This article first appeared in Personal Wealth, The Edge Malaysia Weekly on January 8, 2018 - January 14, 2018

The insurance industry is often saddled with standard operating procedures that come with a lot of paperwork, particularly when it comes to claims. As a result, policyholders frequently find themselves turning to other means of obtaining funds when payments are delayed, says microUmbrella founder and CEO Lim Fang Jiaw.

“I was involved in the [insurance] industry for 10 years, but I left it for a time because I felt that insurance payouts were too slow. Thus, you had clients calling and chasing you at all hours of the day [to find out when they would receive their claims]. I didn’t think it was appropriate, and it certainly wasn’t very peaceful either,” he says.

He adds that the acceptable timeframe between putting in a claim and receiving payment is between two and four weeks. “But even that is too long when you take into account the underlying rationale for purchasing insurance in the first place.

“People buy insurance because they lack the means to come up with a certain sum of money when it is required. So when they make a claim, it is likely that they need the money as soon as possible. And they become desperate when the payouts are delayed.

“At present, the fastest way to raise funds is to either borrow from family and friends or go to loan sharks. I know someone who ran into financial trouble and needed money quickly. He borrowed RM10,000 from a loan shark, but ended up having to pay RM30,000 with interest. I feel that it is wrong for people who already have insurance to have to resort to such desperate measures to raise cash.”

According to Lim, much of the two to four weeks’ insurance payout timeline is taken up by non-claims administrative and logistical tasks. “I would say that on average, about two of those weeks are spent on handling just logistical and administrative tasks related to the insurance claim, very little of which have any relevance to the actual claims processing.

“For example, mismatched and missing paperwork can cause big delays. If, for instance, a receipt from a police report is missing, the claims department would inform the insurance agent, who would then inform the client, at which point the client needs to go to the police station. The station would then reissue the receipt, and the entire process would start all over again.”

Another factor that contributes to the long processing time is the sheer amount of paperwork that needs to be completed, says Lim. “The buying process is simply not user-friendly. For instance, if you look at the insurance questionnaires from today and compare them to, say, 50 years ago, very little has changed. This is a sign that the paperwork and documentation have not gone through any innovation.

“In a way, it’s ironic because insurers have all this paperwork that needs to be processed, which doesn’t leave them with any time to actually look into streamlining it.”

The cumbersome insurance distribution networks in Malaysia are also notoriously resistant to change. “The microinsurance model is not attractive to traditional insurers because it is difficult to justify the small profit margins against the cost of maintaining a large network of brokers and agents,” he explains.

To address this, Lim has launched microUmbrella, Asia’s first mobile-only, on-demand, microinsurance and microtakaful services provider. The app will be available for download in Malaysia and Singapore from this month.

For Malaysia, microUmbrella provides microtakaful products via its insurance partner Hong Leong MSIG Takaful (HLMT), while in Singapore, it provides conventional microinsurance products via Hong Leong Assurance, Singapore.

Lim says the policies provide coverage for a maximum of one year, with the minimum coverable periods being 14 days for Malaysia and 30 days for Singapore. “Of course, for travel insurance, there will be a minimum period of one day.”

The app is expected to be launched in Hong Kong sometime this year, once Lim finalises negotiations with a leading international insurer that is operating there.

Currently, microUmbrella offers personal accident microinsurance with three types of coverage — death and disability, medical reimbursement, and a weekly indemnity. It also offers travel microinsurance as well as phone protection.

“The full details and product features will become available on the app once we launch,” says Lim.

He adds that in the insurance industry, the customer passes the documentation to the insurance agent who, in turn, sends it to customer service, after which the documentation would finally reach the insurer’s claims department. He aims to expedite this process via his app.

“With our app, customers are connected directly to the claims department. What the customers need to do is just snap a picture of the police report and damaged vehicle, and upload it to the app. It is then transmitted instantly to the claims department on the other end.

“Suppose the picture of your police report is not very clear. Now the insurer’s claims department can simply send you a push notification informing you of the problem, and all the customer needs to do is snap a clearer picture of the police report and resend it via the app.

“There is no need to liaise with an insurance agent and no need to involve customer service. This results in reduced processing times, paperwork and menial administrative and logistical issues. Additionally, the claims departments can now turn around cases much faster,” Lim explains.

The app is connected directly to the insurance companies by means of an application programming interface (API). Lim says the purchasing and claims departments will have unique microUmbrella desktop-based dashboards from which they can view all insurance applications and claims from the app user. This, he explains, is why purchasing a product on the app as well as the subsequent claims process will only take a few minutes to perform.

“From this dashboard, the insurance company is able to interact with the user. The claims department can comment on any part of a user’s claims via the API, which would then appear on the user’s app by way of a push notification.”

