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Asia Will Be Focus of Insurtech in 2017

Asia will be the key pillar in the coming revolution of insurance and in all likelihood will become the hottest market for insurance technology (insurtech) globally. It’s no longer just a pipe dream, as this time all the stars are aligning. Take the sheer population size and rapidly emerging tech-savvy middle class, together with low effectiveness of traditional insurance distribution. Combine that with a destabilizing wave of political populism, making its rounds across much of the developed world, and you’ve got most of the ingredients for a region that will take on a leading global role for insurtech.

So what, if anything, is missing to really ignite insurtech in Asia? It turns out that while the region is ripe for insurtech, the actual quantity and quality of startups in Asia is nowhere near that of other regions… at least not yet.

Share of investments in insurance startups can be used as a good proxy to the overall level of insurtech activity around the world. According to the figures, the U.S. takes 63%, with Germany (6%), U.K. (5%) and France (3%). China is at 4% – which doesn’t account for Zhong An’s massive investment in 2015 — and India at 5% (Source: CB Insights).

See also: The Future of Insurance Is Insurtech  

So the logical question is, why aren’t there more startups in Asia, considering the substantial opportunity and funding that exists in the region? Is it due to a shortage of experienced entrepreneurs, difficulty of starting a business, lack of access to investment or something else? The answer is that it’s likely a combination of a few factors, including a weaker early-stage entrepreneurial ecosystem, which doesn’t yet effectively support startups, and a cultural aspect of lesser tolerance for failure. Both of these are changing fast, though, and entrepreneurs across Asia are starting to identify and test innovative insurtech solutions.

The following are just a few recent notable insurtech startup examples across Asia that have already reached beyond Series A funding: Zhong An (an $8 billion Chinese insurtech startup), Connexions Asia (Singaporean flexible employee benefits platform with a U.S.$100 million valuation), and two large insurance aggregators out of India– Policybazaar and Cover Fox.

So why am I convinced that Asia insurtech startups will not end up dominating their regional home turf ?

Probability and “Survival of the Fittest”

The lack of critical mass of startups in the region means that they will not enjoy the same quality filters and network effects of the larger entrepreneurial ecosystems of the U.S., Europe and to a somewhat lesser degree China.

“Surviving” U.S. and European startups have to fight their way across a lot more competition to reach scale in their home markets. Hence, where a weaker startup in Asia could get repeated life support simply because there aren’t that many others to invest in, natural selection weeds out the weaker models in EU/U.S. much quicker in favor of more robust ones. Stronger startups then get to attract the best talent from the entrepreneurial ecosystem, including talented entrepreneurs whose models didn’t work as well, further reinforcing successful EU/U.S. startups.

Home Market Advantage

Success in a large home market like the U.K., Germany or a few U.S. states gives a substantial boost to any startup. It provides both credibility and cash flow to allow a much more aggressive expansion into other regions. This also gives a startup flexibility to develop the necessary adjustments to the business model to adapt it for Asia.

The U.S. and EU have a deep domain level of insurance expertise, which gives EU/U.S. startups from those regions a further edge to tap advisory expertise locally, because most of the largest global insurers are based in these two regions.

Lastly, considering that most startups adopt a collaborative approach with insurance companies, having a relationship that originates close to the top decision maker at headquarters gives an added advantage to EU/U.S. startups when they are looking at expanding to new regions. I’ve personally experienced examples of relationships developed in Europe that later carried over in creating a pre-warmed partnership with the insurer’s operations in Asia.

Regulatory Complexity

Asia is made up of a large number of countries, where each has its own insurance regulator, who possess views on how things should be run. This means an additional potential growth hurdle for Asian startups.

For example, a startup out of Singapore will need to figure out how to navigate the neighboring Asian country regulatory regimes pretty early in its growth cycle. Thailand, Malaysia, Indonesia and Vietnam markets all have diverse regulatory requirements. This lands the Singaporean startup at a disadvantage vs. a more mature startup out of EU/U.S. – which not only has experience dealing with regulators in its home market but also possesses a proven track record and a larger resource pool that it can use to overcome any regulatory issues.

Meet Future Leaders of Asia InsurTech

Here are  35 insurance startups from across the U.S., Europe and China that have a real shot at collaboratively shaping the future of Asia’s insurance . Granted that not all of these startups will successfully adapt their models for Asia, a few would and will go on to successfully dominate Asia’s insurtech landscape in the foreseeable future.

Credit: George Kesselman

Credit: George Kesselman

The future of insurance in Asia is coming fast, and it’s looking pretty exciting!

See also: Insurtech Has Found Right Question to Ask  

Below are links/brief description of each of these 35 ventures.

