Insurtech Scene In Asia: Potential And Challenges Ahead
09th, March 2020 - Guest blog
Asia might not be the first continent that comes to mind when we talk about insurtech. When UBS surveyed the state of insurance in Asia in 2017, they found that the region accounted for just 13 percent of insurance premiums. Given that Asia held 43 percent of the world’s population in 2016, this number makes the region one of the world’s least insured markets.
But things are changing fast. Just a year after the UBS report, Venture Scanner released a list of the top 20 cities for insurtech. Most positions were dominated by American and European locations, but three Asian cities made it to the shortlist: Singapore, Mumbai, and Gurgaon.
Asian countries might not have the biggest or the most advanced insurtech scene, but they certainly have a fast-growing one. When innovation is combined with low market penetration, the potential for growth is immense. Let’s sum up the opportunities and challenges ahead of the three biggest insurtech markets in Asia: India, Singapore, and China.
With two Indian cities on the top 20 cities for insurtech ranking, India is a strong contestant for market domination in the region. The market penetration in India is particularly low. Poor awareness, limited access to insurance services, and a burdensome process made for an insurance penetration in India at a drastic low of 3.42% in 2017. With a 1.3 billion population of under-insured Indians, the local startups have a huge market to tap into.
The sharp increase in mobile phone usage and cheap internet access across the country is a huge opportunity for insurance companies. A customer base that was previously off-limits can now be reached over the internet. People living in rural areas would typically need to travel to the insurer’s office to fill out and sign forms, which was a strong deterrent to potential customers.
But as Indian insurtech startups are working on mobile apps and extending the portfolio of online services, more and more people will be able to buy insurance remotely. The fact that both Paytm and PolicyBazaar earned unicorn status shows the potential for online insurance services.
Even with easier remote access, changing people’s perception of insurance will remain a challenge. Traditionally, the Indian population relied on strong family bonds as a form of risk mitigation, as opposed to buying insurance from an institution. To attract those skeptical of insurance, insurance companies are rolling our microinsurance plans. From crop insurance to dengue insurance, microinsurance is cheaper and more flexible than a traditional plan. It offers a bite-size taste of the product, without a long-term commitment or big financial investment.
The second significant obstacle to insurance in India is cybersecurity. India is the most targeted country in the Asia-Pacific region when it comes to cyberattacks. If the expansion of insurance in India depends mostly on online services, cybersecurity vulnerabilities can be a deal-breaker.
Common hacking attacks such as man-in-the-middle can be avoided by downloading a VPN app onto a phone or computer. But at the end of the day, cybersecurity measures need to be stronger on the insurance provider side. As we know, poor cybersecurity hurts not only customers’ trust but also the company’s revenue.
The insurance landscape in Singapore is different than that in India when it comes to market penetration. Two-thirds of Singaporeans are already insured — a relatively high number for the region. As a result, the local industry is working hard on improving existing services, rather than reaching out to new customers.
That approach has brought some great developments on the insurtech front. For example, Singapore Life can boast a claim payout within 24 hours, while the insurtech startup PolicyPal just rolled out a first-of-its-kind group insurance platform called PolicyPal Business. Yet another Singaporean company, Bandboo, introduced peer-to-peer coverage which proved successful in the American market. With deeper market penetration, Singaporean insurers are free to push the boundaries of innovation in the field.
The business-friendly conditions in the country certainly don’t hurt either. The Monetary Authority of Singapore's (MAS) encouraged experimentation and innovation in the financial industry with its fintech sandbox. The government also led to the early adoption of AI in the region. Thanks to that, Singaporeans are among the most ready (together with Emiratis) for “hyper-personalized” AI services.
Chinese insurers are uniquely positioned for introducing digital-first solutions. China’s population collectively owns more than 1 billion smart devices and WeChat penetrates every aspect of life. It’s no wonder that Zhong An, the first Chinese insurer to sell services exclusively online, boasts more than 400 million customers. Insurtech companies based in Shanghai alone have raised the most funding of all Asian cities — staggering US$1.3 billion.
AI is currently one of the leading technologies used for insurtech in China. Chinese providers are deploying it for fraud prevention, but new applications are also being tested. Auto insurers, for example, are experimenting with solutions that could use AI to settle claims on the basis of the photos sent by policyholders. But before fully realizing the potential of this technology, insurers need a lot more infrastructure to collect and handle vast amounts of data necessary for effective AI.
China as a market is relatively new to insurance, which isn’t necessarily a setback. The lack of legacy IT systems gives Chinese insurers agility that American or European markets don’t have. Moreover, leading Chinese insurers like Zhong An or Ping An have a daring approach to innovation, rarely classifying anything as impossible. Their market domination allows them to experiment, rolling out new services, evaluating, and iterating them. Despite their size, in some aspects of product development, Chinese insurance companies are operating much like startups.
The main challenge ahead for insurtech
A survey involving insurance professionals from the UK, Bermuda, North America, and Switzerland found that cybersecurity isn’t among the top three concerns. It turned out that the most important tasks according to insurers are relating to technological advancements: developing big data projects, machine learning, and blockchain.
It’s ironic that those tech-minded insurers seem oblivious of cybersecurity threats. But the irony isn’t the core of the issue. The main problem with this approach is that insurance is moving forward at a pace that can’t be sustained without the right digital security.
One might point out that none of the surveyed professionals were working in Asia. Unfortunately, the Asian insurance market is showing a similar tendency for cybersecurity negligence. While Singapore, India, and China try to catch up with the US, let’s hope they will distinguish themselves by their digital security efforts. Only that way can they truly become the world’s insurtech leaders.
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Brad Smith is a technology expert at TurnOnVPN, a non-profit promoting a safe, secure, and censor-free internet. He writes about his dream for a free internet and unravels the horror behind big techs.