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Blue adding more Tencent tech

The digital insurer is gradually adopting more of its shareholders’ capabilities.

Charles Hung, Blue

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Blue launched a year ago with a simple front end, some simple protection products for critical illness, and a lot of hype. Although it trades on the traditional life-insurance license of shareholder Aviva, Blue launched as a digital-only business, at least on the distribution end.

(Read here about Bowtie, the city’s first digital-only licensed life insurer.)

Expectations for a new company backed by Tencent, Aviva and Hillhouse Capital ran high in the fintech industry. The backing of Tencent, in particular, had traditional insurers nervous.

They relaxed after Blue launched. Executives at several firms have told DigFin the first iteration of Blue was a little underwhelming. The claims process, for example, involves printing out forms – hardly an insurtech triumph.

Moreover, people in traditional industry look at traditional metrics. By that light, Blue hasn’t moved the dial. In 2018, Aviva (the license under which Blue operates) sold 1,375 annual-payment non-investment life policies, with a total premium of HK$1.3 million ($167,000), according to the Hong Kong Insurance Authority.

The likes of AIA, Prudential and HSBC Life sold upwards of 385,000 policies each and generated payments of over HK$16 billion ($2 billion) each – plus more in monthly-premium sales (another HK$15 billion in AIA’s case).

Brand building

But that was a year ago. Blue is beginning to broaden its product set, improve its financial operations, and most importantly, embrace more technology. In short, it continues to leverage its three shareholders to forge a new kind of competitive insurance business.

Charles Hung, Blue’s CEO – a former head of risk at Aviva – acknowledges that the company’s traditional stats are nothing to brag about. The company doesn’t represent a threat in terms of policies sold, manpower (it doesn’t run an agency force), or APE (annual premium equivalent, the formula to compare insurers’ various types of premiums sold).

“We follow impressions, site visits, traffic volume, and customer engagement,” Hung said. “Brand recognition is important.”

On this front, the chief exec is happy to share statistics. “We’ve had 300 million impressions, 1 million site visits, and three to four million engagements via social media,” he said. That’s netted about 80,000 new accounts and the thousand-plus policy sales.

Moreover the company’s offering focuses on protection, whereas many traditional metrics rely on investment-linked business.

“The 7 million people in Hong Kong – that’s our benchmark.” Hung said, referring back to marketing and awareness.

Front-end iteration

What about the fundamentals of the business’s set up, though? For example, the heavy paperwork for the claims process? This is something traditional players already automate better. Is Blue using this as just a way of pushing KYC to the end of the product cycle?

Hung disputes that characterization. “Most KYC is on the front end, using facial recognition and OCR [optical character recognition]. But certain criteria require a manual query,” he said.

He says the firm has been constantly working on the front end.

Over the past year it’s made 150 changes based on how customers interact with the site and mobile app: things like placing the icon, the color scheme, fonts, the wording. This is the sort of granular iteration that tech companies use to build a better mousetrap.

You’re going to see more in the way of A.I. and chatbots

Charles Hung, Blue

The company has also launched a claims service that gives customers information about their submission, in case they are missing information, and to update them on the payment’s status.

But bigger, if less visible, changes are in store.

Leveraging the shareholders

First, Blue is about to launch its first non-protection product. Citing regulatory concerns, Hung declined to specify the type of product, or confirm whether it’s taking Blue towards the kind of savings or investment-linked policies that would put it in head-to-head competition with the big incumbents.

Second, it is in discussion with Hillhouse about internal asset management. All insurers need to invest the premiums they receive, a task made difficult in today’s environment of low interest rates. Hung declined to comment further on this, but it suggests the business is reaching the point where it needs to think more strategically about financial operations.

Third, it has obtained regulatory approval to move its tech stack and data to Tencent’s cloud.

“That will improve our turnaround and let us react quickly,” Hung said. “Within the next few weeks, we will be on a new platform for our back end. Meanwhile, incumbents are stuck with old legacy systems with high operating costs.”

We need to be part of a consumer’s life

Charles Hung, Blue

By shifting to a cloud-based tech stack, Hung says the insurer will be able to roll out more innovations quickly. “You’re going to see more in the way of A.I. and chatbots,” he said.

For example, the insurer has been experimenting with personalization. It’s done so using IBM Watson’s deep-learning tools behind a game it launched on WeChat (the messaging and gaming platform of Tencent). The game has nothing to do with insurance, but it’s a way to learn how to personalize responses to customer inputs.