U.K.

  • Guevara – People-to-people car insurance
  • Bought by Many – Insurance made social
  • Cuvva – Hourly car insurance on-demand
  • SPIXII– AI insurance agent
  • Gaggel – A better alternative to mobile phone insurance.
  • ClientDesk – Digitizing the insurance industry
  • Insly – Insurance broker software

Germany

  • SimpleSurance – World’s leading e-commerce provider for product insurances
  • Friendsurance – The future of insurance (P2P)
  • Getsafe – One-stop digital solution for all your insurance matters
  • Finanz-chef24 – Germany’s largest digital insurance for entrepreneurs and self-employed
  • Money-Meets – Save money and improve finances
  • Clark – Insurance as easy as never before
  • MassUP – White-labeled platform for online insurance sales
  • FinanceFox – Your insurance hero

USA

  • Metromile – Pay-per-mile insurance (usage-based auto insurance)
  • Oscar – Smart, simple health insurance.
  • Zenefits – Online HR Software | Payroll | Benefits – All-In-One (EB distribution)
  • Policy Genius – Insurance advice, quoting and shopping made easy
  • Embroker – Business insurance in the digital age
  • Slice – On-demand insurance for the on-demand economy.
  • Trov – On-Demand insurance for your things
  • Cover Hound – Compare car insurance quotes from top carriers
  • Insureon – Small-business insurance
  • Bunker – The marketplace for contract-related insurance
  • Lemonade – Peer-to-peer renters and homeowners insurance
  • Cyence – Comprehensive platform for the economic modeling of cyber risk

China

Incumbents, Insurtechs Must Collaborate

Insurtech has finally come of age in 2016. The segment has seen a year-on-year doubling of global investment for the past two years, with 2016 appearing to continue the trend. While it’s still a fraction of the broader fintech wave that has swept the globe since 2013, insurtetch is rapidly catching up. Insurtech is officially the next hot thing.

Asia, with the exception of China’s outliers (Zhong Ang, Huise, Joyowo and Xishan), has lagged in terms of investment and the volume of startups. That said, the region has seen a surge of interest since mid-2015.

Much has been said about the need for the insurance industry to innovate to remove various frictions that exist throughout the insurance product experience – from buying, owning, to claiming. Innovation is critical to help regain consumer trust and ultimately help the industry remain relevant in the digital age of on-demand everything.

Furthermore, little doubt remains that with a tidal wave of bright and unbiased people enabled by financial and tech resources injected in the industry, all the frictions will eventually be eliminated.

We live in a world in which traditional models of investment in captive innovation have largely been proven ineffective and inflexible in an environment of rapid, technologically driven change. R&D departments with large budgets and armies of researchers couldn’t stand up to the agility of startups, which tap into customer proximity, high tolerance of failure and technological sophistication to nail solutions to relevant problems and scale fast.

See also: Unified Communications and Collaboration are Increasingly Important for Insurers

The value that has been created through entrepreneurship during the past decade has been disproportionate versus corporate innovation.

Where do startups and corporate entities meet?

Against that backdrop, major corporations around the world are increasingly waking up to the fact that startups are becoming the key source of innovation for them. There’s even a new acronym for it: CSE (Corporate Startup Engagement). Call it what you may: it’s delivering rapid iterative customer-centric R&D to quite a few of the largest global players. According to an INSEAD report, “262 of the world’s 500 largest corporations are actively partnering with startup companies.” 

There’s clearly a set of complementary strengths that exists between corporate and startup entities. Rather than trying to fit the square peg of startup innovation into the round hole of corporate structure, corporate leaders are choosing to actively collaborate with startups to explore ways of combining the best of both worlds.

This trend, not to be underestimated, creates an opportunity for the peg to round off, and for the hole to become sharper-edged, thus learning from each others’ strengths and each thus increasing their competitiveness.

Corporate innovation in Asia: from attempts at ownership to collaboration

Contrary to the co-innovation trend, in 2015 we saw a number of insurers rushing to create in-house innovation centers, labs and garages in an all-out arms race to become digital innovation leaders. Driven by a legacy mindset that dictated that money can solve any problem, we saw the rise of fancy innovation centers full of PhDs, entrepreneurs, data scientists and so on.

The trend reinforced the fear of missing out and of being left behind: More and more insurers piled in, justifying the act to their boards by saying that everyone else is doing it, and so must we.

After two years since the innovation arms race began in Asia, I’m happy to report that it has largely proven itself ineffective in generating any meaningful value beyond PR. It’s not unsurprising, considering the innovation evolution in other industries: from aiming to own innovation to collaborative cultivation with startups.

