This article first appeared in Wealth, The Edge Malaysia Weekly on December 27, 2021 - January 2, 2022

The insurance industry is changing rapidly, with 2021 witnessing some of the biggest shifts in recent years.

As the world navigated the pandemic, especially in the area of health and safety, more people are asking questions about life and health insurance protection while demanding better digital solutions. 

The digitalisation trend that has been gradually gaining ground in the centuries-old insurance industry also prompted incumbent insurers to work more closely with insurance technology (insurtech) start-ups.

In the future, insurance premiums could be priced based on big data and billed monthly, just like your water and electricity bills. All thanks to technology. 

Ben Ng, CEO of AIA Bhd, tells Wealth the pandemic has accelerated people’s awareness and acceptance of insurance. Over the last two years, demand for products that come integrated with Covid-19 coverage has been high. 

Eddy Wong, CEO and co-founder of VSure, an on-demand lifestyle digital insurer (approved by Bank Negara Malaysia under its Financial Technology Regulatory Sandbox Framework), saw increased interest in life insurance, especially health products, as people feared their health and livelihood would be affected if they had Covid-19. 

“Based on data points and research, we believe there is a huge demand for any kind of Covid-19 coverage, which is why we are developing a new product for post-vaccination coverage,” Wong says.

“Research on people who are concerned about vaccination showed that they wanted some assurance that in case anything happened to them, they would be covered. As the effects happen within 14 days after vaccination, we provide on-demand coverage for 30, 60 or 90 days.”

More importantly, technology, in the form of automation and personalisation, dominated the insurance landscape, prompting insurtech players to further diversify their products and services, and forcing incumbent insurance companies to adapt to technological advancements.

“It was a wake-up call for incumbent insurers,” says Wong. 

“They were prompted to work with insurtech companies because there were clear opportunities to drive synergies as well as more revenue channels. This inadvertently opened up more opportunities for insurtech players to come together and ­co-create and develop products,” he adds. 

The technological advancements accelerated interest from the investor community. Wong says over the last two years, insurtech unicorns were seen in Europe, while in countries like Hong Kong and Singapore, insurtech companies raised a lot of money.

Travel insurance that took a hit because of the ongoing pandemic has rebounded strongly as global lockdowns eased. Rohit Nambiar, Tune Protect Group CEO, says there was a steep increase in travel insurance towards the end of 2021. 

Innovation is also picking up speed in the travel space in areas such as baggage protection, cancellation protection, travel delay insurance and Covid-19 coverage. “Within the Covid-19 coverage area, there are low-end plans that provide an allowance if you get Covid-19 and high-end plans that provide hospitalisation coverage,” Rohit says. 

In the current environment, insurance companies are seeing a consumer shift towards easy-to-use and convenient digital platforms. AIA’s Ng says it seems only natural that insurers also explore the various opportunities that lie within the digital space.

“The beauty of digitalisation is that it removes the barriers of time and space. Due to digitalisation efforts spurred by the pandemic, our life planners can now engage their customers any time and anywhere. Potential customers get to experience a process that is convenient, seamless, efficient and secure.”

But Ng believes insurtech is not just about being able to sell directly to customers as it is also a means to elevate the digital experience so that customers can engage with the company on a new level.

VSure’s Wong concurs. He says it will be interesting to see how incumbent insurers collaborate with insurtech companies or digital insurers in the coming years. He believes these insurers will seek insurtech solutions to help with product distribution.

“We [digital insurers] are strong in digital marketing and online distribution, and we can help. There will be collaborations and acquisitions of insurtech companies by incumbent insurers, especially those that are looking for an ecosystem partner relevant to their build-up,” he says.

“But the opposite can happen too. In China, we are seeing insurtech companies buying over bigger insurance companies. These are real possibilities.”

From a technology standpoint, utilisation of the cloud is a crucial part of the digitalisation journey. Tune Protect’s Rohit shares that when he first entered the insurance space, cloud adoption was a big roadblock as the regulatory environment made it very difficult. 

Insurers should be much more open to the cloud, says Rohit, adding that they are now working with Bank Negara to make it happen. 

“The cloud makes the [digitalisation] journey so easy. It becomes easy to connect to the external ecosystem where we can use services provided by others who are also cloud-based. And with the help of artificial intelligence (AI) and the Internet of Things (IoT), we can offer better solutions too. This is something that’s very important as we progress and we are working very closely with Bank Negara to get the approval,” he says. 

Data will also take centre stage going forward, says Rohit, as insurers develop products and make data-driven decisions. “Now, we don’t have to make guesses as to whether a product or service will work. There is data to validate the decision and that will help us cross-sell and upsell products and services.”