The company is also starting to learn how to use data.

Data and partnerships

For example, Hung says the most surprising takeaway is that the majority of its customers are male. Traditionally protection products are mostly sold to females. Then there are other patterns emerging, such as enquiries from elderly people, or more business during mornings than afternoons.

“We need to turn this information into opportunities,” Hung said.

What about that WeChat relationship? Blue has a business account on the platform – but so does everybody else. Is it getting any special treatment? Can its parentage give it an edge?

So far, the answer is no, although Hung says he’s still looking at possibilities. Blue is constrained because it isn’t licensed to sell policies to people outside of Hong Kong.

“I can’t say what we’ll do,” Hung said, “but there will be stronger integration – like our use of facial recognition technology or cloud, which are Tencent technologies.”

He is also looking at broadening Blue’s reach via partnerships, including with virtual banks. Tencent holds a stake in on Hong Kong licensed VB, called Fusion Bank, along with ICBC. Is that going to be a home for Blue?

“It’s still early days for the virtual banks,” Hung said. “We’re interested but it’s too soon.”

But he’s working on the broader question of an ecosystem.

“Insurance is traditionally sold, not bought,” Hung said. “To change that we need to be part of a consumer’s life, integrated into what they do on a daily basis. The normal way would be to tie up with medical associations or pharmacies. But there’s also lifestyle ways to leverage customers. The sky’s the limit.”

Insurance

SingLife takes on insurers…banks…Revolut…

Insurers want to join ecosystems. Can the insurer become that ecosystem?

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Walter de Oude, SingLife

Think “insurtech” and one thinks of a scrappy startup taking on the traditional AIA/Prudential/Allianz incumbents’ mob. And SingLife is trying to do that, along with digital insurers such as Bowtie, Blue and (in part) FWD.

SingLife has just rebranded. It was until now “Singapore Life”, a traditional insurance brand with lions in its logo and everything. Now it’s styling itself as a tech company, and it’s pursuing a business model that is redefining what insurtech can be.

Walter de Oude, SingLife’s CEO, has broader ambitions. The firm has just issued a Visa-approved debit card that makes it a competitor to money-market funds, to bank deposits, and to fintech companies like Revolut.

It’s a twist on the current drive by many insurance companies – be they startups like Bowtie or traditional players – to be part of an ecosystem. The argument goes that insurers need to tie themselves to something bigger, a bank or a virtual bank, in order to access new customers.

But what if the insurance company becomes the center of the ecosystem? That’s what SingLife is trying to do.

Not just direct-to-consumer

De Oude explains that, first of all, SingLife is only partly digital – that’s its direct business. But direct accounts for only about 25% of its premiums sold (to about 15,000 customers). The majority comes from a very traditional advisory business that caters expressly to global rich individuals who want to bank – and insurer – in Singapore.

It’s de Oude’s view that a digital-only insurer is destined to fail because there are still too few people willing to use it. This is likely to change, but for now, for the business to succeed it still needs agents out there wooing customers.

That provides a stable base from which SingLife can pursue its more digital ambitions. But digital sales require an ecosystem to develop scale. Instead of attaching the brand to, say, an e-commerce platform that owns the customer, SingLife is trying to attract people.

Enter the Visa card.

“We can give customers a 2.5% yield on their premium,” de Oude says. Allowing customers to earn something on the money they give the insurer puts it in competition with bank accounts (which typically offer negligible interest) and with money-market funds.

“Just a debit card”

The advantage that deposits and funds have is that customers can withdraw cash any time, whereas a premium placed with an insurance company is locked in.

So SingLife’s card – and the mobile app affiliated with it – allows people to treat their premium as something that can be spent. “It’s just a debit card,” de Oude said. “It lets you save, or tap the card or use your phone to spend the money or transfer it back to your bank account. And I’ll give you commission-free foreign-exchange, and an unemployment benefit” commensurate with how much people spend with the debit card.

The idea is to create a reinforcing spiral. People buy an online insurance policy partly to get a card, against which they can spend the value of that premium, get additional insurance, and get Revolut-like benefits.

If people like the experience, they’ll use that card to spend more…until they hit the end of their premium amount, at which point they have to re-up. SingLife, meanwhile, charges a fee per transaction (which goes to fund its unemployment insurance benefit), and moves clients who max out to other offers beyond the basic 2.5% return program, with longer term premiums that can in turn be converted into spending programs.

