Insurtech - Myth and reality!

Across the multiple conversations I have had at events, conferences and meets, similar questions as stated below are being asked about InsurTechs:

1. What does an Insurtech mean? 

An Insurtech, as the name suggests is someone who uses tech to improve a certain part of the value chain.

Insurtechs no longer talk about disrupting the whole industry as it is simply not possible by one player. In the same light, Insurtechs don't mean direct-to- consumer alone!

It boils down to simplifying experience! In our case - it is customer experience for lifestyle solutions like travel. 

2. Insurtechs don't make money! You just burn it!

Unfortunately, this is partly true! And not true for everyone as well. Traditional Life Agency businesses took almost 10-15 yrs to break-even on a channel basis. Today we seem to have lesser patience. A bit of an extreme version and demanding returns in 3 and 4 yrs vs. What we saw a year or so ago, where significant funding went into companies that went belly up a few months later! A Singapore based regional aggregator comes to mind.

Neither was that model right of money following dreams, nor is this model of wanting overnight returns the right one.

Bottom line - Businesses need patience!

After a point, any story you place or build devoid of real business will be found out. Businesses run on 170+% combined ratio, using newer terms like sum assured  instead of premiums or gross margins instead of Combined ratio and talking about being an Insurtech when essentially one is a business introducer or connector, just wont fly for long!

Businesses built on strong foundations will always find a way. E.g. claims fraud engines, niche tech players who solve specific issues like cyber insurance. These businesses are here to solve a real problem and are built around good people and support systems. 

3. Direct-to-consumer is the future and hence, traditional models won’t survive; None of these Insurtechs will survive and they will all fail once funding stops.

Loaded views from loaded folks is all that I can say. 

Bottom line is that most pure-play D2C models have failed (barring some early successes in US, UK, etc.) due to cost of acquisition and challenges around anti-selection.

Hence, many moved towards a partnership model where one leverages on partners who have access to a captive base and to be able to offer embedded solutions on a frictionless basis to their customers. E.g. buying travel insurance with a ticket or device protection with gadgets. No different to what banks did for decades when they attached home insurance with a loan. The difference today is that since the products are fully digital with no individual level of servicing, price tends to be lower and yet viable.

However, a customer who wants to make material protection decisions will still want to talk to an Advisor. And that’s where professional education, experience, etc counts. But this model cannot service pure transaction based businesses in the traditional way either. Hence, the link between tech and advice becomes vital for all parties.

Most traditional businesses will survive as they are generally over-governed and micro-managed by regulators, board and various internal systems. This is a good thing for customers and financial industry needs stability. 

However, very few will really differentiate/ innovate for that fear and thats bad for customers. 

There is always a flip side of being strict parents at home as they say ;)

This is where InsurTechs help as they have to differentiate to survive. In that journey, most Insurtechs will fail or be consolidated as well. 

But, that’s just the way business will evolve and mature. The future remains that of multi-channel. Some will go deeper into specific channels, while others will be everywhere. But, customers will continue to decide based on life stage, need, convenience and above all impact on their lifes... Majority of retail mass products will be commoditised and distributed digitally. While, majority of emotional/material financial decisions will be backed by human intervention, even if AI may simplify large parts of it....

What do you think? Do share your thoughts

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Health insurance - The model is broken...

One of the raging debates of late across multiple geographies has been the increasing health insurance costs. This coupled with low penetration levels means there is a large part of the population that may not be able to afford it now, even more than before.

Health Insurance in Malaysia and S-E Asia is fundamentally flawed on several counts. 4 reasons for it in my personal view:

1. Medical cost inflation ranging between 13 to 14.5% in Malaysia as an example. No skin in the game for hospitals to control costs. And we have hardly any control over it. Not a single product launched today takes into consideration this kind of medical inflation. If they did, it will become unaffordable at launch itself. Hence, the need to constantly re-price causing a lot of consumer pain.

Doctor fees and room & board charges havent changed much over the last few years. But the investigation, procedures and related costs have sky rocketed.

2. Products are built on a comprehensive basis and distributors tend to play one over the other and as we add features (many of it so irrelevant and purely marketing), it adds cost. Further, "as charged" products are significantly more costly than "inner limit" products and more likely to be abused.

