Two themes are expected to drive the insurance industry in Hong Kong. One is integrating with mainland China via the Greater Bay Area (GBA), the idea of merging Hong Kong’s international financial sector with Shenzhen’s tech industry to create a global rival to Silicon Valley. The other is fintech, which is seen as an enabler of a GBA-wide business.
That’s what regulators, industry bodies and some insurance companies are talking about. There are likewise two reasons to think that these ideas will be realized.
First, the politics driving cross-border integration is inevitably setting the direction: Hong Kong’s elite is parroting “GBA” left, right and center. (Beijing is expected to announce measures to spur integration on February 21.)
Second, and more compelling, is that the economics look very attractive to Hong Kong-based insurance companies. Integration means huge business opportunities, and technology is the likeliest means of realizing them.
Let’s take a look at the numbers.
Liu Anlin, deputy chairman and president of China Life Insurance (Overseas), says in the first half of 2018, Hong Kong’s population of 7.4 million people took out 13 million life-insurance policies. In other words, the local market is saturated.
Much of the Hong Kong industry’s growth is due to mainland Chinese visitors: for example, they accounted last year for about 63% of critical-illness policies sold in the city, up from 58% in 2017. (Liu, like the others cited in this story, spoke at a conference last week in Hong Kong organized by CLIO.)
There is a growing opportunity across the border, meanwhile. Guangdong Province boasts a GDP of Rmb8.9 trillion. Per capita income is relatively low, at Rmb3,900, but residents are increasingly eager for insurance products. Most of them can’t travel to Hong Kong to buy them. Meanwhile, more Hongkongers are expected to retire in the more affordable Guangdong, but will continue to buy insurance.
Moses Cheng, chairman of the Hong Kong Insurance Authority, notes that 27% of household finance in mainland China has poured into insurance, investment and savings products. Wealth management and medical insurance are the most popular retail products, but whereas 18% of Hong Kong households own such cover, only 6% of households in major Guangdong cities do.
Three growth areas
James Lau, Hong Kong Secretary for Financial Services and the Treasury, says integration creates opportunities for other insurance sectors, including maritime insurance and catastrophe insurance. In particular, he sees bright prospects for cat bonds, letting Hong Kong’s capital markets securitize catastrophe risk; among the main cities in the GBA, last year typhoons and other disasters triggered Rmb4.5 billion in claims and compensation.
What is needed, he says, is a cross-border legal framework to allow a sort of “Cat-bond Connect”, in which Hong Kong-based insurers provide catastrophe coverage to clients in mainland GBA cities such as Shenzhen or Guangzhou, or Macau.
A third area can be added: the I.A.’s Cheng says there is a huge demand in the GBA for commercial insurance. Corporations operating in Guangdong may want to set up captive insurance businesses, be they multinationals or domestic companies and state-owned enterprises. But the expertise lies with Hong Kong’s insurers.
Right now, Hong Kong’s government, regulator and insurers are pushing Guangdong authorities to let them set up after-sales service centers, to handle claims, renewals and other customer needs. From there, says Secretary Lau, the hope is that Hong Kong’s insurers can eventually sell products directly to customers in Guangdong and Macau.
But how? Via technology, says Chan Pui-leung, chairman of the Hong Kong Federation of Insurers (day job: general manager, China Taiping Life Insurance, H.K.). “Do we do this traditionally, or are there innovative ways to do so?” Noting the size of the Guangdong market compared to Hong Kong’s, he says a conventional bricks-and-mortar approach would be too expensive.
Secretary Lau added that, if Hong Kong insurers were to be able to sell directly into the GBA, they’d need to rely on innovation and tech-driven connectivity.
Carol Hui Mei-ying, executive director of the HKIA, says only fintech can overcome the challenges of scaling a business across borders. “Fintech is good for lowering costs and increasing efficiency,” she said, noting that the I.A. is trying to push this by licensing purely digital insurers in Hong Kong.