SingLife will also offer a metal card to bigger spenders.

DIY ecosystem

But, de Oude contends, SingLife is not engaging in banking activity. It is not taking deposits or making loans.

“Revolut’s not a bank,” de Oude said. “They’re managing money.” He says he’s putting a similar activity on top of the insurance business. “We’re not accepting deposits; we’re investing your insurance premiums.”

And Singapore government backing for insurance contracts, on average, exceeds its S$75,000 deposit insurance.

To make this work the firm will run a liquidity fund, in order to meet customer spending off their premiums. But de Oude is betting that the attractiveness of a yield plus the other benefits will encourage customers to keep their money with SingLife.

This is SingLife’s strategy to build a similar kind of funnel of customers that digital insurers would otherwise get by teaming up with a Big Tech company, e-commerce platform or conglomerate.

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Insurance

Aegon Life goes all-in on digital for India

The insurer is immersing itself with major Indian tech partners in a move to reinvent the business model.

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“Insurance sold through digital platforms is here,” said Curtis Chen, chief strategy officer and head of business development at Aegon Asia.

But how this plays out remains up for grabs: “How big a disruptive force will it be for insurers, how big will insurance be for ecosystem platforms, and who will dominate?”

Insurance companies are jostling for position among Big Tech, e-commerce companies, and superapps. “Everybody’s chasing new platforms, including us,” Chen said. “It’s about how you make a partnership work.”

The Hong Kong-based Chen made these remarks from stage at a recent Finovate conference, where he outlined how Aegon is going all-in on digital in the region, starting in India, where it is licensed to do business in life and health.

Aegon is a nobody in that market, at least as far as retail-facing business is concerned, ranking 22nd out of 23 licensed life insurance companies. It has nothing to lose so it is putting all of its chips on the table in a bet on total digital immersion.

Partnerships

Because it has no agency force or other channels in India, Aegon has no conflicts of interest, so it can commit itself wholly to e-commerce and other partners.

This is why leading Indian technology companies including Paytm (digital payments) and MobiKwik (mobile phone wallets), as well as child-focused platform called FirstCry, have backed Aegon’s new business, which has just launched in the country with licenses for life and health insurance, with protection and wealth management on the horizon. (A fourth partnership with a leading Indian e-commerce company is also in the works.)

For Ageon, this is a turn away from the usual corporate strategy of accelerators and innovation labs, which Chen argues have merely wasted money. Instead, the insurer is embedding itself with a variety of tech companies. “That’s the only way we’ll transform,” he said.

The right partnership brings something to customers they can’t find among incumbent insurers

Curtis Chen, Aegon Asia

The trick though is to work out what parts of an insurance policy’s lifecycle to leave in the hands of a partner, what parts to retain, and where both can combine to add value.

“The real magic happens in the intersection of how we use data to take risk, or to position a product, or do customer onboarding,” Chen said, “and the digital partner’s proxy data, and insight into purchase patterns. That could be a useful, compelling proxy for what insurers do traditionally.”

Some functions like marketing and lead generation are best left to e-commerce partners, while insurers should remain in charge of risk, asset-liability matching and reinsurance. But other areas can benefit form combining both parties’ expertise, such as claims service.

“We don’t have this all figured out, but the right partnership…brings something to customers that they can’t find among incumbent insurers,” he said.

New operating model: all about scale

“The new operating model has to be 70% to 80% different, not 80% the same,” Chen said, capable of far better customer service at a much lower operating cost.

“If your unit cost today is X, you need to think X divided by 100, or X divided by 500, and create something so scalable that we can deliver service at a cost no traditional insurer can imagine,” while also constantly innovating, he said.

That means serving far more people with a lot more policies, even if those ticket sizes are also miniscule.

But it also means the insurance company needs to figure out its value proposition in these ecosystems. If Aegon is merely providing balance sheet, how does it protect its brand? How does it ensure the values the company stands for are embedded in the new venture?

If India is a success, Chen says the model can extend to other Asian markets where Aegon has a license but is a small player.

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Insurance

Will Bowtie make it?

The stakes are as high for backer Sun Life as they are for Hong Kong’s boldest insurtech startup.

