Insurance industry gets a digital makeover
Behonce Beh 
Policy Street CEO and co-founder Lee Yen Ming (left) and U for Life Sdn Bhd general manager Kenny Thing believe insurance products must keep up with consumer needs

Taking the cue from the popularity of financial technology (fintech), insurance technology (insurtech) is here to disrupt the insurance industry with digital innovations.

On the local front, insurers are already forming partnerships with technology solutions providers and have been rolling out new solutions to cater to the changing market demand.

What was previously a supply-driven market, insurtech brings the consumer to the forefront by reducing the many layers of distribution and connecting them directly to the solutions.

For starters, it is now possible to purchase a term life insurance policy online without the need to speak to an agent.

U for Life Sdn Bhd general manager Kenny Thing explains that online distribution of insurance products meant what is sold needs to be direct and straightforward.

Products such as term life insurance with no frills are commonly offered by online insurers.

“When you distribute a product without advisory, there is always a limit to how many products you can sell to that one customer,” Thing says.

When U for Life started in 2015, it took the conventional digital marketing path and was faced with low sales.

In order for online insurers to grow, partnerships with offline and online players have to come into play.

“We opened up our application program interface (API) to other partners to bring in more sales and transactions.

“We also combined attributes from our digital platform with the physical location of our pharmacy partner. That helped us to scale up positively over the past 12 months,” says Thing.

He explains that as an online insurer provider, U for Life has a lower capital base than a conventional insurer. Being online also allows the company to offer customers wider accessibility and more affordable products.

To date, the company has underwritten over RM800 mil in terms of sum assured.

A Bank Negara Malaysia report states the insurance penetration rate, measured by the ratio of total number of life insurance and family takaful policies in force to the total population, has remained fairly static within the range of 54% to 56% over the last five years.

“If you remove those with duplicate policies, that figure could drop to about 35%,” Policy Street CEO and co-founder Lee Yen Ming points out.

Insurtech start-ups such as Policy Street have a role to play to not only bring down the barriers of entry for the population to secure basic life protection, but also for insurance to be present in different facets of one’s daily life.

Other insurance products that could be purchased online range from travel and automobile insurance to protection for the elderly.

Lee adds digital distribution of insurance products allows for more innovative products to be sold to the market.

“There is hair insurance offered to women in some markets as people are seeking to protect their various needs,” he says.

Policy Street is believed to be planning to offer cover for musical instruments, photography gear and also a package for golfers in the near future.


Agents remain relevant

Despite consumers reaching out directly to brands on a digital platform, the conventional insurance agency channel remains relevant in today’s market.

However, insurance agents have to change the way they approach customers. The days of hard selling a policy is long dead and a softer, more advisory approach is welcomed by modern consumers.

Allianz Asia Pacific regional CEO George Sartorel explains the traditional insurance model which is based on averages meant that almost everyone will have a similar policy.

“The future is about the segment of one. That means there will be people who will buy a RM500 or RM5,000 policy, or a policy for just next week or the entire month,” he explains.

Sartorel believes insurance agents remain an integral part of the distribution value chain

A digital solution forces insurers to be transparent in their offerings as solutions can then be tailored to individual needs.

Earlier this year, Allianz Malaysia Bhd introduced its digital agency where agents are able to deploy solutions and connect with potential customers in consistent manner through a mobile platform.

Sartorel says the take-up for the digital agency among Malaysian agents remains positive.

“There will always be agents who move fast while some may move slower than others. Our job is to help them move with an online ecosystem,” he adds.

A similar solution was deployed in Taiwan earlier where agents are able to attend e-learning courses and set appointments on the platform.

“Our agents in Taiwan hand a tablet to the customer for him to fiddle around with the application.

“That way, when a customer faces an agent, he faces someone who can address all his needs as opposed to just one,” explains Sartorel.

The productivity uplift in Taiwan from its agents following the introduction of the digital agency was said to be about 40%.