See also: 4 Benefits From Data Centralization

What started off as the insurance industry’s attempts at protecting itself by replicating rapid innovation internally is evolving into something more powerful: collaboration magnets and cultural transformation catalysts.

Startup innovation enablers

What smart insurance corporates have discovered is that some startups have magic in them that makes them fly. That magic is a combination of awesome teams, purpose-driven cultures, completely different constraints, tech savviness and customer proximity, among other things. It’s also pretty apparent that while you can try replicating all these factors in-house as a corporate, it doesn’t make any more sense than keeping your grown-up kids housebound.

If you can’t own them (… yet), embrace them!

Understand what’s driving them: The mission of creating an efficient risk transfer, which is as easy as grabbing an Uber, is a big and hairy ambition. Nonetheless, it’s an exciting one. And it’s drawing droves of bright entrepreneurs, developers and data and behavioral scientists. Undeniably, for some, “get rich fast” is the primary driver. But for a lot of entrepreneurs, the ambition of making a dent in the universe is a powerful motivator, and money is an outcome rather than the objective.

Be open: As much as innovation is about nailing the brilliant idea, it’s also about many other controllable (team, execution, supportive ecosystem) and uncontrollable (timing, network, partners) factors. Taken together, these factors translate to a meagerly low probability of a startup making it big.

Openness to failure and the ability to quickly bounce back are important entrepreneurial traits. As insurance leaders, we should keep an open mind to different ideas, entrepreneurs who have failed and even our best employees who are itching to join a startup.

Be nimble: Startups are very different; that’s what also makes them powerful. They sprint around the clock; a week might as well be a lifetime in the startup world. It’s all about developing and refining tech solutions based on customer feedback.

Bootstrapping with limited resources and finding creative ways of overcoming obstacles are important. “Just do it” and “fail fast” are persistent mottos that drive progress.

If you come across a startup solving a relevant problem, please don’t drag it through endless rounds of meetings with legal, compliance, distribution, senior management, then regional management and so on. Figure out a way to do a limited pilot within a month to test how the startup concept resonates, and secure the next, bigger step.

Most legal and compliance folks are not prepared to assess startup risk; To stay on the safe side, they’ll advocate the status quo – which, as we know, is not an option. Senior management will need to figure out how to insulate the pilots from the status quo folks, at least in the early stages.

Cultivating a startup ecosystem

It will take a large number of startups trying various idea/team/location combinations to help us find the next revolutionary model for insurance. That said, chances of success can be improved through two factors: improving the controllable and increasing the number of attempts to overcome the uncontrollable.

The idea of InsurTechAsia was born to act as that very catalyst for insurance innovation and collaboration. The aim was to:

  • Connect startups with the best resources and partners for them to succeed, do that transparently and without friction, rather than trying to skim the value;
  • Work with various stakeholders to remove any roadblocks, regulatory and otherwise;
  • Bring together a community that will actively collaborate, share and help its members to make it much bigger than a collection of its individual members; and
  • Encourage more startups to join the mission by building visibility around the opportunity while focusing the energy on the highest-potential areas to maximize the impact.

Our community has grown rapidly across Singapore, Hong Kong and most recently Ho Chi Minh and Bangkok. Right from the start, we’ve encouraged insurance leaders to be part of the community to experience and learn from the startup world first-hand. Being part of the community also means paying it forward by helping to mentor startup founders and connect them to potential opportunities in the market.

See also: FinTech: Epicenter of Disruption (Part 4)  

It’s been really encouraging to have a growing number of corporate leaders actively participate in our meetups and use those as opportunities to mingle with startups, entrepreneurs, regulators and investors and looking at ways to help the community grow. It is truly a beginning of a new era in the insurance industry, that of collaborative innovation and building an awesome future of insurance together.

This article originally appeared in the October 2016 issue of the Asia Insurance Review.

Can Insurance Become Utility, Like Electricity?

Imagine a time when oil lamps dimly lit streets. They were difficult to service — someone had to light them and put them out every day, and they required regular maintenance. Moreover, oil had a nasty tendency to catch fire during transport.

As it became possible to improve the lamps, it was difficult for oil lamp manufacturers to comprehend that what society needed was light, not a better lamp. Light with all the fundamentally wonderful things that it enabled: joy, safety and productivity.

It wasn’t lamp manufactures that brought about the revolution in electricity and electrical lighting that most of us take for granted now.

Insurech as a Catalyst for Change

What if I told you that the story of insurance resembles that of oil lamps? We are now in the age of oil lamps of insurance while electricity is being invented in our backyards. Investment into insurtech has grown exponentially since 2012, and 2016 is the year it entered the mainstream. Entrepreneurial talent powered by investment is rapidly experimenting across the whole insurance value stack and is starting to chip away at the first set of key insurance industry problems.

