Going Digital – Insurance in the Sharing Economy
by Dawn Sit
As first published on the Asian Insurance Review:
The advent of digital technology paved the foundation of the sharing economy, which is now ubiquitous to many industries, and steadily impacting the insurance world. We canvassed three InsurTech startups for their views on the industry’s evolution and how it can stay sustainable.
The term “sharing economy” was added to the Oxford English Dictionary (OED) in 2015, and even then, the OED was considered a laggard when it came to tech terms. The phrase’s induction into the English language is but a formal recognition of the present era of consumption.
The sharing economy today is more ubiquitous than ever, as industries like entertainment, transport and hospitality – so long as they serve mass consumers – grapple to adapt their operations to its intricacies.
In the last few years, the insurance industry has seen the emergence of InsurTech startups that have made enough of a splash for incumbents to sit up and pay attention to. So how will insurance evolve in the sharing economy? How can the industry ensure its sustainability in the new consumer landscape?
Ms Maureen Nova Ledesma, CEO and Co-founder of VESL, a micro-trade credit insurance platform, believes that the rise of the sharing economy will in turn proliferate the accessibility of insurance. One can expect more mutual insurance concepts to spring up, enabling clients to obtain enough “coverage at a competitive price”.
Insurance is a right – not a privilege – and should not be exclusive, she said. Cover should be affordable to everyone because “that’s basically what the sharing economy advocates”, and bringing trade credit cover to more smallholders is exactly what VESL is trying to do. (See “New kids on the block”)
Both Mr Ashley Kee, CEO and Co-founder of Bandboo, an InsurTech that pioneered unemployment insurance in Singapore, and Ms Regine Lai, Managing Director of my-insurer, a policy management solution, agreed on the trend of “on-demand” insurance taking dominance. Insurance coverage will be dictated by the customer, when they want it, and how they want it – a customer engagement concept that many industry incumbents still struggle to deliver on.
But insurers must first be able to collect the correct data to understand their customers and market segments, a key aspect that he noted the industry is “particularly weak in”. Or even if incumbents have collected the relevant data, some may not be as willing to share it, Mr Kee added.
If one has not already noticed, the nature of the sharing economy is fast-paced and lean – and is a complete opposite of the classical economy that traditional insurers operate in, where a relatively slower and more cautious approach to doing business is taken, Ms Lai said. So insurance incumbents will face the inevitable need to meet this new consumer landscape with adaptability and fast integration with their existing business models to stay abreast.
But the industry will also need to tackle the challenge of trust that is at the foreground of all sharing economy businesses, she added, as users need to be assured of security in any transaction conducted. “Most traditional insurers have yet to master how to cover the wide spectrum of peer-to-peer transactions. Constant changes in regulation further complicate the challenge.”
Throw tech giants into the mix and the result is a melting pot of challenges that must be tackled with urgency. Mr Kee highlighted that technology behemoths like Facebook, Google and BAT (Baidu, Alibaba, Tencent) have all the data needed to structure new products in this new economy. If incumbents do not, or are unable to collaborate, “it may well leave us with a situation where the tech giants start developing in-house products” as a means of diversification.
Chinese online insurer Zhong An, he said, is a particularly good example of positive collaboration between a tech giant and an existing insurer, and adopting good technology. “The next dominant player to emerge in the InsurTech space will probably be a startup that has the professional expertise of an insurer, and who is also agile and dynamic enough to deliver its offerings seamlessly online.”
Indeed, collaboration between traditional carriers and new InsurTech players is the crux of the industry’s sustainability that cannot be emphasised enough. While startups can innovate on products relatively quickly, insurance companies have the capital and experience and resources to take on regulations. Hence, it takes two hands to clap, working as supportive partners for a healthy insurance ecosystem in the sharing economy, Ms Lai said.
Meanwhile, Ms Ledesma is optimistic of the industry’s future: Between traditional insurers, InsurTech startups and non-insurance competitors, the latter two are not likely to dominate insurance, at least for the next few years. “While tech will advance, it takes people to really make the business work – and the reality is that talent is in shortage.” “
It’s hard to see a successful insurance talent willingly move across to join a startup. So the outcome will depend on which entity is able to retain and grow its talent pool, and meet the needs of the market in its offerings,” she added.
