The general assumption about innovation is that it's top-down. Someone invents something complicated and expensive. As it achieves scale, the innovation becomes simpler and less expensive, making it accessible to broader audiences. Rinse and repeat until the innovation becomes global.
In insurance, that trend has typically meant an innovation in the U.S. or Western Europe that finds its way over time into developing economies.
But there's also an interesting trend known as "reverse innovation" that I've watched play out for some 15 years. If you have a multimillion-dollar medical device, you can take cost out, time and again (and again and again), and still not make it cheap enough to be economic in a poor, rural community. So some smart folks in India working within the severe cost constraints of a poor area invent a version of the medical device — and sometimes that device works well enough that it can reverse the normal flow, migrating from developing areas into the major economies.
To learn more about what reverse innovation is happening — or could be happening — in insurance, I turned to George Kesselman, the founder of InsurTech Asia. He grew up in Canada and went to school there, before spending the last nearly two decades working in Hong Kong and now Singapore, so he has a thoroughly global perspective.
His short answer: Pay very close attention to China.
His longer answer follows.
I met George through a sister organization, the International Insurance Society, for which he has been hosting a working group on innovation that I'm part of. (George will present the findings from the IIS's global survey on insurers' priorities, as well as insights from our working group, at the IIS' annual gathering, the Global Insurance Forum, being held in London at Lloyd's on Nov. 15 and 16.) Here is what he said about innovation in Asia, edited slightly for length and clarity:
KESSELMAN: This year, I had the pleasure of doing a coast-to-coast tour over two weeks in the U.S. and Canada, spending a few days in New York, Toronto, Vancouver, and San Francisco. My read is that innovation is really quite different in North America than what's happening outside.
The last wave of innovation, from roughly 2014 to 2023—let's call it a 10-year span—was very much an Asia-first wave. It was all this digital insurance that started in China, then Southeast Asia, with a lot of new models when it comes to embedded, small insurance. Then I think the innovation went a little bit more to Europe. In North America, it hasn't really taken off in the same way.
This time, the wave is kind of inverted. With all the AI innovation, all the investments, it's North America first, then Europe. Asia is seeing bits and bobs but not nearly as much as the other two regions.
My theory is that the scale is massively different in the regions, and the problems are also quite different as a result. Asia is very much about the growth of insurance. Insurance wasn't really popular here because the region was a lot less developed. The last 10 to 15 years have seen tremendous economic growth, so innovation and insurance started to come in. Insurers couldn’t scale the same face-to-face distribution, so they found different ways, including digital distribution.
But the scale still remains drastically different. When I was in North America and Canada, everybody talked in terms of billions of dollars. In Asia, people talk about millions, maybe sometimes tens of millions.
CARROLL: What kinds of embedded insurance innovations emerged in parts of Asia that have filtered out to other parts of the world?
KESSELMAN: In e-commerce, we saw quite a bit of innovation in warranties and the return shipping space. Now we're seeing innovations around trying a new product and getting coverage if you don't like it—you experience an upset stomach after eating something, or face delayed delivery. These are very region-specific and emblematic of the logistics and distribution challenges in Asia.
Travel is another ecosystem that saw significant innovation. Mobility is the third. Then fintech-related insurance is probably the fourth. Each has its unique characteristics. In fintech, for example, we've seen a lot around cyber incidents—if your wallet gets hacked, you get paid—or bill payment protection, where if you get sick, the bill gets paid on your behalf. These are embedded and bundled propositions that are very continuous to the core offering.
These innovations started here because digital leapfrogged in a lot of countries where the infrastructure didn't exist before and really accelerated adoption. Last week I talked to one of the big e-commerce players here, and they estimate about a billion dollars in these micro embedded insurance propositions being conducted yearly now. The growth is definitely there, and the trend has reached scale across the region, though it's still relatively small compared with an average MGA in the States.
As for how this is spreading, some of it is now landing in Europe. Warranty products, lens insurance, hearing aids—these are probably more specific to Europe because the needs and market development are different. In the mobility space—scooters, car insurance, and ride-sharing—I'm hearing that's happening there, as well.
