What is InsurTech? What kind of impact is this Fintech sub-segment expected to have in Singapore?
InsurTech, the portmanteau of insurance and technology, is an industry that is disrupting the insurance industry. These are fintech companies specialising in the insurance sector.
They are threatening the business model of incumbents by offering customers policies with lower rates and better features. These recently launched InsurTechs have attracted large amounts of investment and are poised to gain market share at the expense of existing insurers.
According to data published by the Singapore FinTech Consortium, over S$1.4bil was invested globally in insurance startups, intermediaries, and reinsurance companies in 2015. The first quarter of 2016, saw an additional sum of S$650mil being invested in InsurTechs.
A survey titled 'Opportunities await: How InsurTech is reshaping insurance', conducted by PricewaterhouseCoopers, found that 90% of insurers fear that they will lose business to FinTechs in the near future.
Almost three-quarters of insurers say that their businesses will be disrupted in the next five years, but only 43% have FinTech at the heart of their corporate strategy.
Singapore is well positioned to take advantage of the rapid growth that InsurTech will see in the coming years.
The Monetary Authority of Singapore has committed S$225mil to the Financial Sector Technology & Innovation scheme (FSTI). This sum will be used to support the nation’s FinTech and InsurTech ecosystem over the next five years.
A FinTech and Innovation group has also been set up within MAS to identify opportunities for FinTechs and to help in clearing regulatory hurdles.
Manulife, a Canadian insurance company with S$934bil in assets under management, has set up its third ‘Lab of Forward Thinking (LOFT) in Singapore. It already has similar labs in Toronto and Boston.
The focus of these labs is to develop technologies that can be used to provide Manulife’s wealth, asset management, and insurance customers with new and innovative products.
Greg Framke, Manulife’s chief information officer says, “We are using emerging technologies and platforms such as blockchain and artificial intelligence to build competitive advantages.”
The fact that Manulife has chosen Singapore to set up its innovation lab is a testament to the nation’s reputation as a centre for technological excellence.
How InsurTech can change auto insurance
What exactly is InsurTech and what are the types of benefit that it can provide? Take the example of auto insurance. Advances in technology could offer customers several advantages:
Sensors installed in cars could track how safely a customer drives. This information, along with data on distance driven, could be used to offer customers tailor-made policies.
Claim processing could be made much more efficient by connecting the customer, the insurer, and the repair shop to provide a seamless solution.
Automated brokers or robo-advisors could replace humans to provide low-cost alternatives.
But InsurTech will not benefit customers alone. Insurers, too, stand to gain through reduced customer acquisition costs and by being able to deliver a higher level of service to consumers. Automated systems and telematics would also help to reduce claim costs and fraud.
Successful InsurTech startups in Singapore
Direct Asia Insurance Singapore was launched in 2010. It offers lower rates to customers by eliminating agents from the insurance process. Policies are sold through the company’s website.
Direct Asia offers policies for car, travel, home, and accident insurance. After launching operations in Singapore six years ago, it has expanded into Hong Kong and Thailand.
The company has adopted a customer-centric strategy in an effort to provide its clients with better service. Each of the three countries that it operates in has a local call centre.
Call centre staff does not follow a pre-determined script. Instead, they respond to customer queries based on their knowledge of the insurance product that they are handling.
Staff receives service training and are also required to clear an exam that tests their knowledge of the product.
GoBear is another successful Singapore-based InsurTech. Owned by insurance giant Aegon, GoBear was launched as recently as 2015. In addition to Singapore, the company has operations in Thailand and Malaysia as well. There are plans to start business in the Philippines, Hong Kong, Vietnam, and Indonesia.
The company provides an impartial metasearch engine for insurance and financial products. In its first year of operations, GoBear attracted 1.2 million users. CEO Andre Hesselink says, “After just 1 year in the market, GoBear has helped consumers on average save more than 20% in their premiums.”
Tremendous growth potential
The push being provided to FinTechs by MAS is sure to help the InsurTech sector expand rapidly in Singapore. Asia’s 4.4 billion population and the proliferation of smartphones and improved connectivity will ensure that the nation’s InsurTechs do not suffer from a lack of potential customers.