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A.I. drives China techfins into car insurance – and beyond

Car insurance, the first place China’s tech giants are applying a range of A.I., is their vehicle of choice for crashing into all manner of financial services.

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China’s biggest tech companies are all diving into the business of insuring motor vehicle accident damage. Using A.I. – artificial intelligence – to provide protection against car accidents may seem marginal to financial services, but it is the vanguard for China’s ‘techfin’ companies to reshape insurance, investments and banking in their image.

Of course these tech companies have been involved in insurance and other financial services such as payments, but the sophistication gained by combining different forms of A.I. is taking their offering to a new, expansive level.

Ant Financial, Ping An Technology, Tencent and Zhong An, as well as Chinese developer SenseTime, all presented similar services for assessing motor vehicle damage in Hong Kong last week.

Drivers take pictures and video of their damaged car at the site of an incident. They take selfies to authenticate their identity as the car owner or driver. The tech company ensures the make of the car and the license plate number match their record. Their computers assess the damage, and provide itemized lists of problems, the costs to fix them, the amount of coverage available, and a map with nearby garages. If the customer agrees to the cover, the money is in their account within a few minutes.

Data, scale, speed – and ambition
These apps not only let customers claim their auto insurance quickly. They also help insurance companies cut back on the need to send employees to accident sites. Some car crashes will require human intervention, and some types of damage are hard to analyze based on photos alone. But the bulk of routine assessment can be now automated, and the customer can sort out the entire process vis-à-vis their insurer immediately.

Chinese tech companies say this service is just a flavor of what A.I. will deliver, provided they amass enough data to deliver a particular service. Although foreigners may fulminate about Chinese privacy law, the fact is that Chinese consumers are perfectly happy to share their data – and at a scale of hundreds of millions of customers, says Ericson Chan, CEO of Ping An Technology.

This willingness to share, combined with incredibly fast computer processing optimized for neural networks and machine learning, and with a conglomerate mentality among tech providers, is what sets China’s tech leaders apart.

Ping An Group, for example, has 32 subsidiaries, of which half are in financial services and the rest are in things like autonomous cars, healthcare and housing. “You can’t just do finance if you want to serve your customer holistically,” he said, speaking at Hong Kong FinTech Week. “What’s money for?”

It’s the same story for Alibaba’s Ant Financial and Tencent’s various financial subsidiaries, including WeBank and WeWealth.

New markets, lower risk
Douglas Feagin, president of Ant’s international business, says A.I. is the key to enabling a range of functions work better, from opening an account to selecting a service to managing risk. “We’re investing in machine learning, natural language processing, prediction, image recognition and speech recognition,” he said. “All of these things need to come together to create a more innovative form of financial services.”

Shang Hailong, Hong Kong-based managing director at SenseTime, says access to hundreds of millions of people’s data makes car accident insurance the easiest place for tech companies to apply A.I. to financial services. The company, which raised $410 million in a B round from venture capital in July, is working with mainland banks and tech companies to help them further develop A.I.-led initiatives in health and life insurance, as well as wealth management.

“A.I. works now because of deep learning,” he said. In turn it allows an entire business to be automated, enabling insurers to reduce their cost of human capital – and provide a better service at the same time. “Damage assessment is no longer subjective,” he said.

This technology also allows insurance companies to expand into new markets. Daniel Hong, deputy general manager of financial technology at Tencent, says automating everything from accepting new customers to assessing car damage allows insurance brokers and carriers to extend their offering to smaller cities, beyond the reach of brick-and-mortar offices.

Data’s limitations
Such a trove of reliable data doesn’t exist in other businesses yet. For example, Hong says robo advice today is too simple and prone to customer manipulation if they aren’t truthful in how they respond to questions about risk appetite. He says using A.I. to generate actively managed investment products is probably better suited to hedge funds than to retail customers – for now.

But Tencent is gaining enough user information via its WeChat messaging service (ubiquitous in China) that it is learning how to match wealth-management attitudes with actual consumer behavior.