Lead or lag
Thus at this point, it would not be wrong to say industry incumbents have a leg up on the competition. But for how long insurers can maintain their lead will depend on companies’ drive to transform their business to suit the sharing economy. It is high time for incumbents to lose the laggard label. In Bandboo’s experience, Mr Kee said their collaboration with insurers has been “generally positive”, save for two stumbling blocks. The first is compliance and regulatory issues, which most new startups face. The other hurdle is “existing technical infrastructure within companies that is often old and can cause potential issues if we try to integrate and collaborate.” Change in the insurance industry, he added, is often limited to distribution, with “very little effort focused on product structure, underwriting and even the inherent business model”.
New kids on the block
Asia Insurance Review checked in with three startups, each a pioneer in their respective scopes, for a quick brief on their core missions and challenges they currently face.
Q: What is VESL’s core purpose and where does it fit in the insurance value chain?
VESL provides one-of-a-kind insurance protection for trade invoices. Our platform allows a pay-per-invoice premium, thus allowing our clients financial flexibility for premium payments, instead of committing to an annual plan.
We aim to fill the gap, particularly for trade credit insurance. Making available a product that was once out of reach to small and medium businesses through the use of an online platform which reduces the cost, risk, and overall level of effort for insurance providers.
What our platform does is extend the customer footprint to the mass SME market that the big insurers are unable to serve. To the banks and the lenders of the SMEs, the scheme provides a great risk management solution to support their SME clients. At the same time, we aim to give SMEs access to greater trade financing facilities so they can grow their business faster.
Q: What key obstacles keep VESL from fulfilling its aim?
Getting the word out on a new product tends to be difficult. Not only is it time consuming, we also need to use an innovative marketing strategy to sell our product well. Talent acquisition is another challenge. Fortunately for us, VESL has help from Sage Fintech, our venture partner that provides us the necessary advice and guidance.
Ms Maureen Nova Ledesma
CEO & Co-founder, VESL
Q: What is my-insurer’s core purpose and where does it fit in the insurance value chain?
Our vision for my-insurer is to be a one-stop solution for intermediaries and policyholders alike when it comes to policy management, purchase, renewals – essentially the entire purchase and servicing cycle. At present, my-insurer is the only solution of its kind that provides a value proposition of equal strength to both intermediaries and policyholders. We are an enabler.
At present, my-insurer is actively onboarding intermediaries and corporate partners onto our solution. We are also collaborating with other InsurTech companies to better the development of my-insurer. We have since seen exceptional results in Singapore and have started to slowly expand into neighbouring markets.
Q: What key hurdles do you face in bringing my-insurer to the market?
Tenacity and patience. Most InsurTech startups are dabbling in a new ecosystem without precedence, pushing boundaries and creating new spaces. It often takes time for acceptance, recognition and adoption both from users and traditional insurers to view us as partners and not competitors.
Ms Regine Lai
Managing Director, my-insurer
Q: What is Bandboo’s core purpose and where does it fit in the insurance value chain?
Bandboo is an InsurTech platform that allows members to form insurance communities to protect themselves without going to an insurance company. At this juncture, our focus is very much in customising solutions for new emerging industries that are typically overlooked or neglected by insurance companies. We aim to fill the gaps through niche products so our products are generally complementary in nature to general offerings within the insurance industry.
For example, we created our Car Excess Protection plan, tailored towards drivers within the ride-sharing economy. Excess (or co-payment) charges are often very high for these drivers due to a lack of data and poor understanding of this market segment, so we use technology and plenty of non-traditional data points to help understand this particular segment and to structure the product more efficiently.
Q: What key challenges do you face in entering the industry?
To begin with, regulation is the main challenge for InsurTech startups like ours and this was a hurdle that we worked very hard on, to convince MAS that we were operating within the regulatory framework. Secondly, insurance is one of the most advertised industries globally, but most startups are generally not well-funded, so we definitely have to be creative in our go-to-market strategies and how we brand ourselves to the general public.
Mr Ashley Kee
CEO & Co-founder, Bandboo