Harshet Lunani says he has – still – never met the leadership team of FairDee, despite having recently acquired the company.
“We felt we were aligned, given our relatively similar business models,” said Lunani, founder of Indonesian insurtech Qoala. “And they’ve proven they can succeed in the Thai market.”
That confidence enabled him to strike a deal to win FairDee despite COVID-19’s making it impossible to meet his counterparts in person. Financial terms were not disclosed when it was announced in March.
Lunani, Qoala’s founder and CEO who spends most of his time in Jakarta, is still reacting to the scope of the deal. He had to catch himself from referring too specifically to the firm’s Indonesia operation. “I have to say Southeast Asia now – we’re a regional business.”
Qoala does have newly established offices in Malaysia and Vietnam, as well as a corporate headquarters in Singapore, but it built these organically. Thailand required a different approach. It’s the region’s largest consumer insurance market, for one thing. It also presents language barriers and distinct regulation and market practices.
Hence the acquisition of FairDee, a startup founded in 2019. The deal represents Qoala’s bid to become Southeast Asia’s leading insurtech.
The business model: platforms
Qoala is taking a two-pronged approach.
First, it has a direct-to-consumer business through partnerships with e-commerce and other companies, such as OVO, Traveloka, and others. “E-commerce, digital travel services and ride hailing are great innovations, but financial services is fundamental to society,” Lunani said. “As emerging markets grow into becoming major economies, they need an insurance industry to absorb the shocks. The world’s leading economies are more stable partly because they’re well insured.”
That’s not true for Asia, however. He cited Swiss Re research that shows the region’s insurance penetration rate is just 3.8 percent for life and 2.1 percent for non-life insurance – but that Asia Pacific is on track to account for 42 percent of global premiums by 2029.
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Qoala is taking a page out of the pioneering work by Zhong An and others, by offering consumers a smattering of policies that people can relate to: covering a package that doesn’t get delivered by an e-commerce platform, or a broken mobile phone, or a flight that’s been delayed.
“The difference is that when Zhong An launched in China, China already had established digital platform leaders like Ctrip and Alibaba,” Lunani said. “In Southeast Asia there’s a war raging over who will be the dominant platform.”
It will take time for this aspect of Qoala’s business to mature. For now, Lunani says it’s important that most people experience insurance for the first time by being able to make a claim. This would sound crazy to an actuary at an incumbent.
“Buying insurance doesn’t equate to value,” Lunani said. “Using insurance creates value. We need to give people a taste of what it’s like.”
The use of third parties helps diversify the business and build the sort of data that a firm can use to gradually upsell users. Also, the insurtech business is asset-light, once the tech stack is built: it’s not creating incremental costs when it adds customers.
The business model: agents
Qoala’s second business appears to be quite distinct: it is digitizing processes for tied agents at the likes of Allianz and Great Eastern.
Lunani turns to the examples of Grab and Gojek to explain the rationale behind this. Indonesia has always had taxis, and the drivers provided value because they learned the routes. The internet and GoogleMaps, however, means almost anyone can drive a taxi.
Similarly, insurance agents were tied to a particular carrier because they need a detailed knowledge of the insurance company’s products, as well as familiarity with the firm’s contact persons, operations, and where to file the paperwork. Qoala (which is a licensed broker) is putting product knowledge and contact information onto a digital platform so that an agent can access a wider range of providers and products. This in turn makes them more valuable and trustworthy to customers, because they become more like an advisor than a single product-pusher.
This is a difficult business to build in places like Indonesia, where there are no APIs to seamlessly connect with incumbents’ systems. It’s early days and expensive to build. But over time, the direct-to-consumer business via digital platforms can create a pool of users for which Qoala has data – data that it can use to create insights for tied agents.
“Ultimately, in the long run, by combining these two businesses we can construct products on the go through data, instead of only selling policies that are off the shelf,” Lunani said.
He acknowledges it’s too soon to tell whether the data Qoala has gathered so far is adding value to the agents it works with, or helping them sustain performance once they’ve exhausted their personal networks of friends and family. “We’re still trying things out,” he said.
FairDee has a similar agent-facing digital business in Thailand. The acquisition is both to enter the Thai market as well as to absorb the FairDee team and its experience.
FairDee’s co-founders Yujun Chean, Prateek Jogani and Thanasak Hoontrakul will join Qoala along with their team; the engineering department has already been integrated, Lunani says.
“They can teach us things like how they use chatbots, and we can teach them about how we use image recognition and visualization,” he said.
FairDee will keep its brand in Thailand.
Lunani says the company’s venture-capital backers played an important role advising him on the deal. Although he says the idea for the acquisition came from Qoala’s management, this was his first acquisition and he leaned on his VCs to help him both strike a valuation for FairDee as well as work out the operational challenges of a merger.
Qoala’s investors include Sequoia Capital, Centauri Fund (created by Kookmin Bank and MDI Ventures), Flourish Ventures, Mirae Asset Management, Central Capital Ventura, MassMutual Ventures, and SeedPlus.