This quest for whose product is the most comprehensive one can end only one way! And we as insurers are to blame for this. We just havent done enough to challenge this model till it broke down.

3. High distribution costs. Life Agents earn around 40% commission first year (including over rides) on ILP products where health is the primary product albeit it is sold as a rider.

Add around 70% claims ratio + expense ratio of companies. It cannot be profitable for the 1st 2 years at least and then another 2-3 yrs more to make money if persistency and other factors stack up. My own view - health insurance will become a more stand alone product with lower distribution costs to survive in the times to come. And they will be distributed directly, digitally by intermediaries (low touch) or through affinity partners.

More comprehensive products will be distributed through face-to-face channels. For e.g. HNW cover, comprehensive covers at a justifiable price, etc.

4. On the group side, something has to give. Employees mis-use the system as we are on a defined benefits system in most of Asia. Co-pay and deductibles have to be introduced to put more skin in the game to avoid using hospitals like a break away zone.

And this is tricky as today it is an entitlement in this part of the world and the 1st company to not give it, will lose out on talents. But, like in the west, that is the only way out.

My own view - Mass market health insurance plans have to become modular with inner limits and mandatory co-pay.

And customers can earn more liberties like "as charged" options when their experience demands it. And data should drive that!

This kind of an engagement ensures more people are covered, more data to cover more and less of the complaints we hear in the market that insurers are becoming more and more restrictive on dealing with claims in the 1st two years. 

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We are at our best when we have no choice!!!

"C u soon” - I watched this Malayalam (Indian) movie earlier today. The speciality of the movie was that it was entirely conceptualised and completed during the lockdown and mind you India had one of the more stricter lockdowns at least during the 1st 2-3 months. 

And what was amazing was that quality wasn’t compromised. The acting, BGM, storyline and messaging was impeccable. A very heavy story left me with a very heavy heart in the end and going on my usual trip of how the society has so many problems that we don’t talk about enough or more importantly do much about. Alas - thats for another blog

This got me thinking. When we go back to our corporate lives, we have seen something similar. So many stories about people doing things faster. Yet in the old world of definition, they should have been slower as many are working from home? How is that even possible. Let me lay out 3 reasons in my view. I am sure there are many others and I am happy to hear them out.

1. Survival instincts - Mankind discovered most of lives essential skills when something was at grave risk. This has resulted in more meaningful time-bound energy being spent by people across teams to solve “real” problems. This time-bound discipline has made us much more efficient
2. Focus - In my view, CoVID has done what Industrial revolutions after Industrial revolutions couldn’t. As human beings we have become more productive. this is because the lines between work and family have merged even more now and this has forced us to be more efficient about work in a shorter time and worry less about life (what would kids do after coming home, traffic, etc.)
3. Manage by objectives - We had no choice but to finally practice what we always said we want to. i.e. measure people on what they deliver and not so much on how long they were in office or how long they worked on something. Reminds me of those school days were essays were marked higher when we wrote more

Finally, we all realise technology works (it was always us people who found ways to not adopt tech). 

Next time you want urgency, lets learn from this situation and find the 3 golden drivers”

1. How can we create real urgency?
2. How can we create smaller goals?
3. Who can do this the best and how can we empower them to go there? Instead of having layers and layers working hard to dis-empower them!

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Leadership in the time of a crisis - Part 2 of 2

Top trends for 2020/2021 across the dimensions of customer, distributors, employees and markets…

Employees:

For many, working-from-home for an extended period was an unknown territory or a no-no and for others, working away from office made much more sense. Like all things in life, moderation is the “word”. I don’t believe one way works and we need a mix of working-from-home and working at office.

This situation has also challenged the managerial capabilities of many traditional managers. For long, we have spoken about managing people by objectives vs. time. CoVID forced them to practice this and many came out stronger in my opinion. Similarly, those who wanted to work away from office all the time now value those brainstorming sessions, walkthroughs and so on much more.

