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.
“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.
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?
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.