Cool ideas, few specifics
The real problem is that both GBA and the fintech required to make it something tangible are both vague.
In the case of cross-border integration, the holdup is Beijing’s capital controls and its restrictions of people traversing the border.
I.A.’s Cheng says insurers can’t operate smoothly in a GBA context so long as customers can’t pay for Hong Kong insurance premiums from a mainland bank account. This is one driver for the industry’s demand for after-sale service offices in Guangdong.
Then there’s the insurtech part. There are plenty of interesting ideas being considered to help Hong Kong insurers access the GBA market. The I.A.’s Hui notes that blockchain could be used to verify customer identities, handle compliance, and process claims.
But if GBA remains a foggy concept, the clouds thicken around digital solutions. Plenty of regulators and industry players have called for a government-led eKYC utility, on or off a blockchain. None have emerged.
Timothy Leung, deputy general manager at Tencent, the creator of WeChat, suggests cross-border integration of insurance will rely on two themes.
First will be the use of scenarios for selling insurance; in other words, Zhong An-style micro policies around, say, whether an airplane takes off on time. Leung thinks this sort of policy should apply to health and critical illness coverage.
“In the mainland, we use WeChat to record the number of steps users take every day,” he said. Users like to know their ranking, and this desire gives Tencent insight into their activities, such as whether they go hiking. “A good scenario penetration would remind people to pay attention to their health and of their need for health insurance,” he said.
That’s for product. As for cross-border integration, Leung noted that WeChat Pay is currently piloting a scheme that allows Hongkongers who access the app with their own bank accounts to pay for services in mainland China.
The I.A.’s Hui said, “If you can clear up the [cross-border] payments issue, everything else can work.”
Leung suggested if mainland payment apps are bundled with blockchain for identity verification, it could create conditions in which Hong Kong insurers can sell products into the GBA.
Such a blockchain would, however, be overseen by central authorities rather than be fully decentralized, Leung noted.
How exactly is this supposed to work?
This discussion leaves us with important questions. Will Beijing allow some form of relaxation on capital controls to make GBA a reality for insurance companies (among others)?
Is scenario-based insurance, in which people could be penalized for not, say, recording X number of steps on their WeChat app, compatible with international regulatory and consumer-protection standards?
Will Hong Kong-based insurers really be able to compete on a level playing field in Guangdong Province? If they rely on “fintech”, does that mean they must operate on Chinese super apps to access payments?
Is a utility, public-private blockchain for digital identity going to be workable, and under whose rules?
The GBA discussion for insurers has been about Hong Kong firms accessing the GBA, but what happens when mainland internet companies receive virtual banking licenses – who will end up with the most compelling insurance offerings on their platform?
Finally, how prepared are Hong Kong’s largely traditional insurers to seize the opportunity in GBA, should it arise? The incumbents, despite their various digital initiatives, are still tied to their traditional agency models – a business model that is unlikely to work in the GBA. As CLIO’s Liu said, “We have to look more at fintech” to compete.
Cigna reboots with WhatsApp/chatbot mashup
The U.S. firm is leveraging WhatsApp business API and A.I. to get a leg up in Hong Kong health insurance.
Cigna is the first insurer in Hong Kong to deploy
WhatsApp Business API allows an enterprise to manage one-to-one communication with customers using the messaging app. With over 1.5 billion monthly active users, WhatsApp is the largest messaging platform in the world. In markets such as Hong Kong, it is the dominant messenger (see chart*).
What’s the importance of APIs? Applied program interfaces connect two different networks. A Cigna customer would normally need to log into the company’s app or website to receive service. But Cigna has now linked its server to WhatsApp, the
WhatsApp built its Business API service for large businesses to easily handle big volumes of notifications. For example, Booking.com and Wish use WhatsApp API to send booking confirmations and shipping information to individuals.
Cigna took this a step forward. It has hired Hong Kong
Its first use case is to help customers find a doctor.