For too long I have heard – “Insurance is a boring industry to work in” from young graduates, outside of actuarial science. I doubt any industry will go through the pace of change that insurance will over the next 5-years. This is driven by an existential question on the current model, costs associated, customer needs and the overall need for change now! On top of that, while some of the sexier industries like travel, hospitality and others faced mass closures, layoffs and salary cuts, insurance remained relatively stable, despite some short term capital and profitability challenges. Above all, people are now looking for stronger purpose around their businesses and insurance provides that. We might just see a younger and more dynamic bunch of people next time you walk into an insurance office J

At AXA Affin Life, more than 60% of our staff now are millennials and this number is growing every day.

Some organisations I have spoken to have implemented a set of high impact/smallish projects within 4 and 5 weeks. One of them I know has implemented a dozen within this time-frame. Unthinkable in our part of the world and goes to show, what desperation does to human beings. And this in my view will become the norm. Once a CTO of a large e-commerce firm told me, they have something going into production every hour! As insurers, doing that twice a week is a gigantic task that unsettled many across the length and breadth of the organisation.

At AXA Affin Life, we have a simple philosophy; any project that takes more than 3-months is not approved and in the last 2.5 years, we had only 2 projects that took longer and both occasions were due to governance reasons. And we aren’t talking about small projects here, we are talking about proper full-scale launches covering system development, product, pricing, marketing and so on. The discipline an agile project with a small budget and defined timeline brings coupled with prioritization based on consumer needs and consumer needs only is simply amazing and one will only know it, until one does it. No one better to say that than me as I am also guilty of having worked on multi-year waterfall projects which spent upwards of 7 figures and failed miserably once launched as it only had 1 or 2 lenses – distributor and or/internal!

Neither will agile be about a process, nor will it be what some complex consultant-talk type presentations claim – maturity matrices and concepts and frameworks. Simply put, it will be the veins of the organisation. It will be the way everyone thinks and delivers change!

Remember any new project that goes live today is already outdated from a tech stand-point!!! So, dont spend so much time on it, that it has to be killed on the day of its launch ;)

Customers and Distributors:

Millennials will bring in a whole new dimension to insurance. Many researches have proved that mobile phones are the number one prized material possession of a millennial/zillennial. This clearly will force insurers to “think mobile first”. This means our traditional way of adding one feature on top of another and on and on in response to other competitors will have to come to an end. These complex products cannot be delivered through a mobile and the complexity that this industry thrived on will be fundamentally challenged at its roots. Consumers will buy what they really want, how they want it and not buy what someone sells to them because they feel this is what someone wants.

For the same reason, I believe there will be a clearer division of lines across different channels with some cross-linkages:

(A)    COMMODITIZATION of lower involvement products - Travel, Motor, Home Simple health, protection and so on will move from traditional channels to pure direct or integrated direct channels like tele-assist

(B)    AGENCY 2.0 – A MORE PROFESSIONAL SALES NETWORK - Supported by digital, RPA, big data, Robo Advisors, VR and AI for complex products (Health, CI, Life, etc.).

Agents will be more productive than before as there will be fewer of them selling much more than before thanks to technology and the learnings they had during this CoVID for example. They realize they can sell or almost sell to most customers through a video chat or a call and very little requires direct physical meetings. Advice, trust and relationship are central to this model of business and age old philosophies of requiring physical meetings to evidence these are being challenged by technology and the lack of time and greater social awareness amongst people post CoVID. Hence, I do believe that Agents who are ready to change will thrive in a new world and this may also mean that may even sell a bit of lower involvement products through their digital channels/interfaces. This will help them build up their customer lifetime value and hence, their profitability. For too long, companies haven’t engaged Agents on this side of the world and hence, digital has been limited to digitization of processes. Beyond which it was considered a threat and not complimentary in nature as detailed above.

At AXA Affin Life, our message and intent from the beginning have been very clear – Digital will expand Agency channel and not contract it. As we acquire more customers who buy simpler and lower involvement products through digital channels, we are also aware that as these millennials will become older, richer and demand more complex financial products, they would need advice and hence, there is a massive opportunity for our Agents. In 2019, almost 20% of the sales of our 1^st year Agents (EYE Agents as we call them), came from the leads we provided them. Net result – both Digital and Agency channel grew in tandem and one didn’t substitute the other.

(C)     POWER OF PARTNERSHIPS – Integrate them to our value chain (CX, claims, anticipation, etc.)

