There were a few times when i went to a gathering introduced myself as from the insurance industry, people would give me a sympathetic look “I am sorry to hear that”.

Insurance, especially life insurance, in this region has been stable, and mostly complicated, for many years. Probably the only thing that grew was the regulations in place to protect customers.

The main product of insurance companies – a peace of mind – is sold through their agents. It is not hard to be agent (I know many people who do it part time), but it is hard to be an effective one. You need to gather a lot of information about your customers; you need to make them understand the premium obligations, the risks, and the 500,000 other terms and conditions.

Has the industry been too harsh on itself? 

No – Insurance companies lost trust of the customers during the financial crisis back in 2008 and needed time to strengthened their financial balance sheets and gain back that trust.

Over the past decade, the industry as a whole has strengthened its solvency positions and zealously increased disclosure. But it has also been very careful to  avoid risks that may irk the regulators, its shareholders or distribution channels. 

As a result, the industry can confidently say  today that it can withstand any financial or regulatory storm that comes its way, but this is at the cost of innovations in the industry.

Is it time to make insurance cool again?

 Yes-  ‘Peace of mind’ is no longer ‘in’ – ‘disruption’ is. Customers, especially millennials have grown up with the digital evolution. Their concerns are not Protection or Retirement. It’s about maximising “Living in the Now ”. Their digital gadgets and appliances have pushed the customers expectations even higher – and now these customers expect the same from their social, work, medical, financial and insurance services (a term called ‘liquid expectations’). And outsiders are rising to the challenge..

New Entrants are changing the insurance landscape

Many of these outsiders are not only raising the bar for customer experience, but also, in some cases, encroaching the very space that insurance companies survive in.

Zhong An Online Property & Casualty companies (China), a general insurer, and FWD insurance, which does both general and life, are two prime examples.

Both were started in the last couple of years mainly by people outside the insurance industry. Zhong An is a joint venture between Alibaba Group, Tencent Holdings and Ping An Insurance; FWD by Pacific Century Group, a PE group with diverse interests (particularly Telecommunications) chaired by Richard Li, son of Li Ka-Shing.  

Both are selling insurance directly to customers, mainly bypassing the advisors. They can focus on customers because they do not have the legacy of a huge distribution workforce, neither are they burdened by legacy processes and infrastructure.

Both pride themselves on data and technology, rather than insurance experience/expertise. By the end of 2016, Zhong An boasted 60% workforce in tech and less than 5% in sales/distribution; while FWD claimed to have spent US$50 million in FinTech.

The Status Quo Dilemma

Many of my friends in the traditional insurance industry are not worried:

  • “How much life insurance can you sell through a direct platform?”
  • “Good luck managing your reputation when your customers complains (of mis-buying a product online)!”
  • “These small companies look fancy, but they aren’t making any profit. How long can they last if they don’t have the strong financial backing that we have?”

Whilst these comments may hold some truth today, don’t underestimate your digital savvy customers or the potentials of new entrants that have 3 key weapons: 

Weapons of choice 1: Data

An important advantage Zhong An has is data, through their shareholders Alibaba and Tencent. They know who their customers are, who their friends are, what the customers are buying, how much they are spending, and even how many steps customers walk every day.

Zhong An’s shareholders Alibaba and Tencent know a lot about consumers

That gives them a very powerful tool versus traditional insurers. With the data they have about their customers, they know the risks much better, and therefore are capable of reducing the premiums in the medium and long run.

In addition, if they decide to enter the life insurance space, the only barrier is probably the regulations. But are you sure that the regulations will remain the same 5 or 10 years down the road?

Weapon of Choice 2: experiment & (fast) iteration

Zhong An sold insurance to protect customers’ virtual assets such as Tencent’s Q coins back in 2013, the year it was founded. Then it started experimenting with all sorts of new insurance products: bicycle accident insurance, heatstroke insurance and insurance protection against hooligans during the Soccer World Cup, to name a few.

Of course, many of these insurance products proven to not make sense. However, Zhong An kept experimenting. Many products were phased out; many others were refined; while many new ones were introduced.

FWD was also launched in 2013. It has since experimented with different ways to engage customers – Spotify back in 2014, hip-hop with HK rap star in 2016 and a lot of hip marketing campaigns.

FWD, as an online insurer, is quite aggressive with direct marketing campaigns

Today, it boasts of being not only the top direct insurance channel, but also among the top 3 most recommended insurance brand in Hong Kong. It also entered Singapore market in 2016, being one of the first to offer term and endowment insurance products online.

Weapon  of choice 3: A very long and bold forward looking strategy

People were also initially skeptical about whether Zhong An could ever be viable. The company has been losing money since the beginning but the gap is closing. But it persisted with it’s experimenting, marketing and utilization of internet customers’ data.

Today, the company is now the largest insurer in China in terms of customers and policies sold. Between 2013-2017, Zhong An has sold 7.2 billion insurance products and served more than 492 million customers.

In July this year it filed for IPO at Hong Kong Stock Exchange, valuing the company at US$9 billion. Who’s having the last laugh now?

What traditional insurers need to do

Zhong An and FWD are not the only disruptors eying or vying to get market share from the large insurance market. Other internet companies, armed with data, analytics and customer experience, might also encroach the space very soon. Amazon is already providing financing to its sellers, maybe the next step is in-house insurance products.

Established insurers are not doomed, they still have strong advantages – their strong financial position, their brand of trust, and their solid experience running insurance for decades.

But with the upcoming disruption, many have realised, rightly so, that they have to act fast. One insurance company I met told me that they are looking to retrain or replace 40% of their workforce by 2020 to meet the new demands of the digital age – the reality is that most of the skills used in the industry today will not be applicable in the future.

They cannot afford to underestimate their customers, or treat their customers they way they treat their customers’ parents. And most importantly they need to re-balance their relationship with the traditional distribution channels. These channels are still relevant in certain scenarios, but not all.

How to get that done, however, is a major challenge for these companies. It requires (very) strong political will, (dramatic) shift in employee mindset, and (iterative) change in company structure, processes and systems.

Regulators are your allies

Fortunately, regulators are already innovating the regulations around insurance to promote creativity (something unheard of in the last decade!).

They understand that fintech landscape is changing rapidly, therefore they are enhancing regulations to stimulate and foster promising innovations. Regulators in Singapore and Hong Kong have rolled out fintech grants, supported fintech hackathons, introduced fintech sandbox and even rolling out new regulations- they are competing to be the fintech leaders in Asia (excluding China – which is on a whole different innovation level!)

Singapore’s MAS sends a clear message supporting innovation

These initiatives are loud and clear message to the industry to innovate.

The ball, now, is really in the court of the insurers and their teams.


Thanks for reading The Low Down (TLD), the blog by the team at Momentum Works. Got a different perspective or have a burning opinion to share? Let us know at [email protected].


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Prior to Momentum Works, Yorlin was in the financial sector in SIngapore and Hong Kong for 10 years - working with the Monetary Authority of Singapore, AXA and HSBC. She feels that corporate knowledge are undervalued in the start-up ecosystem and want to change this. At Momentum Works, she manages operations, overseeing joint venture operations with partners from all over the world. She always makes time to speak to people as you never know what’s the next game changer in the fickle world of fintech, e-commerce or mobile internet. In her free time, you can find her being the slave to her 5 cats.