CARROLL: I assume China has played a big role.
KESSELMAN: Embedded and digital insurance really took off from China. The big players were Ping An and ZhongAn—both kind of protection-focused players—and both of them really aggressively invested in innovation. China probably remains three or four years ahead of the rest of the region.
From China, innovation propagated to Southeast Asia. I think India is now also quite a significant market for it, but China was very clearly the first because of the combination of digital payments penetration being super high there, the development of super apps that put everybody—all the distribution—in the same place, and then e-commerce and all the logistics. Everything developed at the same time pretty rapidly.
CARROLL: What are some examples in Asia that other parts of the world could learn from in terms of insurance innovation?
KESSELMAN: Ping An and ZhongAn remain interesting examples. They have been investing very actively in AI, and I think they're still very much focused on distribution and servicing, and developing propositions that are very targeted.
In India, there are some insurers that are starting to do some really interesting stuff. Acko is one that comes to mind in the mobility space that has been quite active. The rest of the region has pockets of innovation, but because the countries are generally smaller in scale, it's very hard for insurers to really grow very rapidly. You know, you start in Singapore, then you need to expand into a neighboring country, and then you need to go and redo the whole growth journey again.
CARROLL: What sorts of interesting startup ideas are you seeing at Insuretech Asia?
KESSELMAN: There have been a couple of waves of startups. The first was really about trying to disrupt distribution. That wave has kind of passed now.
As part of the second wave, we have a couple of really interesting startups. Two are unicorns. Bolttech is one. They focus on distribution and have a couple of different complementary models. They have a very big presence in the U.S. and a global presence, but their headquarters are in Singapore.
Then we have InsureMO, which is like an infrastructure for insurance distribution. They have very big operations in India and Southeast Asia, and now they have growing operations in Europe, the U.S., and Latin America, as well, but they’re also based in Singapore.
CARROLL: What makes those companies different?
KESSELMAN: I think it’s exactly the fact that they started in Southeast Asia, so they needed to do everything very cheaply and fast even though the platforms that are here are very demanding in terms of the operational support that’s needed, in terms of technology. Being incubated here, I think, gave them that natural foundation of really building a scale-up in a demanding environment. They tell me that when they go to the States and talk to insurers there, insurers are very surprised that they can do things for a fraction of the price and at double the speed.
CARROLL: What has surprised you about how AI is being adopted—or not being adopted?
KESSELMAN: The part that surprises me is that it is still very much a technology conversation rather than a business conversation. To give you an example: Recently a couple of insurers in the region came here, and they have flagship programs, but they're all kind of stuck. They don't really know how to solve the problem of creating business value with AI.
This is the same theme we saw in the IIS survey.
Everybody kind of saw this shiny object and had experience with really interesting outputs of this technology, but there's a disconnect between the solution that exists and the problems that insurance companies need to solve. I also think there's a disconnect between the leadership level of the organizations and middle management organizations, which is not as bought into this whole idea of "let's bring AI everywhere, let's augment every job with it."
CARROLL: That's such a common problem—bosses demand change, and underlings nod their heads… but they also find ways to keep doing things the way they always have. Peter Drucker once told me that people don’t change. They just die off, and the next generation then does things differently. But we were talking 25 years ago. I hope we’ve learned a bit since then.
This has been great, but any final thoughts?
KESSELMAN: There are interesting developments in health insurance, again starting with China. Everything is getting so integrated. Hospital data is getting a lot more integrated with insurance data, and it's getting linked up in the hospitals to make it much more proactive—managing health, managing well-being. So rather than putting strain on hospitals, with insurance being really at the back of it, the loop is starting to get closed.
The rest of the world will eventually need to tackle that integration issue as populations age and healthcare systems are probably redesigned. Insurance right now is still very much on the receiving end.
That integration in health insurance is probably one of the most interesting things happening in this part of the world, and, again, I’d use China as the reference market.
CARROLL: Thanks, George. This is super helpful.
Cheers,
Paul