Yuman Chan, Cigna’s CEO for Hong Kong, says the company routinely gets such inquiries, and it wanted a way to automate the process. It was also an easy way to begin working with artificial-intelligence tools.
It chose Clare.AI because of its local-language capabilities and its reliable natural language recognition, says Johnson Wong, Cigna’s senior manager for transformation.
“For some other [vendor] solutions, if I asked a question a bit differently from the standard question, they can’t answer – especially if it’s in Cantonese,” said Wong.
Bianca Ho, co-founder of Clare.AI, says security and compliance are also important components to providing chatbots to financial institutions.
Clare.AI doesn’t keep or use data with personal information. It uses aggregate data to provide analytics.
WhatsApp’s messages are encrypted end-to-end. Therefore only the two parties in
For Business API, the data is stored on the servers of the corporate client (Cigna).
“It’s the consumer and Cigna and Cigna’s database that have the information,” Ho said.
Cigna launched its WhatsApp chatbot in April, and since then it has handled about 1,000 queries a week related to “find me a doctor”. The company is working to build out more functionality over the messenger, including claims submissions for both individual and group customers.
Wong says Cigna has the infrastructure ready for the automated process.
“If you ask about your claims, we can easily retrieve the data from the back end to the top. We’ve built the core already,” Wong said.
Its WhatsApp chatbot will then help it collect data based on customer questions, said Chan. For example, if customers ask about particular doctors, they could potentially be added to the insurer’s panel of clinics.
Cigna is also working with a Hong Kong telemedicine company called Doctor Now. This began as a voluntary service created by local doctors for elderly people. Cigna is the first insurance company to work with the service and commercialize it.
The idea is to let patients receive a consultation from licensed doctors via the app at home, instead of having to go to a hospital and wait in a queue. They can also get medicine shipped to their residence.
The business model is similar to Ping An Good Doctor, while Cigna aims at the health-insurance market for local, Cantonese-speaking residents.
Good Doctor is huge in mainland China, where it provides teleconsulting, appointment bookings, and medicine home deliveries. The app serves 265 million users, as of December.
The unit behind Good Doctor, Ping An Healthcare and Technology, listed in Hong Kong last year; the app is now available in Hong Kong and
WeChat’s parent, Tencent, has its own healthcare app in China called WeDoctor, or
Of course, in mainland China, Ping An and Tencent have built digital health empires on the back of poor traditional healthcare infrastructure, vast reservoirs of people (=data), and looser data privacy rules.
Hongkongers have access to doctors already. Its public hospitals have some of the same problems: with an aging population, doctors can be overwhelmed. But the system functions and is widely available. Cigna is a relatively small player in this market: according to Insurance Authority statistics (most recent data available only for 2017), it ranked 23rd in gross premiums. ( For direct medical business, it was ranked sixth in 2018).
It might be adding a feature similar to Ping An’s playbook but its real target looks to be gaining
*None of the internet companies release statistics but Hootsuite graphics and unattributable Reddit opinions suggest WhatsApp leads in Hong Kong thanks to a longer history and a local English-friendly culture, but WeChat is catching up and Japan’s Line also has traction.
Citi, Mastercard vouch for digital coupons
Mojodomo, a Hong Kong fintech, is helping insurers and banks engage directly with consumers.
Financial institutions are digitizing their product design, sales and operations, in order to cut through middlemen and reach end users. But one fintech is working with insurers and banks via their marketing departments.
Mojodomo is a Hong Kong-based company that digitizes coupons and vouchers, like gift certificates. Citi and Mastercard are introducing it to their B2B customers. The company is now raising an initial seed round of funding to help it expand to other regional markets.
“The Citi virtual card account lets us offer a redemption-based payment model to clients using our loyalty voucher platform,” said Dennis Shi, CEO of Mojodomo.
The insurance use case
The best way to understand what this startup does is to take one of its current use cases: insurance.