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Fred Ngan, Bowtie

Of the various companies pursuing digital-only insurance in Hong Kong and Singapore, the most daring is Bowtie.

The company was the first to receive a digital-only life-insurance license from the Hong Kong Insurance Authority, in December 2018.

It is starting from scratch. There is no traditional book of business it could acquire (unlike SingLife).

Its largest stakeholder is Sun Life Financial but the relationship is arm’s length (unlike FWD’s digital arms). Bowtie has built its own systems, and is run under its own steam, by founders with no history working at the traditional insurance backer (unlike Blue).

There is no big tech company shareholder (also unlike Blue).

Bowtie’s mistakes and its successes are its own.

That is its opportunity – and its vulnerability.

“A digital-only insurance business is not viable,” said Walter de Oude, CEO of SingLife. “Yes, there is a segment of a population that purchases digitally, but the extra marginal dollar of spend does not add up to an extra dollar of sales.”

Fred Ngan, Bowtie’s CEO and co-founder, positions the company’s need as one of partnerships: the need to immerse Bowtie into a bigger ecosystem, of e-wallet operators, virtual banks, other fintechs, and any entity with a customer database.

Those relationships take time, Ngan says, and the company is brand new and still addressing fundamental operational issues.

Maria Sit & Clement Lam, Sun Life

“They launched in April after just 16 months of founding the company,” said Clement Lam, general manager of life and health at Sun Life, and the insurer’s point person for Bowtie. “That’s really good. And once they received the license they had less than four months to go live with systems, workflows and products.”

Bowtie debuted with simple, pure-protection plans, and these alone are probably not enough to satisfy a potential partner such as a virtual bank. So Bowtie needs to build out its products in order to make itself an attractive partner.

But it also needs partners that can integrate with Bowtie. Ngan says this is ultimately what will give Bowtie an edge. “We need a strong proposition,” he said, “but it’s not just about having products to sell online. It’s about deep integrations, designing a technology breakthrough [with partners] that integrate us in a way that others can’t replicate.”

It’s that integration that will foster fast, agile iteration – at least to the extent that an insurance company can do so.

Therefore for the first year of operating, Bowtie’s focus remains building its own foundations. 

But partnerships are on everyone’s mind – including Sun Life’s.

“I’m a big fan of the digital ecosystem, and open-API connectivity is going to be a major theme,” said Lam, noting that backing Bowtie is one way the traditional insurer is exploring what’s possible.

“We’re in active talks with virtual banks, through Bowtie or directly ourselves,” Lam said. “Banking, general insurance, life insurance and funds businesses today are all in their silo. Using digital technology to connect these is the long game.”

Maria Sit, chief client experience and digital officer at Sun Life, says the insurer, although pursuing its own initiatives, hopes to learn from the relationship.

Over the past three years, Sun Life has developed digital tools for client self-service, including transactions, and supporting the firm’s tied agency sales force to make them better able to serve customers. It’s also backed innovative projects by third parties.

“We can go further with the straight-throughness of things, creating a more holistic view for our customers,” Sit said. For example, the firm’s legacy systems track separately its life insurance, pensions and group benefit businesses. “With open APIs and all the things happening in the industry, clients should get a fuller view of their total relationship with Sun Life, in a more accessible way.”

This kind of work is occurring throughout the industry. What differentiates Sun Life is it took a chance with Bowtie. When the Hong Kong Insurance Authority announced its intention to “fast track” licenses for digital-only businesses, Sun Life saw the opportunity to fast-forward its own transformation.

Bowtie advertizing

There is no direct work between Sun Life and Bowtie. For now, Bowtie only offers pure-protection policies, whereas Sun Life sells a lot of savings-driven and complex policies through agents.

“But we’re learning from Bowtie,” Lam said. “Their systems are home grown and cater for straight-through processing. One day, if we want to expand into a new market with online sales, their example could help us.” The potential for extending insurance sales into neighboring Guangdong Province and Southeast Asia make this an alluring possibility.

Ngan says the relationship with Sun Life is working because both sides recognize it is an experiment. “They understand this is unproven,” he said. “Not all insurers are like that; some were just interested in us as their execution team. But Bowtie is not a mini-Sun Life. We need time to find the market, and try new things – if we can try them fast enough.”

