When Rohit Nambiar took on the role of CEO of AXA AFFIN’s life insurance business in Malaysia, he realized the firm needed to do something dramatic if it was going to have a shot at entering the industry’s top ranks.
“How could we differentiate?” he recalled to DigFin. “The big guys are behind the same group of customers," the mass affluent and affluent. "So let’s disrupt them by going after millennials.”
The subtext: large insurers depend on agents, which represents a challenge to reframing the business model around closer connections to end consumers. The life business Nambiar oversees is just as dependent on agents as bigger rivals such as AIA, Great Eastern and Prudential: 61% of his premiums are sold through agents.
So when he began pushing for a mobile-only, disruptive product, he wooed his agency force’s top performers with the argument that digital was vital to securing tomorrow's customers.
Nambiar related the story of how he had the top six revenue-generating agents in the front row during his rollout in April of a new digital medical-card service, endorsing a product that, at least initially, cuts them out of winning new customers.
The story is confirmed by a fintech that helped AXA AFFIN as implementation partners. “The CEO took the agents into his confidence about going direct to consumers,” said Mukesh Pilania, Kuala Lumpur-based CEO of startup Yantrik.
The value proposition was that the medical card was a gateway for new, younger customers, whose needs would grow to the point that they’d need an agent later. “Leaders need to engage and take a calculated risk,” Pilania said.
Malaysia is experiencing an infusion of digital challengers in banking and insurance, targeting new customer segments, millennials in particular.
Regulatory barriers keep out the biggest insurtechs from China and the U.S., such as Zhong An or Lemonade, which would require an operating license. But e-wallets and other payment platforms have proliferated since 2016, which insurance companies are studying as potential partners.
Digital means thinking on the go
Banks, telecom operators and tech companies are flooding the market with apps, and industry execs who spoke with DigFin say they expect consolidation in the coming year or so – making it a confusing time for insurance companies to place bets. So far, no insurers have inked deals, as they remain concerned over issues around the ownership and sharing of data.
So far insurtech is challenging incumbents in distribution, through aggregators and comparison sites such as iMoney, RinggitPlus and Singapore-based GoBear. They are trying to work out how to add enough value to entice insurers, with their established agency salesforces and other distribution channels, to give these insurtechs access to product information. These startups won official recognition in 2017 when Bank Negara, the regulator, admitted them to its fintech sandbox.
But aggregators and comparison tech appeals to people who are already digitally inclined, and wouldn’t be open to agents anyway, according to industry executives. “It’s not a full-frontal disruption,” says one digital officer at a foreign-owned insurer in K.L.
Indeed, the regulators are keen to promote digital channels in order to deepen the industry’s reach. Malaysia’s government benchmarks itself to Singapore, not to emerging markets. Life insurance penetration is around 55%, but it hasn’t grown since 2010, according to DBS research, and is far below Bank Negara’s target of 75%.
Leaders need to engage and take a calculated risk
In some ways the industry is going into reverse: according to the Life Insurance Association of Malaysia, new business premiums in life insurance grew by 3.8% in 2017, to RM10 billion ($2.6 billion), but that’s a lot slower than the 6.9% rate the industry clocked in 2016. Moreover, all the growth is driven by investment-linked products, while traditional individual life policies are in sharp decline, and group policies are holding steady. Against that backdrop, claims in life in 2017 increased, to 5.3% (RM10 billion), so the rate of increase for claims is exceeding that of new premiums.
Life insurance is dominated by a handful of foreign-owned players: AIA, Great Eastern and Prudential together account for 67% of net premiums, according to DBS. (The market for general insurance is more fragmented, with Allianz and Etiqa leading the pack.)
Going direct to consumer
Industry execs say companies such as AIA have introduced new self-service apps but have shied away from any direct-to-consumer initiatives, out of fear of upsetting their agents.
Nambiar became CEO of AXA AFFIN’s life business in December 2017, having spearheaded customer-experience and other strategic initiatives for AXA regionally.
We want 20% of our life business to be digital
He wanted to bring something new to the Malaysia market, where regulators define life as including certain kinds of health cover. The traditional underwriting business for health involves a 20-plus questionnaire on-boarding process, which won’t work in a digital environment. Nambiar insisted the team cut it to three questions, a process that itself involved changing internal processes, including risk management.
“No one has the data to know the cost or impact of certain exclusions,” he said. But, backed with consumer insights, “Digital means thinking on the go.”
The medical insurance plan, AXA eMedic, is being pitched to millennials, who in Malaysia are underserved. The product offers basic hospitalization plans, and qualifies customers by asking their gender, age, and whether they engage in manual work. There is an additional three questions to price an offer, based on histories of critical illness, previous hospitalizations, and whether the customer has ever been declined insurance. Upon purchase, customers can use the e-card for hospital admittance or use the health-claims app while they’re still at the hospital.
AXA AFFIN partnered with two other health-techs to add features: BookDoc, a rewards program that enables customer to book appointments with specialist doctors, and Naluri, which provides psychological support and rehabilitation services, which is designed to help mitigate recurring illnesses – and therefore reduce future claims. The insurer is also marketing its healthcare services through local telco Digi’s own apps.
AXA AFFIN will own customers sourced through digital channels, not agents – but the firm is also now fielding questions or complaints directly from consumers too. “I get problems brought straight to me on WhatsApp,” Nambiar said.
Nambiar predicts agency forces will shrink but professionalize, with the top agents still bringing in the bulk of business by using social media and other tools to generate leads.
He says digital channels account for 5% to 10% of the Asia insurance market – but direct or online accounts for only 1% of total life sales in Malaysia (not including telemarketing). “We want 20% of our AXA life business to be digital by 2020,” he said.