Gone are the days when all an insurer has to do is develop a product and push it to customers. Rohit says in today’s world, customer experience is important not only in providing convenience to customers but also in ensuring that a product is chosen over a competitor’s.

“Now, customers can switch providers with just the click of a button. So, it’s important to provide convenience in just a few clicks, provide products and services that they will need and provide the right support and aftercare,” Rohit points out.

It is partly due to online competition that AIA launched a super app, My AIA, which gives customers easy access, convenience and a complete view of their engagement and interaction with AIA at the touch of a button. Ng says they can manage their plans, do a quick assessment of their financial health, submit claims, track their health, upload photos of their meals to find out if they are maintaining a balanced diet, earn rewards, make online payments and much more — all from the comfort of their own home.

“Digitalisation means that we can introduce new services that support our customers’ health journey virtually — one such example is the telemedicine services within our My AIA app. This new service, which is offered to our individual and corporate customers at a preferential rate, allows them to get immediate online medical consultations and medicine prescriptions without having to leave home,” says Ng.

“Understandably, doing things online is not necessarily everyone’s cup of tea, and this could be true for those who are less digitally savvy. There are customers who still prefer a more traditional approach, given that most insurance consultations and sales have always been done face to face … at least prior to the pandemic.

“While we go digital and focus on high-tech pursuits, I believe it is equally important for insurers to not lose the personal touch when interacting with customers. It is possible to marry the best of both worlds — that is, have the efficiency of technology while retaining the interpersonal communication that customers still appreciate.”

While travel and motor insurance will be one of the key areas that will drive growth over the next two quarters, VSure’s Wong notes that the focus will also be on designing products for small and medium enterprises (SMEs).

“Many SMEs cannot access insurance because of affordability. They cannot afford to pay millions a year for staff, like big companies do. There are huge opportunities for us to find ways to help the SMEs. They are the backbone of our economy,” he says.

Lifestyle-based insurance, such as coverage for travel and the home, lends itself well to advanced tech devices such as smart-home systems and others that use IoT. For that reason, Rohit believes in the years to come, insurance premiums — whether for motor, housing, travel or health insurance — will be invoiced like an electricity bill, where people will get a pay-per-use bill at the end of the month.

In fact, this trend is already being seen. “Imagine at the end of the month, you get a bill saying you drove this much and you had good driving habits, so we can keep your premium at this price for the next month. Or, for example, being assigned a health coverage premium based on physical activity and sleep habits,” says Rohit.

Pay-per-use will also be attractive to the B40 community, says VSure’s Wong, as it breaks down the premium to bite size, such as a weekly premium, making it more affordable. It helps that those in the B40 bracket have mobile phones although insurance is rarely spoken among them.

“I think what we need is to come up with B40 types of products that cost only RM5 or RM10,” he says. 

“We innovate with personal accident (PA) products, which are customised to different lifestyles. But it will be interesting to see, over the next two years, what pay-per-use will be like for life insurance products. If that can be done, it will be a major breakthrough.”

Wong says at VSure, the concept of selling on-demand or bite-sized insurance is to embed it in a person’s lifestyle while ensuring that it isn’t a case of buying insurance unknowingly. Embedding insurance policies into events is one way of doing this.

“For example, you sign up for a sports event and the insurance is already embedded in it. In this case, we work with the event organiser so that when the participants sign up for the event, they are subscribing to insurance protection,” he explains.

Currently, the challenges that the country faces in insuring the B40 community aren’t just about availability and affordability. AIA’s Ng says there are many government and insurer initiatives that provide affordable coverage for individuals and families. There are also incentives to encourage them to take up insurance. But awareness continues to be the biggest barrier.

The 2019 National Health and Morbidity survey shows that the public’s perception of personal health insurance is still below satisfactory level and the insurance penetration rate remains stagnant at 54%. There are various barriers to increasing insurance penetration, says Ng, one of which is the belief people have that they have enough coverage or that they are adequately covered by their company.

“Many do not realise that they may have a protection gap and that their company medical/insurance benefits are not portable. It doesn’t follow you when you leave that job. But the pandemic has shown us that our health isn’t something to be taken lightly, and we’ve generally seen an overall increase in acceptance of the need for insurance.

“People want insurance and are willing to make other financial sacrifices to be covered if they need to (according to a study by KPMG). Having been in the insurance business for over 25 years, I have never seen a shift quite like this before,” he says.

“This change, however, isn’t going to happen overnight. But it is a step in the right direction as we try to make insurance solutions more accessible. We have the responsibility to not only help customers choose the right kind of protection in line with their needs and budget but more importantly, also help them stay protected.”

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