Hong Kong poise for insurtech growth in 2018

Chatbots, e-claims, and online sales await expectant clients.

With more than 47% increase in gross premiums to $101m Prudential (HK) Life moved up from second place in the previous year to the top spot this year. Prudential switched places with AIA International, which has also experienced an increase of 35% from $71mto $96m gross premiums. China Life and Manulife also went up the rankings from 4th and 6th to 3rd and 5th, respectively. HSBC Life went down one notch from 3rd to 4th. According to Guy Mills, chief executive officer of Manulife Hong Kong, the increase in his company was mainly attributable to higher sales from their bancassurance and broker channels, and a well received investment-linked product during 2016.

When Hong Kong’s Insurance Authority launched flagship programmes Sandbox and Fast Track late last year, it opened a huge opportunity for insurers to finally move away from their clunky legacy systems and collaborate with insurtechs in a more open and encouraging environment. These two platforms have allowed stakeholders to be more hopeful of the future of insurtech in Hong Kong, a city that has been left behind by neighbouring China’s speed of innovation in the insurance space.

EY’s Fintech Adoption Index 2017 revealed that Hong Kong has an average adoption rate at around 32%, compared to the adoption rate in China at 69%, India at 52%, and UK at 42%. In terms of insurtech, which has gained traction a little later than fintech, the numbers could be much lower, thereby leaving plenty of room to develop for Hong Kong.

“Sandbox provides a safe place for insurers, together with technology firms, to experiment with ‘insurtech’ pilot projects without the need for full compliance with the Insurance Authority’s usual regulatory requirements. This flexibility allows insurers to collect real market data and user feedback. The Insurance Authority could also assist insurers to overcome any regulatory issues before formal market launch,” said Kevin Bowers, partner, Howse Williams Bowers Hong Kong.

In fact, the city could be at an advantage when it comes to innovating life insurance. Hong Kong has one of the longest life expectancies in the world, and the insurance industry must step up in order to cover the risks associated with old age and capture the opportunities that this brings. 

As insurers recognise the demand for advanced-stage insurance products, they must also wager on their heavily tech-savvy population as well as on the evolving expectations of millennials. Speed is king in this arena, making it the perfect opportunity for insurers to overhaul their back-end systems and finally make it big in the digital landscape.

“2018 is likely to be the year of innovation for the insurance market in Hong Kong. To maximise the benefits of the regulator’s supportive stance, we predict that insurers will blend technology with insurance products, from distributing microinsurance products via Chatbots to using Internet of Things devices to collect customer data, thereby monitoring risks more accurately and offering more competitive prices to customers,” said Joyce Chan, partner, Clyde & Co Hong Kong.

Pioneering care
Tony Chan, associate director for policy and development, Insurance Authority, said that insurtech is still considered a relatively new phenomenon compared to banking and other areas of financial services. Despite this, insurtech is rapidly catching up on the back of strong investor confidence in the sector’s growth potential. For instance, China’s first online insurer ZhongAn held the first major initial public offering (IPO) in 2017, raising US$1.5b on a market valuation of US$10b.

“We are excited to see more insurtech start-ups emerging in Hong Kong. An increasing number of Insurtech start-ups have approached the Insurance Authority (IA) to explore possible applications of their Insurtech initiatives. From the discussions with these startups, we find that the potential applications of Insurtech could be wide-ranging, covering almost the full spectrum of the insurance value chain, from product development, underwriting, sales and advisory, policy administration to claims management,” Chan said.

Several insurers have already achieved strides in developing digital solutions for their products. ManulifeMOVE, Manulife’s unique insurance concept integrating a health-tracking program with insurance solutions, has experienced tremendous success as more clients jump on the bandwagon of maintaining active lifestyles in exchange for discounted premiums. Manulife has also recently launched claimsimple.hk, an e-claims solution that allows customers to make a medical insurance claim anytime anywhere in less than a minute.

Insurers have also begun leveraging data analytics to monitor and observe the needs of their clients and provide them more personalized solutions. Edward Moncreiffe, chief executive officer, HSBC Insurance Hong Kong, said that they have been working on a simple, purely digital solution that is unmatched in the market in terms of value for money and ease of online application. 

The application for HSBC Term Protector takes just around five minutes, making it the fastest in the market. Moncreiffe said that by answering just three questions, clients can be covered by up to $5m.

Meanwhile, HSBC’s Insurance Academy, launched in 2017, provides rigorous training and development of staff in order for them to deliver an innovative range of services. According to Moncreiffe, the training curriculum is designed based on Engage-Discover-Recommend-Act-and-Service (EDRAS) sales process, which provides a framework to train the staff and partners based on customer- and user-centric approach.

Keeping customer-centricity According to Chan, IA has seen increasingly greater interest in developing customer-centric innovations. For instance, some insurers have introduced e-onboarding and e-Financial Needs Analysis (e-FNA) to speed up the underwriting process. 

He said that many of these insurers are employing chatbots with artificial intelligence (AI) to handle customer enquiries as well as a claims management system to speed up and standardise the claims process.

“Just to give an example, patients who have pre-existing diseases in the past would always face challenges in purchasing medical insurance, either being rejected by insurance companies or being charged with premium loading. Now, thanks to the innovative online health management tools that could track and analyse the users’ health indicators, insurers may now use the data to adjust premiums based on the risk level,” Chan said.

Better customer experience
Mills said that advances in technology, particularly the adoption of mobile devices, is one of the biggest consumer trends for all insurers. Mobile devices have made it possible for insurers to get to know their clients more and engage with them much faster and more effectively.

“The demand for a better customer experience will continue to drive technology change in 2018.What customers increasingly want is convenience, responsiveness, and the chance to have all sorts of information at their fingertips,” Mills added.

“It’s been reported in many instances that Fintech would disrupt the financial industry, including the insurance industry. So far, are those Insurtech applications we have seen disruptive or just facilitating the sale and development of new insurance products in Hong Kong? What areas of Insurtech would be most promising in the near future? Blockchain, AI, chatbots? I do not have the crystal ball, but these may be promising areas for further advancement of the Insurtech ecosystem in Hong Kong,” said Chan of the Insurance Authority.