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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

An Eruption in Disruptive InsurTech?

I attended an InsurTech “boot camp” at the magnificent Christ Church, Spitalfields, U.K., my first such event, and I was intrigued to see what would be presented and how the audience would react.

The organizers billed the day’s theme as “Experience the Eruption.” Their website stated the aim was to “recognize the fast-paced appearance of insurance start-ups, which are creating seismic shifts behind the scenes that will lead to the emergence of a new identity within the insurance sector as we know it today. An ‘eruption,’ which will allow new disruptive entrants to break out into the mainstream and support an industry that needs to engage differently in a highly customer-centric and digital-friendly world.”

Was that lofty ambition that labors excessively on hyperbole, or did the afternoon live up to the hype?

The format of the afternoon was a series of Dragons’ Den (a U.K. TV show) style pitches (without the interrogation) for investment or partnerships from the incubated firms selected for Startupbootcamp’s program (which includes investment from them, meaning there is an element of self-interest that firms do well). The pitches were preceded by a fireside chat from the chief strategy officer of Knip, a Swiss-based app that acts as a portal and broker for insurance policies.

See Also: InsurTech Forces Industry to Rethink

Were any truly disruptive? My view is that they all fell into one of three broad camps of focus:

Distribution and Sales

I’d put four firms in this bracket: MassUp, Spixii, Buzzmove and MyFutureNow — but all had a different focus with different levels of potential disruption.

MassUp was all about making buying insurance for “stuff’ easier by making it an add-on for any purchase. The company had a good story and was slick, but it didn’t feel truly disruptive. Credit card companies have been offering similar protection for years, and MassUp will do well to distinguish itself from extended warranty products that savvier consumers tend to decline. That, perhaps, is the problem with the business model for me — while tech may make it easy for the consumer to purchase the insurance (and for sales companies to add it as an option), it doesn’t obviously increase the value for the customer.

BuzzMove is a successful online removals broker, a portal to help customers find a removal firm when they move houses. The company has added to its capability by recognizing that a key element of quoting for removals is an inventory of the things that need to be moved. Typically, individuals don’t do this when they take out contents insurance (or, indeed, don’t update it when they buy new things), so they run the risk of being under-insured. Linking the life event with an inventory that can be used to underpin an insurance quote is a smart way to add value to the customer — without additional effort. As such, it is effectively looking to take over the customer by owning the life event in the same way banks have looked to do — e.g. take out a mortgage, and they will try to convince you to re-visit your life insurance levels. As such, the concept is not disruptive, but the concept of the home inventory and the tech underlying how this is put together is something insurers (and others) will undoubtedly embrace, so it is therefore significant. I’ll return to this later, as the ownership of this data becomes key.

MyFutureNow has a reasonably simple proposition; it is an online portal for customers to manage disparate pension plans by consolidating them into a single plan that is offered through the site. On the surface, its proposition is attractive and is reinforced by a slick implementation of the website and the app — the economics are being driven by a percentage fee on the value of the pension fund when transferred in. The key to success will be to differentiate the consumer experience. However, as regulated financial advisers will tell you, this is a complex area, and the consolidation of old plans is not necessarily the appropriate outcome for all consumers. It is unclear to me the extent to which MyFutureNow has have thought through the compliance and advice issues. Again, the focus is to try and take over ownership of a particular part of a customer’s portfolio (in this case, pensions).

Spixii’s proposition was timely, what with Facebook’s recent announcement of the addition of “bots” to its Messenger app. Essentially, Spixii offers a message bot that sells insurance (currently just travel insurance, but the concept could obviously be extended quite easily.) Inevitably, all financial service providers will add bots as way of communicating and selling, as will the price comparison websites, so this is definitely an “on-trend” area to watch.

Customer Experience

Three firms fall into this category: RightIndem, Domotz and Quantifyle.

