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2019 November
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InsurTech Drives New Industry Ecology

Insurance technology (InsurTech) is also on the rise at a time when financial technology (FinTech) is in full swing. The use of electronic applications can not only improve the efficiency of the industry’s daily operations, but also combine technology to develop a more diversified insurance business.
 

 

Dick Fong: Virtual Insurance Presents Opportunities as Traditional Industry Faces Challenges

Unlike general consumer goods, the public will only realize their need for insurance products when faced with a crisis or risk. Dick Fong, China/HK Emerging Technologies Leader, Insurance Consulting Partner at PwC Hong Kong, said that many consumers often choose virtual insurance as online insurance products enable them to clearly know what is being insured and the application process is simple and straightforward.

 

“From a consumer perspective, the choice of virtual insurance depends on the insurance type, amount insured and coverage.” Fong said that if coverage is very important and the amount insured is huge, consumers will prefer traditional insurance products that include intermediary services.

 

Cross-industry collaboration to develop different scenarios

Even so, InsurTech undoubtedly reduces the operating costs of virtual insurance significantly. Fong believes this will help promote cooperation between the insurance industry and other industries to develop different insurance scenarios. He explained that the modus operandi is for virtual insurance companies to provide insurance products but sell them through other industries. “For example, telecom operators can let customers buy insurance while selling them high-priced smartphones so that they can enjoy a longer warranty period and more warranty items.” Fong said that because InsurTech can drastically reduce administrative costs, virtual insurance is able to fully meet the needs of scenarios where previous insurance products have failed due to high administrative costs.

 

Fong also said that thanks to its well-developed e-payment ecosystem, it is easy for the Mainland’s retail industry to serve as a distribution channel for virtual insurance. For Hong Kong, however, it is more difficult to connect to virtual insurance since traditional payment methods are still widely used. “As Hong Kong’s retail industry still widely uses traditional modes of transactions, insurance customers need to spend extra time to fill in their personal information with pen and paper, and then submit the application to the insurance company. This will incur additional administrative costs, which may even be higher than the insurance benefits, resulting in the slow pace of cross-industry cooperation in promoting insurance in Hong Kong.”

 

Competition and complementarity between traditional and virtual insurance

In view of the trend of virtual insurance, Fong believes that large insurance companies have more resources to invest in R&D. In contrast, due to resource constraints, small insurance companies generally face greater difficulties and challenges in transformation. He hopes for the industry to drive the development of regulated technologies. “InsurTech will further develop across the industry if some regulated platforms emerge for sharing claims data while ensuring customer privacy. This will also benefit small insurance companies.”

 

Between the traditional insurance companies and the emerging virtual insurance companies, Fong believes there is both competition and complementarity. He hopes to see them jointly expanding the insurance market. In fact, traditional insurance companies also have online insurance business and their own strengths, such as a huge business footprint and long-established reputation. In comparison, virtual insurance companies can more directly and flexibly create innovative distribution channels and products since they do not need to take into account existing intermediaries, customers and policies.

 

Technologies and regulations must keep pace with the times

Fong noted that the challenges faced by traditional insurance companies in transformation are mainly how to reduce the administrative costs and improve the efficiency of the existing operating models and intermediaries. Hence, technologies such as AI and robotic process automation have gradually become the main technologies needed by traditional insurance companies for transformation.

 

He added that the challenges faced by virtual insurance companies are mainly compliance issues when developing insurance products for new scenarios. In fact, the current regulations do not have clear definitions of compliance for these innovative technologies and insurance scenarios, making it often uncertain for virtual insurance companies to address compliance issues with regard to insurance products in new scenarios. Fong hopes that the insurance regulations will keep pace with the times so that the rules on insurance products for new scenarios will be clearer and more specific.

 

 

Ken Lo: Leveraging AI to Improve the Insurance Experience

To seek international business development, cooperation and investment opportunities in overseas markets, ZhongAn Online, the Mainland’s first online InsurTech company, set up ZhongAn Technologies International Group Limited (ZhongAn International) in Hong Kong in late 2017 to leverage InsurTech and AI to employ a large-scale online sales model to reduce insurance premiums while improving the design of personalised policies to enhance service efficiency.

 

Two years ago, the company made its debut on the Hong Kong Stock Exchange after its IPO, and its market value once surged to above HKD100 billion, a remarkable feat that is still fresh in our memories. Last August, it announced a partnership with SoftBank Vision Fund to expand its business to overseas markets with Asia as its primary focus.

 

Technology helps reduce costs and improve quality

ZhongAn International’s active expansion of its insurance business segment enabled it to record a premium income of RMB10 billion in 2018. Ken Lo, Head of Strategic Partnership of ZhongAn International, stressed that technology has played an important role in this, e.g. AI technology can improve operational efficiency in many ways, including predicting risks and controlling costs, helping insurance providers set up “dynamic pricing”, speeding up “Know Your Customer” (KYC) and introducing customer service chatbots to greatly improve the overall insurance experience.