Power of a Utility

Over the years, insurance has evolved into the equivalent of a super complex oil lamp contraption that resorts to all kinds of complexities and tricks to address inherent structural limitations of the current insurance model. The more time I spend with insurtech startups, customers and insurers across Asia, the more I become convinced that the only way forward for insurance is for it to become a utility, akin to electricity. In fact, as a consumer you want insurance for precisely the same reasons you want electricity, as an enabler for joy, safety and productivity.

See also: InsurTech Need Not Be a Zero-Sum Game  

Furthermore, just as electricity expanded from the original purpose of lighting to power everything from our homes to internet and transportation, once basic insurance becomes a utility there’s a world of opportunities for it to improve society on a much broader scale. Think of these opportunities as apps that plug into the insurance platform, just as fridges, air-conditioning, computers, Teslas, etc. are all ultimately powered by electricity. Electricity is a super enabler, and insurance should be, too!

Insurance Journey Toward Becoming a Utility

If we take an analogy of insurance = oil lamps, we can extrapolate it to help us start imagining what the world of insurance would be if it became the equivalent of electrical lighting. It’s a journey that will take us less time than you might imagine because of the non-linear nature of progress.

Furthermore, I’ll venture to say that we’ll experience a tremendous consolidation across the insurance industry and will end up with three major utility providers per market instead of the current, fragmented landscape.

First Wave of Insurtech

The first wave of insurtech startups is already out there in the market experimenting with new tech/propositions and testing insurers’ appetite for collaboration. Broadly, there are three camps of startups:

  1. Partner with insurers to accelerate their journey toward becoming a utility (eliminating frictions and building insurance grid infrastructure);
  2. Develop applications that plug into the insurance utility grid to provide custom products both in insurance and risk prevention;
  3. Aim to outrace insurers and become utilities themselves.

I’m a big believer in the power of collaboration between startups and incumbents. Hence, I feel that the first two insurtech camps have a better shot at creating a broader impact.

At this point, most of the startups are focused on one particular technology or proposition. For insurance to become a utility and a true enabler of joy, safety and productivity it will take a few of these enablers to join up in clusters and connect to the right insurers. The heat map from Munich Re is a useful reference.

“Insurance as a utility” is the mental model that nicely summarizes all the various things happening in the nsurtech ecosystem and at a same time can act as a beacon for ecosystem players.

Insurtech Ecosystem Emerging in Asia

Building on T.J. Geelen’s blog post about the thriving fintech ecosystems in Asia, I’d like to share with you some insights relating to the emerging insurtech ecosystem in the region. Although insurtech in Asia is in its infancy, since 2015 we’ve seen a surge of interest. By the way, I’m a big believer that Asia has a real potential to power the next wave of global insurance innovation.

Four flavors of insurtech

First, let’s revisit the definition of insurtech to make sure we are all on the same page. Essentially, there will be three major camps of insurtech: one that enhances existing insurance structures, another one that aims to disrupt by providing alternative digital risk transfer mechanisms and the third type coming from existing insurance firms attempting to defend their existing market positions. The first and third types broadly can be broken into the following sub-types:

  • Product sales/distribution (aggregators, online portals, apps)
  • Risk management (IoT, healthtech, blockchain)
  • Fraud detection/prevention (big data, machine learning)
  • Claims management (big data, machine learning, vendor network management solutions)
  • Service management (chatbots)
  • Investment management (portfolio optimization, asset/liability matching)

The second type attempts to drive an end-to-end structural innovation, either removing part of the structure or fully digitizing it.

Why Asia for insurtech

Asia is attractive from both an insurer and an insurtech perspective due to the size of its significantly underinsured population. The region has traditionally seen a large part of the risks self-insured through family and community networks. As the region experiences rapid growth in the affluence of its population, together with an aging population, the risk exposure is becoming even more apparent, and the need for alternative risk transfer mechanisms, including insurance, increases. Insurtech, alongside traditional insurance, can help.

Further, there are near-perfect locations for the launch of a program. Singapore, for one, allows for sandboxed experimentation, regulatory support and advanced tech infrastructure. Limitations of traditional insurance distribution channels and the rapid increase of 4G mobile penetration mean that insurers are also highly interested in exploring innovative partnerships that help them connect with potential customers.