RightIndem looks to enhance claims management by allowing insurers to offer a self-service claims platform and by increasing the transparency of the claims process. Claims is an area consumers point to as frustrating, so any steps to enhance the offering will be hugely positive; it is an area we will see all insurers developing in the coming years.

Domotz is a little more difficult to classify as it is not strictly an insurance proposition. The company plays in the space of the Internet of Things and the smart home. The insurance angle is providing information to the customer that will help reduce claims through smart home management (e.g. the customer gets an alert if running water is detected and nobody is home). Insurers might therefore offer discounts to those who install such systems. As such, it is perhaps similar to the wave some years ago when insurers encouraged drivers to fit alarms and immobilizers in their cars before they were standard issue.

Quantifyle’s proposition is based on driving good customer behavior for wellness by motivating people to achieve fitness goals. Insurers have already played in this area — most noticeably Vitality, whose entire proposition is built around rewarding customers for their lifestyle.

Big Data

The last firm presenting is alone in this category, although others touched upon it.

Fitsense­ demonstrated how it can harness the data collected from wearable tech (such as fitness trackers and smartphones) and overlay that with environmental information to provide the insurer insight into a customer’s lifestyle and behavior. Undoubtedly, there is great insight to be had, but the key element here will be the willingness of consumers to adopt and provide that information to insurers. (Location-aware information was also touched on by Spixii, which speculated that its app could provide, for example, travel insurance options that depend on the travel profile of the individual.)

This leads us into the important area of privacy and ownership of that information, with consumers rightly being concerned about the erosion of their privacy. While the youngest generation of consumers are likely to be increasingly less concerned, the adoption will need to happen slowly to bring customers along. There is also the risk of consumer self-selection (similar to the current adoption of “driving standards” apps by motor insurers), and it raises the moral question of whether increasingly individualized risk pricing is at odds with the original insurance principle of pooling of risks.

So, What Was Missing?

Invariably, InsurTech “innovation” majors on the three areas highlighted above — they are usually the easiest to move elements of the insurance process forward into the digital world but, therefore, are not necessarily disruptive, instead shifting the margin of current offerings. Two areas of development were conspicuous by their absence:

Peer-to-Peer insurance

This is an area where there are a few start-ups dabbling, but they haven’t yet reached any critical mass. Key inhibitors are traditional barriers to entry to the world of insurance, namely regulation and, in particular, capital requirements. It is a fast-moving area and one where, potentially, blockchain technology will grow out of its hype to provide a compelling proposition that satisfies regulators. In particular, recent work suggests that using the Lloyd’s of London model as template and porting to a blockchain model could provide the tipping point.

Consumer-Owned Risk Assessment

While big data has been touted as a way for insurers to get rich, detail on their customers and individualized risk assessment (which, in and of itself is simply a further iteration of the traditional model with more data) leads to issues of privacy and the moral question of individual versus pooling of risk. There is a paradigm shift in the interaction of consumers with institutions in the digital age that isn’t reflected here — that in which the consumer has more power and takes ownership of his or her own data. As such, this could break the mold of the traditional insurance product silos and be truly disruptive. In the new age, the dynamic is reversed, and the richness of data and the assessment of risks an individual faces do not belong to the institution — instead, control is with the individual, who, in turn, get the insight that allows them the power to manage a risk profile.

See Also: A Mental Framework for InsurTech

This shift has started in wealth management, and it seems natural that insurance will follow. New players in this sector will not be the traditional insurer, as the focus will need to be on providing the value to the consumer with the ownership of the data and allowing the consumer to manage it. This sits more easily with the business model of companies such as Google or Facebook than with the incumbents in the insurance market.

Conclusion? 

Nothing I saw in these presentations made me believe this group of companies would be genuinely disruptive (or, indeed made me reach for the checkbook to invest). When compared with the broader FinTech spectrum or tech-centric events, the afternoon felt less slick and less innovative. InsurTech is still young, so there is still a lot of maturing to do, but there were one or two hints from these companies that may stimulate discussion, which, in turn, might lead to genuine innovation.