 

“Through AI technology, we can use a computer or mobile phone as a platform to introduce remote medical consultation services or provide a second medical opinion.” He added that when a policy enters the rehabilitation and claims phase, the company can use data analytics, Internet of Things and automated technology to improve the overall customer service experience. Going forward, it can also use data technology to design personalised policies that are more suitable for its clients, further striking a better balance between controlling costs and maintaining service quality.

 

Committed to developing virtual insurance and banking services

Lo revealed that the company is currently applying for a virtual insurance license with the aim of further cutting costs and reducing risks to provide a better service experience for its clients. Besides the insurance sector, the company is also actively exploring FinTech. In March this year, through its subsidiary ZhongAn Virtual Finance, it received one of the first virtual banking licences issued by the Hong Kong Monetary Authority, which has enabled it to set foot in online banking services, marking an important milestone in its foray into the Hong Kong market. He noted that compared with traditional banks, virtual banks still have a lot of room for development, so traditional banks and virtual banks can coexist with and complement each other.

 

Lo said that currently Hong Kongers make up about 80% of his company’s virtual banking team, which helps it understand the Hong Kong market. Moreover, the team members come from a wide range of backgrounds, including traditional banking or IT sectors. He mentioned that the user co-creation platform, scheduled to be launched at the end of the year, would invite users in for co-creation with the purpose of providing solutions that meet their needs.

 

Nurturing talents to reinforce inherent strengths

Earlier, ZhongAn International signed a memorandum of cooperation with the Hong Kong University of Science and Technology’s School of Business and Management to outline the framework for collaboration between the two sides in the three major areas of technology R&D, talent development and entrepreneurship incubation in order to push for more FinTech research, as well as to identify and nurture more passionate and potential successors for the industry. Lo believes that Hong Kong’s diverse professional talents and world-class infrastructure offer excellent potential for the city to develop FinTech and looks to extending these strengths through stronger interaction and cooperation among the industry, institutes and universities.

 

 

Alvin Kwock: Triple-win Situation for InsurTech & Traditional Insurance Companies and Consumers

R&D and investment in InsurTech have led to new players emerging in the market: InsurTech companies. Alvin Kwock, Founder and CEO of OneDegree, said: “They are a good driver for the insurance industry.” He believes that the emergence of InsurTech companies has made the insurance industry aware that it needs to improve and consumers need a better customer experience, while InsurTech companies can learn from the industry’s insurance knowhow and experience. This is a triple-win situation.

 

Kwock noted that InsurTech has a great impact on the industry’s ecological chain. Insurance application is a case in point. It is no longer new for consumers to go online to choose suitable insurance products for themselves. Also, many insurance companies now have websites or mobile apps for consumers to apply for insurance claims and benefits. InsurTech provides a more convenient service experience for consumers, while technology and automation are instrumental in collecting and processing insurance data. The more data there are, the more effective InsurTech is.

 

Online insurance processes and prevention of data leakage

Online insurance sales platforms are the most visible to consumers. A lot of effort has actually been taken on such platforms to provide consumers with a better service experience. Citing his company as an example, Kwock said that its online insurance sales platform has undergone several revisions, constantly collecting user feedback for improvement.

 

For insurance companies, putting insurance processes completely online can reduce the possibility of data leakage due to human error and manual data review. Giving an example, Kwock said: “All of our information is stored in the cloud using secure encryption methods, and even our claims process is handled using artificial intelligence and electronic means.” Therefore, cybersecurity is particularly important for InsurTech companies. Citing his company’s technology team as an example, Kwock said that besides using different mechanisms to prevent data leakage, the team also uses sophisticated response mechanisms to deal with any unexpected situations.

 

HK has development advantages but insufficient talents

Hong Kong has started slightly later than neighbouring Singapore and the Mainland in InsurTech development, but the Government has devoted much effort for FinTech development in recent years while providing a broad space for InsurTech development. In Kwock’s view, Hong Kong’s macro-environment is conducive to the development of InsurTech companies. Moreover, Hong Kong’s insurance market is relatively mature and consumers are well aware of the importance of insurance, while intense competition in the industry has also prompted major insurance companies to invest in InsurTech.

 

However, the financial sector generally faces a shortage of technological talents. Kwock believes that the public also needs insurance talents with an innovative mindset. Although the public is aware of the shortage of talents and various universities or institutions have begun to hold courses on FinTech, there is still a talent gap in the InsurTech industry. Kwock also said that as a newly established company, OneDegree’s biggest challenge is establishing its credibility. He believes that it took decades, maybe a century, for large traditional insurance companies in the market to have credibility and gain the trust of their clients. Hence, he said that his company must enable clients to better understand and trust its brand by providing reliable services.