While insurance will not be like FMCG with a clear market that they will operate in, insurance will cover a wide array of needs – ranging from upwards millions of dollars for legacy planning for high networth individuals to bit-size products sold as an add along with a primary product. They could be telco who want to sell protection with a connection because they know their customers very well or an e-hailing platform selling bite size covers for their drivers and customers on an on-demand basis.

I wanted to put in something out there using my crystal ball! Thanks to all these partnerships and new age technologies, some part of insurance may move from being charged upfront to being paid at fixed intervals based on usage (similar to any utility bill). E.g. Telematics data for car premium, wearable data for health premium, GPS data for travel premiums, etc.

Insurers will move away from doing everything on their own. This is one of the reasons why many insurers are large, complex and heavy. At the centre of what we do at AXA is specializing and being really good at what we do and partnering with those who are good in other areas. “Beyond Insurance” is a central theme for AXA.

Our vision is to be the preferred health and protection insurer for millennials in Malaysia. In this direction, over the last 2.5 yrs, we have already launched many initiatives for our customers, going beyond the typical health journey!

·       

• Free tele-consultation and drug delivery with DoctoronCall - Launched in July 2019
• COVID testing at a cost (Recent launch) and rewards platform with BookDoc - Rewards platform and discount programme since early 2018
• Rehabilitative care, mental well-being and psychology support with Naluri since early 2018
• Above all, we are fully digital and #1 digital life/health insurer - This means customers can buy, service and claim with us easily online. We have an eMedical card, customer portal, Whatsapp (Ask Michelle) and chatbot (ATOM) for servicing as well since 2018

And we are constantly exploring newer ways propositions with our 23+ partners!

This has never been more important than today when customers are worried about their health and also other elements around potential global slowdown. So we are going beyond just making it easier to buy or claim with us!

Markets:

Finally, this has been something I have personally been talking about for some time now. And it’s almost a personal favourite of mine. For too long, insurance KPIs that the market looks at have also been very traditional like EPS, profits, etc.

I do believe the time has come to give greater weightage to longer term lead KPIs like (1) # of customers acquired (2) How long are they staying with us? (3) How much more are they being from us?

This will ensure the industry moves to a more customer centric outlook coupled with longer term value building vs. walking a tight rope between short term financials and longer term value building commitments. As Jeff Bezos once said, “This quarterly result has actually pretty much been fully baked about 3-years ago. Today I am working on a quarter that is going to happen 3-years later. Not next quarter. Next quarter for all practical purposes is done already and has probably been done for a couple of years.”

This kind of fundamental change will be needed as the industry captains aim to transform the industry to be more relevant and transformative.

These are just some of my preliminary thoughts. I welcome your feedback and thoughts to learn better.

Disclaimer: These are my personal observations and are not the official views of the organisation that I work for.

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Leadership in the time of a crisis - Part 1 of 2

As Leaders, managing change is the name of the game! But, 2020 has seen a level of disruption never seen before in at least my lifetime and many would say, not in over a century! Not many who survived the Spanish influenza are still alive to share first hand insights of what 1918 looked like anyways…

2020 – Global Depression is here (2008 was recession, 2020 is depression)

Early estimates from most rating agencies talk about a decline this year. Early estimates from some of the larger economies of the world like China for Q1 and USA, UK and Singapore forecasts for 2020 are all negative. And we all know estimates most often than not in an aggregate situation tend to follow the wave, upwards or downwards and in this case it is more likely downwards. 

What does this mean for us? We are indeed in a territory where no one really knows. And when there is so much uncertainty and countries, agencies and organisations are still figuring out how to ride this wave and come up with action plans, we have to focus on the “controllables” and communicate more than ever before! In my personal view, the world will soon refer things in a context of pre-COVID and post-COVID world. Almost like a pre WW1/WW2 and post WW1/WW2.

1.       Communicate, Communicate and Communicate

Don’t be shy of over-communicating. Do not under-estimate the common sense of people across levels in the organization. At the same time, do not expect them to know what you know as leaders. This is the time to talk to them, message them and show them!!! No single method works, but together all methods work. Personally, I have run a weekly live stream to all staff to update them on the week that passed by. I also do a Daily video catch up with my DRs to see people, talk to them and make them feel a part. Finally, I have met every single staff in the company, in groups of 10-15 to ensure they have a space and place to communicate and express themselves.

