choose different products and compare quotation platform API’s, all those things, those are the scalable stuff.
That’s what actually gives a company like us a valuation or makes us attractive to an investor. Otherwise, if we were just a pure telesales broker, we would not be InsurTech, we would be an insurance company.
Nothing wrong with that, people make tons of money doing that. Some people have even successfully raised money doing that, but it’s not scalable because you’re tied to where your human capital is, as opposed to where the platform can actually go.
In one sentence or short speech, can you give us your prediction on what will be the key to success in the future of this business?
I think to me, the beauty of technology in bringing insurance to the market is in helping risk assessment and risk improvement, and not just selling a product, the prompt, and pay a claim later.
I think for me, data science really needs to build your capabilities around your predictive capabilities risk modeling to become a sustainable insurance company for the future, who can basically underwrite any type of products
Honestly, I wish the industry had more competitors. I say that because we need consumers to start realizing that they can and should buy insurance online directly by themselves as opposed to going through a traditional agent or broker.
I think insurance space is a really interesting space. It’s primarily a data-driven business because you’re looking at risk and behaviors. I think this industry has got a huge potential, and there’s also a lot of changes that are happening in this industry.
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