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After Michael Spencer buys Singapore Life, here’s what they’ll do with the money

Before the London financier acquired the insurer, founder Walter de Oude told DigFin his broader ambitions.

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Last week, on December 5, London financier Michael Spencer announced he was buying a controlling stake in Singapore Life, paying $52.7 million for a 33.8% stake. This is on top of a previous stake through Spencer’s personal investment company, IPGL, that brings his total holding to 63.2%.

Spencer is group CEO of NEX, a U.K.-based electronic broker and vendor, formerly known as ICAP. He is well known in Britain as a philanthropist and backer of the Tory Party.

What is Singapore Life going to do with that $52.7 million?

Earlier this year, Singapore Life founder and CEO, Walter de Oude, had sat down with DigFin at his office, to explain the vision for the digital-based business.

At this point, de Oude was fresh off the success of having gone live the previous year, and acquiring the domestic life business of Zurich.

He noted with satisfaction that the wider insurance industry was beginning to take notice of Singapore Life, based on its strong growth. But raising money had been difficult.

Now that he was finding it easier to raise capital, de Oude said the next opportunity was wealth management.

Going after the HNW space
“We need to get things to market faster,” in order to serve customers with better investment and wealth solutions. “I’m not talking about robo advisory, but a more sophisticated I.Q.—a wealth proposition that’s personalized,” he said.

“We want to blend advice and robo, from both humans and A.I.”

That suggests Singapore Life will make a big push into investment-linked products, but not just to manufacture them. It is using technology to become a distributor of wealth products.

“Our future will be to optimize any kind of fund within the portfolio,” he said, noting Singapore Life can do so within its insurance license. “The lines between financial services are blurring. Banks no longer hold dominion over financial services.”

De Oude’s background includes consulting, actuarial work at Swiss Re, and running the Singapore arms of HSBC Life. He founded Singapore Life in 2014, but spent the first three years raising capital.

From the start, the aim was twofold: outcompete bigger incumbents on the strength of organizing the business around cutting-edge technology; and leveraging Singapore’s industry serving wealth-management services to global elites.

“It’s a very competitive high-net-worth market,” de Oude said, saying life insurance companies already write $6 billion per annum in premiums in Hong Kong and Singapore for wealthy individuals.

Developing private-bank like services are a business priority for the likes of AIA and Prudential. “But no one has done it digitally,” de Oude said.

What digitizing insurance means
The time between setting up the business with a cutting-edge tech stack in 2014, and getting the required capital to go live in 2017, saw incumbents wake up to the digital threat. They are also automating. But de Oude says there’s a difference between “slick front ends” and end-to-end automation. Singapore Life has 50 employees, a fraction of the big teams at incumbents, so it offers products more cheaply: 30% cheaper for term life, de Oude said.

He says that three of four years ago, the incumbents began dabbling in digital with self-service websites, allowing customers to, say, update their personal details without having to call a rep. Now incumbents are partnering with fintechs or buying new tech, but de Oude says he has yet to see any of this lead to product innovation.

That’s because of the underlying legacy platforms: “Digitization is a veneer on an older, manual, processing system.” He notes insurers can’t afford to get rid of their old core, mainframe-based systems, so they are creating integration layers with apps on top. (Incumbents’ tech people have told DigFin the same thing, although some are launching new, standalone platforms.)

“But customer data has a life of its own,” de Oude said. “In the old world, you add a customer to a product; today, you add products to a customer database.”

This difference means that new, nimble companies can put multiple core systems in place beneath an integration layer, specific to a given product, but all serving a single customer account. This gives Singapore Life and other digital insurers such as FWD (its closest competitor in Singapore) the ability to efficiently understand their customers in a way that incumbents struggle to achieve. Over time, these challengers will want to scale on that nimbler tech, while incumbents will find maintaining traditional core architecture a costly, increasingly frustrating exercise.

Challenges
But Singapore Life isn’t 100% automated, and as a small player without a brand name or easy access to capital, it has found the incumbents to be hardy competitors.

The one area that isn’t fully automated is claims (for life insurance; it is fully automated for critical illness and investments). And customer acquisition costs are high. Singapore Life went live with protection products, such as term life and critical illness. This summer, it added single-premium endowments, which are similar to three-year fixed deposits, which provided higher returns than a bank deposit.

As of this summer, the firm claimed 9,500 customers, but the majority of these came from the acquisition of the domestic business of Zurich.

De Oude declined to say how much came from Zurich, but insurance executives at other firms told DigFin they think the Zurich portfolio is the bulk of Sing Life’s business. The deal put Sing Life on the map in Singapore, giving it scale, revenues, and some cash—but de Oude didn’t take Zurich staff, other than some customer-service reps.

Now that the business has been injected with new capital, de Oude will invest in products that can be claimed automatically, which means keeping them simple and transparent. Singapore Life’s systems also validate statements customers make about their health. And, as mentioned at the start, he wants to grow the firm’s footprint in wealth products and distribution.

The next challenge? “The hard part used to be raising the money,” he told DigFin. “There’s no shortage of capital now. What’s going to be hard now will be remaining nimble – not to lose that culture – to avoid becoming a legacy player ourselves.” But he doesn’t see that as an immediate worry, thanks to the way Singapore Life’s technology is arranged. “We’re protective of our architecture and the authenticity of our own coding.”

Insurance

SingLife takes on insurers…banks…Revolut…

Insurers want to join ecosystems. Can the insurer become that ecosystem?

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Walter de Oude, SingLife

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.

DIY ecosystem

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.

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Insurance

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.

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“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.

Partnerships

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 insurers

Curtis 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.

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Insurance

Blue adding more Tencent tech

The digital insurer is gradually adopting more of its shareholders’ capabilities.

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Charles Hung, Blue

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).

Brand building

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.

Front-end iteration

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 chatbots

Charles 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 life

Charles 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.”

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After Michael Spencer buys Singapore Life, here’s what they’ll do with the money