Enterprises, including insurers, banks and other corporations, pay hundreds of billions of dollars per year in coupons and vouchers, as a means of winning or rewarding consumers.
An insurance company may, for example, hand out supermarket coupons or vouchers for holiday mooncakes. Insurers might do so via their tied agents, as an incentive for agent networks.
We offer a redemption-based payment model to clientsDennis Shi, Mojodomo
But agents are also middlemen who own the customer relationship – an arrangement that insurance companies are keen to sidestep, particularly if they can avoid spooking the agents they depend on for revenues. Hence the vouchers as one way to engage with end users.
This activity is paper-based. It is based on pre-paid vouchers (the insurer buys loads of them from the mooncake shop), with no quantifiable return on investment. The insurer hands out the vouchers to its policyholders, but has no means of knowing who spent them. Many vouchers go unredeemed, or customers give them away to others.
Adding the retailers
Tyrone Lynch, chief investment officer at Mojodomo, says the company’s platform allows insurers to issue vouchers in the form of credit, with each tied to a token, similar to a credit-card number. Insurers can issue these digitally – perhaps as an incentive to get people to download their app – and they only pay the retailer when a voucher has been redeemed. With everything tracked, the insurer’s marketing team can get a precise hold on what’s working and who’s cashing in.
The mooncake shops would lose out on giant, up-front bulk sales. They’d only get paid for vouchers that redeem. But the payment would be instant, via Mastercard and the banking system, versus having to wait for the insurance company to send them the money owed. Today, retailers have a cumbersome audit requirement to report the vouchers they do receive, whereas there’d be no need with a digitized process.
We’re using digital tools to move into an open-loop platformTyrone Lynch, Mojodomo
Lynch says the company is in a proof of concept with a global insurance company in Hong Kong that wants to connect with its most lucrative policyholders, particularly when an independent sales agent quits. It is also working with mainland Chinese banks. These institutions can issue a voucher either directly via SMS, or from their app.
“They were getting only about 50% utilization of their prepaid vouchers, but now they’re redeploying their marketing budget and getting realtime feedback on their clients,” Lynch said.
Revenues from marketing budgets
Mojodomo is more of a marketing business than payments, at least in its revenue model. Instead of charging the merchants (the mooncake shop) like a credit-card company, it charges the marketers at the insurance company or bank 8% of the value of redeemed vouchers.
That’s a large fee – but Lynch says it’s worth it to marketing departments that need to deploy their budgets but haven’t been able to find reliable ROI measurements.
“Most enterprises are simply digitizing their paper-based vouchers,” he said. “They’re still operating in a closed loop. We’re using digital tools to move into an open-looped platform.” A closed-loop means customers can only convert with the issuer itself: like using a Starbucks voucher. But open-loop is based on credit, using a B2B payments model, so that now the retailers or other third parties are part of the circle.
Mojodomo’s tech itself is not unique: it’s raising money now to be first into various Asian markets, such as Taiwan and Singapore, while relying on partnerships with Citi and Mastercard to get introductions to clients – such as the global insurer in Hong Kong and the banks in mainland China. Citi has also provided a credit line, while it is relying on Mastercard’s virtual card and payments rails.
In the case of the Chinese banks, part of its selling appeal is digitizing vouchers that customers can redeem overseas, using QR codes at participating retailers. Using Mastercard, the company is giving Chinese banks a means of issuing loyalty points that customers can use abroad. The fintech is still working on a mechanism for foreign exchange.
The fintech is currently seeking a $2 million seed round but expects to immediately follow up with a $15 million Series A round early next year. The proceeds are to go to building a presence in multiple markets, including credit lines. To date the company’s founders have bootstrapped it by about $500,000.
MSIG’s Asia offices file separate claims to digital strategy
The insurance company is pursuing digital transformation, but that means different things to different local teams.