2.       Make yourself vulnerable

Leadership authenticity is key. Yes, people need to see you leading. But, that doesn’t mean you have all the answers. Quite the opposite frankly! Tell them what you know and more importantly tell them what you don’t and how we can engage them in the process of discovery.

3.       Small actions go a long way

We recently sent a box of sanitizers, masks and a couple of other related items with a personalized letter to each of our staff. It was received very positively by our employees, despite it being a very small token of appreciation to the hard work and difficulties they are going through.

4.       Women, Mental health and the silent sufferers!

Women across the world and in particular in emerging countries are donning multiple hats. Lockdown has meant even more hats to wear and this has created a certain level of stress. Recent studies have also shown an increase in domestic abuse in some countries. It is vital for us to provide means and ways to help those who are less vocal and may need newer ways of engagement. Beyond this group, there are many others who can do with that little help from a professional on how to handle the “new norm” or “Work-from-home” challenges better.
We have launched a programme with Naluri to provide mental health professional support to our staff through a digital platform. We also run activities with our partners – BookDoc to keep our staff more active by way of rewarding them for walking more and so on.

5.       Great time to fix your basics

It’s often an over-used term that is in practice under-used! There is no better time for us as an industry to review many of our processes, clear backlogs, challenge status quo and establish new norms as volumes are lower and people have more time to think and solve problems that were kept in the cold storage due to the pressures of day-to-day sales

6.       Technology works, it was always us!

When things demanded, technology worked. From softphones to new business submission and Agency/customer portals. The same people who complained about technology are using it more than ever before and we hear lesser complaints than ever before as well. It once again goes back to the same topic – change management and how can we drive faster adoption during normal times!

7.       The value of strong governance and a challenge system within

I remember sitting through those endless debates on what if a pandemic hits us, what if an equity and bond market crash happens and so on. Worst of all simulating what happens if all the three happens together and how would we look like as an organization. Many a times I enjoyed these stimulating conversations and sometimes wondered how theoretical they can also be at some level!!! Come 2020, no one is saying that was theoretical and most are thanking our stars for such strong risk management practices that permeates through robust organisations. I do believe that 2008 global financial crisis made organisations stronger and 2020 will make us even stronger

People – The secret sauce!

“A Leader is only as good as his team” - During good and bad times, there is only one secret sauce and that is people! People helped us become the fastest growing insurer in the country last year and the same people will find ways to tackle this new challenge. Bet on your talent. They are your best bet during good and bad times!!!  

These are just some of my preliminary thoughts. I welcome your feedback and thoughts to learn better.

In part 2, I will write about what I think are the top trends for 2020/2021 across the three dimensions of customer, distributor and employees!!

(Disclaimer: These are my personal observations and may not represent the views of the organisation I work for.)

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InsurTech in Malaysia – The fastest fish will eat the small and big fish alike

Ahead of our 3rd AXA Affin - InsurTech event next week, I wanted to pen down some thoughts. Our first event had less than a dozen attendees and we all could sit in a largish table. The next one needed a smallish room as we had our Group CEO (Thomas Buberl) in town. The third one is expected to have 55+ attendees.

We have discussed a wide range of topics in the past – from “customer pain points” to “how can we collaborate better between an insurer and InsurTech/HealthTech players”.

This time around we will have a special panel attended by Albern Murty, CEO of Digi, Gopal Kiran, ASEAN FINTECH Lead at Ernst & Young and Yifei Fan from AXA Next Labs China (Our Innovation hub). Yours truly will moderate the session and we will discuss digital transformation, picking the right areas to partner and how each of us approach this topic. We have 2 Business Leads, 2 Evangelists of FinTech in the panel and a crowd who has been there and done that at varying degrees of success.

What we always discuss at length is the mistakes we have made and how we can get better as a group. As I always say, “To innovate, we have to be ready to be fired.”