“Agents have an important role in the digital economy but they have to change the way they work as they cannot survive the way things are done now.

“Manual work such as making cold calls is made more effective by channeling hot leads from the internet with more information about the enquiry such as what they are looking for and when,” he explains.

Insurtech is not limited to consumers purchasing insurance products directly from an insurer.

It extends to the business-to-business (B2B) ecosystem where insurers are working with those beyond the insurance industry to offer new solutions.

This was the case when Allianz Malaysia partnered with the likes of local start-ups Speedrent, Servis Hero and RecomN.

For instance, those who book services from online service provider platform RecomN will automatically receive insurance protection for each transaction.

RecomN’s platform connects users to services like home improvement, repairs, caterers and for events like weddings and parties.

“Users often worry when purchasing services online. We come in to provide value to that digital transaction,” says Sartorel.

“In a digital ecosystem, things are incomplete until the protection element is present.”

Aside from collaborations on a transactional basis, the relationship can be expanded further in terms of helping start-ups to scale up regionally.

In the case of RecomN, it eventually tagged along with Allianz to venture into the Indonesian market through Allianz’s property and casualty company, Allianz Utama.

One of the widely discussed topics is how adoption of artificial intelligence (AI) in business will possibly reduce existing jobs.

When applied to insurtech, Sartorel believes it will free up existing staff to explore new roles.

“Most jobs in a typical insurance organisation are at the back end, such as support agents. In Asia, we could move people from the back to the front end instead of losing jobs as a result of AI,” he rationalises.

Sartorel adds with a digital agency ecosystem, those who are keen can pick up Allianz’s API and build a customised solution to suit individual needs.

“By adding an experienced layer to our API, we are creating more jobs for entrepreneurs. Those who are no longer keen to be in business process outsourcing (BPO) can take our tools to create a new ecosystem,” he explains.

Sartorel says he has seen individuals in some markets who are keen to self-insure and would create a mutual insurance based on the API for like-minded peers.

Understanding the millennial market

The millennial market (for those aged 18 to 34) is one that behaves very differently from the Generation X (aged 35 to 50) or Baby Boomers (51 to 69).

For starters, the millennials’ risk appetite is much higher owing to a larger propensity for adventure and a deep-rooted sense of fear of missing out (FOMO), which compels them to try various activities at least once.

Activities such as scuba diving, hiking and trekking, backpacking and wall climbing are some of the adventures millennials partake in.

“The risk factors for millennials are higher but the awareness of protecting themselves is still low.

“They do not understand that unfortunate things could happen to them and when they do, they’ll worry about it,” explains Policy Street CEO and co-founder Lee Yen Ming.

He believes much of the fundamentals of protecting one’s self remain unanswered among millennials who view insurance as an additional cost.

“When we speak to groups online, one of the common questions asked is: Why do I need to get this (insurance)?

“Though making insurance affordable is one thing, it is more important to help them understand why they need it and that is why advisory is crucial,” Lee adds.

U for Life Sdn Bhd general manager Kenny Thing says about 70% of the company’s customers are below the age of 30.

“As this could be their first insurance policy, they are more likely to be purchasing a sum insured policy of RM100,000 to RM150,000,” he says.

He adds that millennials’ purchasing behaviour transcends platforms. Many would often research for products on a mobile device before making their final purchase on a desktop.

On the other hand, Allianz Asia Pacific regional CEO George Sartorel explains the millennials’ approach towards insurance is usually in a much smaller and flexible policy.

“Millennials are unlikely to spend RM2,000 on a policy but they do purchase services online. When that happens, they want to know that they are offered protection seamlessly at the click of a button,” he says.

“Millenials want (the kind of) protection that once they enter an Uber car, for example, there’s protection from point A to B.

“If you ask them to contribute 50 sen from their fare for insurance, they would likely choose that,” Sartorel adds.

This article first appeared in Focus Malaysia Issue 262.