“Insurers are late adopters of fintech”, said Mack Eng, Singapore-based executive vice president of Japanese insurer MSIG. So insurers bring in third-party fintechs to help speed up their transformation.
MSIG’s claims system alone involves three partners: DBS Bank, NCS (a robotics company) and Laserfiche (enterprise software). Their services may overlap, but MSIG is open to explore with different partners.
MSIG’s example is in line with industry trends. Sanjay Varma, director for Asia Pacific at vendor FIS, says financial institutions in the region are increasing the number of third-party collaborations.
FIS just issued a report that says only 47% of Asian companies with clear leadership in digital transformation say their technological capability is sufficient to meet their growth plans.
Varma says the pattern is for companies to hire outsiders who bring change to the corporate culture; then they build internal digital platforms; and finally they bring in third parties to fill the gaps.
Singapore goes robo
MSIG has travelled down a similar road. Eng was hired in 2018 just after the insurer embarked on a digitalisation campaign for Asia. “It’s critical that leaders set the right tone,” Eng said, to ensure the urgency of the task is communicated to all levels.
Since then the company has built a foundation for a new generation in core infrastructure, and followed by partnering with outside players.
MSIG’s regional strategy has been based on robotic process automation (RPA), deploying computerised tools to handle simple, repetitive, time-consuming tasks, in order to save on human costs and reduce processing errors.
Business units can select what is most relevant for themMack Eng, MSIG
NCS, a subsidiary of Singtel, has tailored two bots for MSIG. One is called Zac, which processes travel claims submitted online, giving customers immediate emails back to acknowledge when a claim’s been filed. It cuts processing time of claims submissions from 14 minutes to 3 minutes, a time savings of 70%.
The second bot is called Velma, which enters details about automobiles for policies covering fleets. The time to log vehicle information has been slashed from about two minutes to 40 seconds.
Hong Kong’s holistic approach
Zac and Velma have been introduced to MSIG’s Singapore and other regional markets, although not yet to Hong Kong. That market has taken a different path: “Business units can select what is most relevant for them,” Eng said.
MSIG Hong Kong works with Laserfiche, which provides software that manages the overall flow of information through the enterprise (this is known as enterprise content management, or ECM; Oracle and IBM are industry leaders in this space).
ECM analyzes all kinds of information, including emails, documents, and images, in order to redesign workflows (as opposed to RPA, which simply improves existing processes but doesn’t change their function).
“It’s starting from scratch,” said Alan Yue, MSIG’s I.T. leader in Hong Kong. “We digitize our claim service to make it basically into a clean sheet.”
Hong Kong customers can now upload their supporting information instead of mailing hard copies when submitting a claim. The firm says 80% of online customers have used this channel. The software now also confirms submissions instantly via email or SMS, and it can forward them immediately to authorized insurance brokers or agents.
It’s starting from scratchAlan Yue, MSIG
ECM, in theory, should be a more strategic solution than RPA since it paves the way for artificial intelligence and cloud computing. ECM help companies transform data sourced from many places (including social media) into data that is structured, and therefore machine-readable for analytic purposes.
API -the payments piece
Finally, MSIG has partnered with DBS to enable real-time payments for claims that are approved. MSIG is the first user of DBS’s RAPID program, which launched in 2017. DBS customers can buy an MSIG policy on the bank’s website and enjoy real-time payment of claims, with DBS’s payment API integrated into MSIG’s claims process.
Having onboarded partners, MSIG now needs to make sure it stays on top of other relevant solutions in the market – not a simple task, given the ever-growing number of insurtechs and other tech providers. MSIG became a founding partner of startup accelerator Plug and Play’s insurtech platform in Singapore. Back in MSIG’s home market of Japan, other institutions are also joining this network, including Japan Post Insurance.
Eng says membership keeps the firm on top of emerging companies as well as mature vendors. MSIG has set up dedicated teams in Asia and Silicon Valley to manage its Plug and Play relationships.