And A.I. and deep learning are better at managing risk and detecting fraud. Alipay’s fraud loss rate is less than one incident in a million transactions, far below what other global payment players experience, says Feagin. “We do this by scanning thousands of variables in a given transaction,” he said, noting that the company is so confident it will protect consumers for losses up to Rmb1 million for a premium below Rmb2. “Everyone will opt for that,” he said – and it works for a company with over 500 million customers.

Tech is not a tool
China’s techfins are not erasing insurers or other financial institutions, but turning them into rather simple suppliers. Ant, for example, uses China Taiping Insurance to provide the actual motor-damage insurance product. But it is the tech companies who own the customers using their apps to access and use insurance – and it is they who get access to consumer data.

This is what makes this trend different from mere digitization of business on a nice app.

Wayne Xu, COO at Zhong An Online P&C Insurance, says A.I. represents a cluster of techniques that when combined, put computers in the driving seat.

Traditional insurance relies on actuaries to develop smart, statistics-based guesses around risk. They use computers to assist human judgment. “Tech is just a tool” for these industries, Xu said. “But with A.I., it’s the computer that makes the call. Humans just confirm it.” Tech is no longer just a tool; it’s the business.

Scale makes A.I. viable. Hundreds of millions of users provide meaningful data points that machines can learn from – and as information accrues, the machines will just learn it better, assuming they are being taught correctly. But even for a Zhong An, with over 500 million customers and 8 billion policies sold since 2013, it needs A.I. to survive. Only machines can process such volumes.

Moreover, companies can only acquire such vast numbers of customers by offering rock-bottom policies. Some Zhong An and Ant Financial premiums cost only Rmb1. Meanwhile, Alibaba has invested Rmb100 billion into A.I.-related research and development.

Selfies and karaoke
Ping An’s Chan says most A.I.-backed offerings in finance have involved a single function or type of tech, such as chatbots, peer-to-peer networks, and simple robo advisors. The competitive advantage is how to blend them – and to make them easy to consume.

While for techies, the killer ingredient may be facial recognition – it’s what has made car-damage assessment viable – it’s also about knowing how to sell a new service.

Taking lessons from car insurance, Ping An is starting to deploy this technology to other subsidiaries selling asset management and other insurance products.

Instead of sitting in a bank’s office for an hour going through a cumbersome application process, customers can do everything remotely with their smartphone. Instructions crawl along the screen – like the lyrics to a song during a karoke session – to guide both the sales agent and the customer through the process.

It takes ten minutes, but more importantly, it doesn’t feel like such a headache. “Whether you’re claiming car insurance or buying a fund, it’s just taking a selfie and karaoke,” Chan said.

Insurance

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.

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Yuman Chan, Cigna

Cigna is the first insurer in Hong Kong to deploy WhatsApp Business API, a feature introduced by the Facebook-owned messaging platform in December last year. 

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*).

Source: Hootsuite

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 favorite communication channel for Hong Kong people.

Adding chatbots

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 fintech Clare.AI to build a Cantonese-language chatbot to field customer inquiries. The chatbot uses APIs to source answers directly from Cigna’s database, so there is no human intervention.

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.

On-premises database

WhatsApp’s messages are encrypted end-to-end. Therefore only the two parties in a communication can see whatever content is stored on WhatsApp’s database.

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.

It will therefore need its chatbot to field questions around policy administration, so that software can match tasks for call centers such as informing customers about policy features, upcoming premium amounts, and managing routines such as changing addresses.

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.

Doctor Now

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 Singapore, and will soon enter Thailand, although its clientele remains mostly mainland Chinese residents or visitors.

WeChat’s parent, Tencent, has its own healthcare app in China called WeDoctor, or Guahao, but which relies on a British health-tech company, Babylon, for doctor consultations. It claims 27 million monthly active users. WeDoctor has announced plans to set up a “Greater Bay Area” business unit for Hong Kong and Macau, but has yet to launch.

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 market share against its larger, traditional rivals.


*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.

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Banking & Payments

Citi, Mastercard vouch for digital coupons

Mojodomo, a Hong Kong fintech, is helping insurers and banks engage directly with consumers.

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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 clients

Dennis 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 platform

Tyrone 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.

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Insurance

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.

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Mack Eng, MSIG

“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 them

Mack 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 scratch

Alan 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.

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A.I. drives China techfins into car insurance – and beyond