Q&A with Fred Ngan, CEO & co-founder of Bowtie

DigFin: You started Seasonalife. How did that lead to Bowtie?
Fred Ngan: My co-founder Michael Chan and I created Seasonalife four years ago, before anyone used the term “insurtech”. We built software and learned. In 2017 we signed an MOU with an insurance company to design their digital front. But that company got sold and terminated the MOU. So we faced a choice: do we find a new partner, or do we get our own license, and control the end-to-end experience?

We wanted to control our destiny and not rely on an insurance company that doesn’t support you first. We heard that the Insurance Authority was going to issue virtual licenses. That would require a lot of capital, and a bigger business model, and shareholders.

What led you to team up with Sun Life?
The I.A. wanted any application to be backed by a traditional insurer. We spoke with many. They all wanted to apply with us. It came down to: do we share a vision? Most insurers just wanted us to tell them when we’d go IPO. Sun Life wanted us to innovate, to find new channels, to create new experiences.

How much of the tech stack is yours, versus outsourced?
We built everything in house.

What is your first product?
We have to prove that digital insurance works. One selling point is VHIS [a new government health scheme]. We launched our product in April and were competitive on premiums: ours are 20% to 40% lower than those offered by the big players.

Why start with VHIS?
Because health insurance is easier to disrupt, and VHIS terms are standardized, which makes it easy to buy online.

After about five months in business, what can you say about your customer base?
They’re young, in their 30s, and usually better educated. They can do self-service, which we’ve made to be like changing your profile on social media. More than 80% of our customers self-serve. Only 20% need our customer service to help them buy a policy.

These are small contracts, small ticket sizes. Just as people are used to paying a phone bill online, they’ll buy a policy for a few hundred dollars online. People still use an agent for more expensive policies. But in Hong Kong, agents mostly sell investment-linked insurance. We serve the mass underserved market with affordable, simple pure protection. And it’s a good deal: under the VHIS scheme, someone paying as little as HK$150 a month could eventually claim for HK$450,000 in cover.

I saw you advertize in the MTR. Your campaign used a lot of bold colors, a lot of pinks and purples, very much appealing to younger people, clearly trying to look energetic. But your main message in these ads was claims. Is that the right approach? Are people that interested in fast claims?
Insurance is a business that pays claims. We didn’t focus on the application process because insurers actually provide service in claims. And we’re already beginning to process claims. 

Are your claims automatic?
The process is automated but it’s not instant, and there is a manual review. We’re doing a better job in disclosing the claims processing. Where is the payment? When does it get sent out? We give customers a lot of micro-notifications.

We still have people on the service team, including an in-house doctor and nurse. It’s mostly self-service but some claims require our specialists to speak with you.

But it’s pretty simple. You can upload a photo of a doctor’s report and your receipt, and you don’t have to type in anything. There’s no paper form. You can even call us, and we’ll fill it out for you.

What’s the selling activity been like?
We see policies sold on evenings and weekends. It’s totally unlike a traditional agent where there are several phone calls, meetings, and maybe a coffee. [Ngan declined to disclose the number of policies sold to date.]

Are these first-time buyers of insurance or people looking to diversify from their existing carriers?
Both.

What’s been the biggest surprise?
The time it takes to educate the market. We’re entering a very different world. VHIS is standardized, but it still takes time to digest what it all means. 

What kind of virtual banks do you want to partner with: those focused on consumers, or those focused on SMEs?
We can partner with both because it’s about shared learning.

How do you compete against quasi-established digital players like SingLife or Blue, which have traditional elements or support in their businesses?
We’re a technology company providing insurance as a service. There’s more trust in technology companies than for financial institutions. We’re aiming to make our customer experienced compared to Apple, not an insurance company.

Is it working? Are you winning business?
It will take us about five years to break even, so it’s too early to say for sure that it works. 

The I.A. data shows that “direct” channels account for fewer than 1% of sales in Hong Kong. There’s Blue, which has a traditional license, and there’s going to be digital general insurance companies like Avo and One Degree. And there’s Bowtie. How do you make “direct” something meaningful?
What that shows is how hard it is to innovate – but it also shows that there’s a big market there. For example, lending rates for online banking are much higher than insurance.

So they can grow for insurtech, too. But how?
Education is critical, but education is an industry effort. When the HKMA licensed eight virtual banks, it created a lot of noise and forced traditional banks to react. The insurance market is big enough for digital players to grow the pie. We need more digital insurers. 

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Blue adding more Tencent tech