Asia Insurance Review speaks to two digital insurers to find out how they are upending insurance.
China’s ZhongAn Insurance and the Singapore unit of FWD are the insurance equivalent of Netflix in the TV industry, Expedia in the travel business and Amazon in retail.
These new digital-only insurers disrupt the insurance industry by providing value to consumers that traditional insurers may find hard to match, through a combination of factors including their customer centricity, talent, technology and culture.
1 Customer centricity
Consumers, shaped by their highly personalised, self-directed and instantly gratifying digital experiences in other sectors, have come to expect the same service from insurers. Nowhere is this more apparent than in China, where mobile internet and e-commerce rule, especially with the young who shop, call for taxis, order from restaurants and book movie tickets via their computers and mobile phones.
These millennials are also likely to buy their first insurance policy online. Enter ZhongAn Insurance, China’s first online insurer. Out of its accumulated user base of 535 million customers, half are born in the 80s and 90s, said Mr Chen Wei, a head at ZhongAn Insurance. “For many of them, ZhongAn has given them their first-ever insurance policy and a taste of the new world of internet insurance,” he said.
Reinventing claims settlement
Automating claims processes and boosting customer convenience are top considerations for ZhongAn when it designs a product. It wants to turn claims settlement from a passive to an active process, through integrating with third-party data sources, said Mr Chen, who is also CEO of ZhongAn Technology, a wholly-owned subsidiary of ZhongAn Insurance.
Its insurance policy for flight delays is a classic example of how the insurer has raised the bar in automating claims settlement. If a customer’s flight is delayed for more than two hours, the minute he disembarks, the flight delay compensation will be credited into his account without any action on his part.
For policies where claims settlement cannot be automated within a short time, ZhongAn provides self-service options for trusted customers with a good pre-established credit standing. These customers can make small claims online swiftly, through dedicated “quick payment” channels without needing to interact with customer service.
ZhongAn plans to use Big Data to further build up and understand user profiles so that it can offer more specialised, dedicated channels for trusted, creditworthy customers.
Asking fewer questions
For FWD Singapore, inspiring customer demand by anticipating and holistically addressing customer needs and wants, comes in the form of shortening the number of questions that potential customers need to answer online before they can receive a quote on their life and general insurance policies.
In August 2016, an FWD survey of 300 consumers showed that 71% of customers wanted to buy their next travel insurance policy online, but online insurers who sold motor and travel policies had less than 10% of market share.
Mr Abhishek Bhatia, CEO of FWD Singapore, attributed the problem to bad customer experience, sometimes requiring consumers to answer close to 30 questions just to get a quote.
To improve the quality of customer experience, FWD scrapped questions on personal details that Mr Bhatia believed served to feed insurers’ intentions for cross-selling, as well as questions on the customer’s risk factors that didn’t significantly affect pricing.
“If the five extra questions helped to refine pricing by just one more percent, we would give up that one percent and not ask those questions,” he said. That helped to bring the number of questions for a motor policy quote to 10, and travel policy, to five.
For life insurance policies, FWD also uses a smart underwriting system. A basic seven questions are asked, and only if the answer to any of these questions is “Yes” will customers need to answer more questions, guided by a logic tree. If not, a quote is generated, and the policy is issued upon payment, all within 10 to 15 minutes.
“This is the case for 85%-90% of our policies, while 10% of the cases where the medical history is complicated would be referred to a manual underwriter,” said Mr Bhatia.
FWD launched its direct-to-consumer business in Singapore last September, and currently offers a suite of life and general insurance products including direct-term life, car, travel, personal accident and maid insurance.
2 Talent
The online insurers are also sector-agnostic when it comes to drawing talent, frequently plucking hires from disparate sectors in the belief that digital competency matters more than industry knowledge. Amongst ZhongAn Insurance’s hires, a third are top IT and digital talents, and another third are hired from outside the finance sector. Only one-third of its employees are from the financial sector. Most of its digital talents hail from top technology companies such as Alibaba, Amazon and Facebook.
3 Technology
Online insurers leverage high-speed, agile technology infrastructures that focus on customer engagement systems and that can support digitisation. For ZhongAn, the first company in China to build an open-source core system on a cloud, the fragmented, high-frequency nature of its insurance business model poses high demands on its IT infrastructure, and operating targets are vastly high as an online insurer.
For instance, during the Alibaba Singles Day shopping event, ZhongAn’s proprietary systems facilitated a heavy volume of nano insurance, processing to the tune of 10,000 transactions per second. By comparison, Visa, at peak trading volume, clocks 14,000 transactions per second.
ZhongAn’s FinTech strategy is anchored on five driving forces, which the company has coined its “ABCD Strategy”. Mr Chen explained: “‘A’ stands for artificial intelligence, which has the ability to draw our business closer to the activities of everyday life. ‘B’ denotes blockchain, which optimises data collection cost and increases data processing efficiency. ‘C’ is for cloud computing, which alters the cost and efficiency of finance, and ‘D’ is for data, which improves risk management and drives business.”
Using FinTech to empower finance
ZhongAn believes its role in the financial services ecosystem is to marry technology with finance to facilitate innovation in internet insurance. An example is its policy for damaged mobile phone screens.
Previously, many such policies provided protection only for new mobile phones. Used mobile phones could not be insured as two problems cropped up. Firstly, it was difficult to prove that the mobile phone in the photo uploaded by the policyholder was the one that he wanted insured. It was also difficult to determine if the mobile phone screen was damaged at the time of policy underwriting.
ZhongAn has solved these two issues using image recognition and machine learning technologies. Using remote identification technology, which employs algorithms to generate identity recognition images, it ensures that users’ uploaded photos belong to the equipment to be insured. These will be automatically refreshed, and any suspicious acts by end-users are also monitored.
Furthermore, intelligent screen recognition technology, via deep learning image recognition algorithms, automatically identifies suspicious broken screens, reducing manual interventions and thus lowering human verification cost. Deep machine learning algorithms get more precise as larger samples are received.
Intelligent chatbot
Another example of how ZhongAn has paired technology with finance is in the introduction of an “intelligent customer service robot” for its health insurance product released during the Alibaba Singles Day event in 2016, offering customers one-to-one, all-weather servicing 24 by 7. During the event’s run, the intelligent customer service robot replied to more than 20,000 messages, accounting for 77.6% of the total amount of customer messages received, and reduced the workload of customer service personnel by 84.8%.
4 Culture
Successful digital firms are distinguished by more than technical expertise. They invariably have a corporate culture and an organisational model that create the conditions for digital excellence.
For FWD, the insurance business arm of Pacific Century Group, that means cultivating an internal environment that constantly encourages its people to push towards the future, even at the risk of failure. “The tone is set straight from the top, that if you try 10 different things but only three work, it’s within the risk appetite. Failure is not frowned upon,” said Mr Bhatia. A