If artificial intelligence is changing the whole insurance industry, it surely starts with car insurance, the most standardized, and therefore easiest segment for machines to take over.
Since 2017, the likes of Ant Financial, PICC, Ping An, Sensetime (an A.I. company), Tencent and ZhongAn have launched A.I. tools that assess motor damage in real time, and offer fast payouts and ancillary services such as helping motorists locate nearby garages or get a tow.
Out of this scramble, the winners so far appear to be Ping An, an actual insurance company, which now claims 23.2% market share in the motor insurance in China which accounts for Rmb 615 billion annual premium, and Ant Financial, which operates a platform for smaller insurers.
Zhu Yougang, deputy managing director of Ping An Property & Casualty, is confident that other internet tech companies lack enough data on car accidents to beat Ping An’s offering.
“We deal with 50,000 cases each day, and now we have accumulated more than one billion photos of accident claims,” he said.
He says being an insurance company with a strong tech side has been a competitive advantage, despite some early friction. His team, responsible for P&C business, used to quarrel with the technology team.
“We fight hard with each other,” Zhu said. “We think they don’t know business, they think that we don’t know technology. We couldn’t have made it without the powerful push of our Chairman [Peter] Ma.”
What this means in practical terms is that, unlike some internet companies competing for a single solution, Ping An develops solutions across the entire chain of insurance.
“We are not only looking to automate damage assessment,” Zhu said. “We also include insurance underwriting, policy application and all related procedures. The whole group is moving towards the aim of ‘no paper issued.’”
Creating a model
To create a reliable A.I. model for car insurance, Zhu explains, it needs three different kinds of data.
First, driver information, including gender, profession, and past records of traffic violations or previous insurance claims.
Second is data for managing risk and controlling against fraud. This involves drivers’ credit data and scanning social media and other readily available sources to develop profiles.
Third is data related to car accidents. This is the part that represents a barrier to internet companies, as histories remain proprietary information of the insurers.
We have accumulated more than one billion photos of accident claims.Zhu Yougang, Ping An
Zhu told DigFin that his team has built a data library around car models, with a growing set of photos taken by drivers of damage, and a list of repair fees by region. Ping An has labelled and categorized all these images. The firm’s model will only improve over time as more people use it.
Ping An and PICC (People’s Insurance Company of China, the country’s oldest and largest P&C provider) together have more than 50% market share in motor insurance.
Ant Financial is the most advanced in breaking the duopoly, thanks to its dingsunbao service (“loss assessment master”), a platform in which insurers can leverage to assess the damage through A.I. instead of manual work. And the accuracy rate is about 98%, claimed the company.
Ant financial applied the same strategy that Taobao used to grow up to the country’s biggest e-commerce site: opening for free.
So insurers can use a free service to save manual work and cost. A typical claim settlement in China requires 5.18 manual interventions, from initial reporting to sending personnel to the scene, and then identifying invoices sent from an auto repair shop. It’s a pain point for the industry.
So far, China Taiping, China Continent Insurance, Sunshine Insurance Group and AXA Tianping participate, while Ant Financial gathers data at an industry level. Eventually it can build a platform for the whole industry to outsource claims management.
At the same time, it is pushing its electronic payments rail, AliPay, to manage car-insurance compensation.
Three months after Ant Financial released Dongsunbao in 2017, Ping An responded by opening its own A.I. tool to the whole industry, via One Connect, the group’s technology arm.
PICC, meanwhile, is developing its own A.I. solution in partnership with ArcSoft, a software company.
Zhu told DigFin, that before Ping An opened the solution for damage assessing to the industry, it has been used in Ping An’s back office for more than one year.
Only Ping An’s solution has been tested in production environment before industry-wide release, Zhu said, and the accuracy rate is 98.75%.
Ping An’s solutions are having an immediate impact. In 2018, the company’s combined ratio for car insurance (a measure of insurer profitability, it’s the sum of costs devided by the earned premiums) fell 0.1 percent to 97.4% while some insurers are suffering conbined ratios higher than 100%.
Over the same period, the company’s market share grows 0.5 percent.
But operations are just one aspect of what digital insurance can do. More important is restoring trust to a system in which, traditionally, insurers have to assume customers might be lying about a claim, Ping An’s Zhu told DigFin.
In December, Ping An piloted a service called Trust Claim in Guangdong province. The algo offers a line of credit for claims on a shifting basis, depending on drivers’ habits on the road and their credit histories.
The first version of the pilot is for unilateral accidents only, that is, those that involve just one car.
We let them decide for themselves.Zhu Yougang, Ping An
The algorithm covers up to Rmb4000 for the best profiles, so drivers can submit a claim and get paid within three minutes after sending through images of the damage on their mobile phones.
The solution also settles the kind of disputes between the car owner and the insurer on whether a small part like a rearview mirror should be repaired or be replaced after the accident.
“As long as the customer has enough credit, we let them decide for themselves,” said Zhu.
Ping An won’t release the number of users on its Trust Claim, but Zhu says 50% of users have posted about their experience on WeChat (the messaging app run by rival Tencent), and that 30% of users are new to Ping An.
DigFin has talked with several car owners in mainland China about their small accident experience. Ping An, PICC, and SunShine are among the brands mentioned by these car owners.
But A.I. technology still seems to be far from ordinary people’s lives. All these interviewees told DigFin that their claims are still handled by insurance agents sent to accident scenes. And the whole compensation procedure still takes days or weeks.
This seems likely to change as the quality of companies’ data libraries improves.
With more usage of Ping An’s app and its Trust Claim, it will accumulate more data per incident.
But how long will mass adoption take? Two years into the launch of the first A.I. for auto insurance, it’s still niche in China. Insurers like Ping An and PICC don’t have to fear an internet company…yet.
SingLife takes on insurers…banks…Revolut…
Insurers want to join ecosystems. Can the insurer become that ecosystem?
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.
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.
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.
“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.
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 insurersCurtis 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.
Blue adding more Tencent tech
The digital insurer is gradually adopting more of its shareholders’ capabilities.
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).
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.
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 chatbotsCharles 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 lifeCharles 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.”