Hong Kong now has its first digital life insurer. Blue, a brand launched by Aviva Life Insurance, is the first such company to go live under the auspices of the Insurance Authority’s digital fast-track program.
Although other insurers such as AIA offer mobile or internet “self service”, this is the first company in the city that is entirely digital, with no agents or physical presence.
Its three joint-venture parents, Aviva, Hillhouse Capital and Tencent, say they solved electronic KYC and customer onboarding. Customers need only take a selfie with a valid identity document. Tencent’s engineers performed the heavy lifting on this aspect.
“The challenge wasn’t KYC,” an Aviva executive told DigFin. “The challenge was how far we could push the envelope.”
CEO Charles Hung, who has been in the role since April last year after serving as Aviva’s chief risk officer for Asia, formerly launched the business with the J.V.’s partners and Carol Hui, executive director for long-term business at the Insurance Authority.
The event was splashy, with a (quite good, actually) dance performance and the usual toasts.
Blue’s pitch is to begin with a term life product and critical-illness cover for cancer, strokes and heart attacks. The company is not charging a commission, and is attempting to make the products as flexible and easy as possible. For example, the term life policy can be set as far out as 30 years, but customers can change it mid-policy, and get back any part of the premium that hasn’t been claimed.
“These products are meant to be profitable,” Hung said. He says the low cost base of a company that relies on digital technology rather than paying distributors or having a big back office enables it to serve attractively priced products.
Blue’s launch throws the gauntlet down to the city’s entrenched insurance players, and I.A.’s Hui told DigFin more digital-only businesses are in the regulator’s pipeline (including some pure-digital offerings from traditional insurance companies).
Questions remain, however.
The biggest one is data. How will Blue, a new company, acquire the data it needs to provide the kind of dynamic pricing and risk management it will need, especially if it’s not relying on traditional paperwork?
Hung says the company will not have access to any user data, health records or other information Tencent may have from its popular WeChat messaging app.
Blue’s website will work by asking just three health-related questions of its users, but is this enough to provide the right actuarial models? What other sources of data can it get? DigFin asked this to Hung at a media Q&A but he didn’t answer the question.
The second question will be answered by the market: how competitive will this offer turn out to be? Hung’s mantra is simplicity and flexibility, and there’s no question that, on first glance, Blue offers a radically different experience for Hong Kongers. It offers a straight-up life offer, without any of the expensive and complicated riders that cling like barnacles to most insurers’ products.
But it’s not yet clear what kind of payouts customers will actually receive, and how competitive these are, putting paperwork aside. Similarly, customers may be able to adjust their policy durations but what kind of payouts can they expect compared to traditional policies?
The flip side to this is how competitive Blue will be as a business and how soon it will take to break even. A low operating cost base is a good start, but will it be enough? And what kind of marketing budget is it going to spend? Hung says the initial clientele will be mobile-savvy people and people who want to “take back control” – hints of Brexit there – but how many people is that?
The third question then is customer acquisition. Blue’s ace in the sleeve is, of course, Tencent. The business has an account on WeChat, and it is not paying Tencent a channel fee. So that’s a massive advantage, particularly if it wants to market to mainland Chinese who can transact on WeChat against a PRC credit card. This advantage may not apply to Hong Kongers lacking a mainland bank account.
From the outset, the whole point of the J.V. was to leverage the shareholders’ resources, so of course Blue will use WeChat – it would be surprising if that weren’t the case. But it does raise the question of how viable Blue would be without it. Can digital insurance be sold without a massive ecosystem backing it? And will Blue have the chance to find other big channels that would also not charge a fee?
Questions for anything new are inevitable. What seems likely, though, is that the arrival of the first digital insurer is an inevitable step to changing the business model in Hong Kong.