We will also discuss how we can work together better and continue to build on our momentum as the #1 digital life protection insurer in Malaysia with 70+% market share. We have seen volumes go from nothing to x, 2x, 3x, 4x and 5x! At the heart of our strategy, is our obsession with customer experience and their user journey. 4 specific areas of focus for us have been:

1. Investing on understanding our customers, their preferences and reactions to our offers before and after launching them
2. Having simple metrics – i.e. can the purchase be done in less than 5-minutes vs. complex insurance indicators like APE
3. Partnership – we have tied up with 20 over partners (and counting!) to simplify our journey and to be able to promote the proposition to a wide audience
4. An amazing and simple tech proposition including API toolkits – Many a partner have commented that we are leaps and bounds ahead of the rest. We hope to keep at it!!!

Our digital proposition covers:

1. Simple products that can be bought in less than 10-minutes – Critical Illness, Health, Life and eGroup Term Life
2. Simplified products wherein we do not create multiple products. Instead we provide customers the choice to pick and choose
3. We have upgraded our propositions to cover new areas based on consumer feedback. E.g. kids, expats, etc.
4. Simplified sales and service journey by way of chatbots, virtual assistants that have humans behind it, apps to use eMedical cards and submit claims
5. Health and wellness propositions to make millennials potentially run their 1st 5 kms, lose weight and so on

Our team consists of “boring” insurance professionals like me, techies and geeks, people who don’t even understand the “I” in insurance, CX professionals and so on. We are attracted by what InsurTech presents as an opportunity and always use these “invite only forums” to tweak and re-tweak our philosophies and approach to innovation.

Malaysians are digitally aware, open to new ideas and we do have a bunch of very interesting start-ups and like-minded established players to work with. This space will grow exponentially. Watch this space for more on what we are doing in our own small way…

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Being customer obsessed

Why is insurance boring for a millennial employee and too complex for a millennial customer?

Think about it - Day 5 into your 1st job ever and you are told, the top 3 KPIs of this company are:

1. Profits
2. Sales
3. Margins

Hmmmm, and your job is to settle a claim or serve a customer!!!

Picture this now - I want to protect my financial outlay stemming from an unforeseen health event. I am told yes we can, this product covers you for A to D and doesn't cover you for E to G and A, B and D under specific conditions?

Insurance was always meant to be simple and cover the customer or his nominee financially against specific financial risks!!! 

Over a period of time, it moved away from this basic concept to become something its founders will not be able to recognise, if they were to come back alive. Reasons are many. But, broadly I would divide them under 3 buckets:

1. Product differentiation on flimsy grounds - one upmanship and this constant fight to have one feature over the other. Even if it made no sense
2. Complex cost structures and levels of margins - Company, reinsurer, distributor, risk cover and so on
3. Risk aversion and the extent of it being built over time into a system which essentially is a risk management business...

Simplicity is the need of the hour. And why do we simplify? We simplify it to make it easy for our customers and employees alike. I am a firm believer of the quote - "What gets measured, gets done". 

What if we change the game and tell our employees our goal is to be customer centric and this could manifest itself in many ways. Some examples below:

(1) Being the NPS leader in the market 
(2) Every product we buy online should take less than 5-minutes 
(3) I can commit/guarantee a time for claims settlement or service request

I love the concept of AHT at Zappos. From Average Handling Time used at normal call centres, they call it Average Happiness time. Now that one KPI changes the message to employees - CX over productivity any day!!!

At AXA Affin Life, we have had some interesting little success of our own by putting a "customer" in the room always:

1. Our digital products can be bought in less than 5-minutes
2. More than 90% of hospitalization takes place within 1-hr (vs. 4-hrs a year earlier)
3. We listen to the customer before we run our famous technical product processes (FGDs with a minimum rating threshold)
4. Highest management attention for customer complaints and we will go all out to use them as an opportunity and not a burden!
5. Priority to launch Products/programmes that pay customers for taking better control of their health!

One has to be happy to put oneself out there behind these simple KPIs.... These would inspire any employee as they are simple and relatable. And imagine buying from a company that prioritises me as a customer and builds its employee culture around this? We dont need PowerPoints for that! We need will and a strong one at that...

Finally, on the age old question of shareholder returns vs. customer satisfaction, I repeat it is a false dilemma and a lack of gumption on the part of CEOs and Management teams to craft a long term story around the impact superior customer satisfaction has on shareholder returns. 

Ultimately the food chain starts with a customer paying for a service. Employees are recruited to serve them and that creates the need for Managers, investors and so on.

It all starts with the customer. Be obsessed with them - why, what, how and who....

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