Filling the gap

After spending 10 years in the insurance industry, Lim, who is a Malaysian, felt like he needed to step away. So, he set up a firm in the country to provide foreign manpower. “It was here that I first began to streamline my processes. All decisions and processes took place only on soft copies and email, so I managed to keep the cost down and remain efficient.

“And then, in early 2016, I took note of Bank Negara Malaysia’s call for insurers to create a microinsurance industry. But they did not respond due to the low profit margins, and due to the fact that microinsurance products were very unpopular among their distribution networks.”

Armed with the experience gained from his time in the industry, Lim decided that the time was right for him to make the jump back into the sector. He founded microUmbrella in early 2016, and set out to create a service that would fulfil two of the main guiding principles that Bank Negara had set out for the microinsurance industry — to be cheaply available, and with little to no red tape.

“These products will be featured on our app. The user can purchase and sign off on the contract right on the platform. There is no physical contract, and no need for the customer to establish physical contact with the insurance provider. We would then draw a fee from each successful purchase,” Lim explains.

To achieve this, he knocked on the doors of Malaysia’s top insurers. “I was armed with a 35-page working paper and met 16 insurers. They were very open to my idea until, that is, when they heard what I needed them to commit to. In order for us to create a microinsurance service that is both cheap and can be easily processed, I needed the insurers to design entirely new and uniquely ‘micro’ insurance products. Also, and more importantly, I needed direct access to their claims department. None of them was willing to commit to this.”

However, HLMT saw Lim’s vision, and decided to partner him. “While creating the products, we discovered that our insurance premiums were too high. In fact, our travel insurance premiums were about 40% higher than Tune Protect’s.

“So I spoke to the managing director of HLMT and she agreed to bring the matter up to her reinsurers. Eventually, we managed to improve the travel insurance premiums to such an extent that our travel insurance is now 40% cheaper than Tune Protect’s,” he says. It was very important to him that microUmbrella achieved double-digit percentage premium reductions, especially on a product like travel insurance.

Lim points out that travellers tend to prioritise convenience and accessibility, apart from cost, when it comes to choosing a microinsurance product.

“Say you end up losing your luggage in a foreign airport. It can be very frustrating and prohibitive to make an insurance claim since it can only be done once you’re back home. With microUmbrella, however, since the application and claims process takes just a few minutes, all you need to do is get a note of acknowledgement of the lost property from the airport management, snap a picture of it and then upload it to the app. It will then be processed by the claims department and the claim will be paid out within seven days.”

Lim decided to focus on providing microinsurance products that provided coverage for up to a year. “I could have gone for longer timeframes but I wanted to focus on creating a shorter, on-demand service because it is cheaper to provide and also, it is the kind of thing that people need right now.

“It is not uncommon for people to work in the sharing economy, perhaps by renting their homes out on Airbnb, or driving for Uber or Grab. Perhaps you are no longer working at a full-time job, or you’d like to supplement your income by being a service provider in the sharing economy. You can now decide to try becoming a Grab or Uber driver for a few weeks, during which time you can purchase a short four-week, low-premium personal accident microinsurance product.”

He says while a greater number of people are now participating in the sharing economy, the insurance sector has not yet moved in to service the needs of this segment of the working population. “People participating in the sharing economy need protection too, but much of the industry has not yet evolved to cater for these on-demand service providers. This is where I believe on-demand microinsurance will excel in.”

microUmbrella will also be launching an e-commerce-centric shipping returns product sometime next year. This, Lim says, is also in response to the growing number of millennials venturing into the e-commerce business.

“However, one major cost of running an e-commerce business is the return shipping. This is something that sellers cannot control, and if they do not offer free shipping and returns, then customers will not buy from them.

“Absorbing the cost of return shipping can be very prohibitive. Suppose one sells T-shirts online, for which one would make RM5 in profit per T-shirt sold. But if a shipping return costs RM20, you are essentially losing RM15 for every T-shirt that gets returned to you. So if for one month you sell 10 shirts, it is a profit of RM50. However, if you receive three returned packages for a total of RM45, it would almost wipe out that month’s profit.

“Now, if the online sellers can quote us a fixed cost for return shipping, then we can insure them for a specified number of returns over a certain period of time.”

This, Lim says, is very convenient since most online sellers are only active for a few months at a time. Thus, short-term, on-demand microinsurance products would work well for these sellers.

In fact, Lim believes that shariah-compliant microtakaful products have a lot of potential, not just in Malaysia but overseas as well. “Right now, there are no microtakaful services available in the market, and this is something that microUmbrella provides.”

He says, “The next series of products that we will be launching are unemployment, term life and, as mentioned earlier, return shipping. We’re also considering launching a loss of business revenue product that could indemnify a business owner for up to a certain amount for loss of business revenue due to certain disasters. Unemployment and term life will be up and running in the first quarter of 2018.”

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