See also: Matching Game for InsurTech, Insurers

Insurtech in Asia

Asia is a very diverse region and has a mix of developed and emerging countries. So far, the major push for insurtech has come from China, India, and Singapore, while Japan, Korea and emerging Vietnam, Cambodia, Taiwan, Philippines, Thailand, Indonesia, Malaysia and Burma have lagged. (While Australia and New Zealand are geographically close and are very well integrated in the Asian region, the markets are much more ”Westernized” and hence are less applicable to this blog post.)

There’s China, and then there’s everyone else when it comes to insurtech. The first full stack (end-to-end) innovator, Zhong An, is valued at a massive $8 billion and raised $931 million. It accounts for more than a third of the global insurtech funding in 2015. It is also worth mentioning TongJuBao (peer-to-peer) insurer and FWD (Asia’s second-richest family’s insurance venture, which is re-positioning itself from traditional insurer to an agile digital insurance competitor).

India, another vibrant insurance market, has seen its insurtech innovation focus mostly on distribution. Not surprisingly, two of the major aggregators come from India: Policy Bazaar and CoverFox have seen healthy level of customer take-up as well as sources of funding. CoverFox has recently expanded its service proposition, now assisting customers with their insurance claims.

Being based in Singapore, I have a particularly detailed view of the insurtech landscape in Southeast Asia. So far, I have gathered the following mapping of Asia insurtech startups as they fit within the insurance value stack. There’s a mix of very-early-stage as well as more mature Series A and listed ventures. The list keeps growing.

Please feel free to comment and reach out if you come across any additional startups that I’ve missed out in the list below, and I’ll update it.

Area:

Distribution

Actual Losses

Operating Insurance Co.

Value:

20%

55% Losses + 5% Fraud

20%

Role:

Aggregators

Leads Generation

Customer Transactions

Improving risks

Fraud detection

Rewarding healthy

Risk assessment

Loss adjustment

Operational/Service Efficiency

Start-ups: Policy Bazaar (Aggregator)

CoverFox (Aggregator)

Health/House-front

Latize (Fraud) JustMove (Health)

Uhoo (Health IoT)

Harti (Health)

WaveCell (Comms platform)

Fixir (Finding repair garage)

MyDoc (Health claims)

Stash.ph (Health claims)

GoBear.sg (Aggregator)

Cxa (Employee benefits)

PolicyPal (Policy mgm.)

UEX (Group policies)

Zhong An (General Insurance) CH

TongJuBao (Peer to Peer Insurance) CH

DirectAsia (Direct General Insurance) SG

FWD (General / Life Insurance) HK

Singapore Life (Upcoming Life Insurance Startup) SG

 

Corporate insurtech

Singapore, with its advanced infrastructure and innovation-supportive financial services regulator (MAS), has secured a leadership position for Asia’s corporate insurance innovation as reflected by the high concentration of insurance innovation centers. Eight of 10 Asian insurance innovation centers are based in Singapore. The innovation centers are powerful corporate change catalysts and typically include elements of awareness building and cultural transformation.

Firm Innovation Center Country Focus Status
Aviva Digital Garage Singapore Digital Transformation Active
Manulife Loft Singapore Digital Transformation Active
MetLife LumenLab Singapore New business models Active
Allianz Digital Labs Singapore Digital Transformation Active
AXA Data Innovation Lab Singapore Big data Active
AIA Edge Singapore HealthTech Active
Munich Re Innovation Lab China General Insurance Launched Q1 2016
Swiss Re

India IoT, AI, Big data Planned July 2016
IAG

Singapore

Rumored 2016
NTUC

Singapore

Rumored 2016

 

In summary, Asia is a region to watch when it comes to insurtech. Whether it be the home-grown insurance innovation from China and India, corporate innovation from Singapore or innovation concepts imported from elsewhere and deployed in Asia, the region is likely to deliver a vibrant insurtech ecosystem during the course of the next two to three years. And when the dust and excitement settles down five years down the road, we’ll have a fundamentally stronger set of competitors.

Wanting to accelerate insurance innovation, we’ve created InsurtechAsia, an action-oriented community of insurance practitioners, entrepreneurs and industry stakeholders across Asia. We are aiming to attract the best minds to tackle the challenges and opportunities in insurance, connect entrepreneurs with the best enablers, validate concepts and help business scale rapidly.

See also: New Insurance Models: The View From Asia  

A dedicated and company-agnostic insurtech accelerator, such as Startupbootcamp InsurTech, which was launched in London in late 2015, would go a long way to spur further insurance innovation here in Asia. We eagerly await the day when Startupbootcamp InsurTech will come to Singapore.

Are you passionate about making a change to the insurance industry? If so, join us at www.insurtechasia.com and follow this great team of like-minded people on Twitter: @insurtechasia.