Three times out of 10, when she tops up her phone credit, Thu sees a pop-up selling insurance on Vietnam’s MoMo payment app.
“I just ignore it,” said the waitress in Ho Chi Minh City, unlocking her smartphone to show the ad, which offers insurance against a cracked screen.
Her reaction illustrates the challenge facing companies as they try to shake up Southeast Asia’s insurance market. Insurance penetration remains slight everywhere in the region except for Singapore, and sales networks are often old-school from Thailand to Vietnam, where salespeople sometimes sit along the highway, hawking motorbike policies costing as little as a dollar a year.
Financial technology startups are trying to win over customers as they bring in new products and new ways of selling—including via platforms that Thu and millions like her use every day—along with new ethical debates over privacy and other issues.
The question is whether the emerging field of “insurtech” has hit upon the right business model for the region.
Indonesia’s PasarPolis thinks it has.
The bulk of its sales, the company says, comes from “bite-size” insurance sold in transactions made on third-party platforms. When people drive for Gojek or order a backpack from Shopee, for example, they can add insurance with a click. If anything goes awry, they are reimbursed within minutes.
To win repeat customers, the company makes a point of paying out claims quickly, according to PasarPolis CEO Cleosent Randing. The stereotype of insurers resisting such payments because it hurts profit is short-term thinking, he says.
“The word insurance and the word love have been so far apart,” he told Nikkei Asia, adding: “We want to make insurance a lovable consumer product.”
With investors like smartphone maker Xiaomi and ride-hailer Gojek, PasarPolis has expanded to Thailand and Vietnam, and will launch a mobile app for people to buy policies covering a range of needs. The company would not say if it is profitable.
Other insurtech offerings in the region come from Qoala, Grab and Coverfox, as well as older insurers.
PasarPolis’ expansion comes at a time of sweeping change for the insurance industry, with trends from longer life spans to electric and self-driving cars making the job of actuaries increasingly complex.
There is also the question of whether companies can turn a profit by selling, in Randing’s words, “bite-size” insurance policies. PasarPolis says it has a database of 20 million customers and hopes that volume will work in its favor.
But industry analyst Christian Konig says that while selling many small policies may work for some companies, bigger policies are likely to have bigger margins. The Fintech News Network CEO gave an example of a flight he booked between Singapore and Dubai, which cost USD 200 to insure.
Some of Asia’s insurtech players, analysts say, have found a model in selling policies via third-party platforms, from payments to e-commerce channels like Lazada or Tiki. This allows them to save on distribution costs, as well as tap massive user bases.
“Asia, in some respects, is leading in the ecosystem space, and it’s really being driven by China and some … in Southeast Asia. They’re really major daily active-use players, where people use the platform seven, eight, 10 times a day,” McKinsey partner Alex Kimura said in a podcast by his company.
Southeast Asia, China and India comprise 50% of global growth in insurance markets, the company estimated in March without specifying a period.
Swiss Re also sees superapps as a path to growth. In a 2021 world insurance report, the Zurich-based company said, “We expect online platforms associated with broader sources like social media (e.g., Facebook, WeChat in China, and Grab in Southeast Asia) or health-tracking apps to become a key source of life insurance sales, particularly since consumers who use digital channels to buy insurance are likely to use the same channel again.”
The downside, Kimura said, is that, “I think a lot of insurers are now at the mercy of these platform players.”
Another common way insurtechs try to save money is by using machine learning to crunch the numbers on risk. Better predictions help companies align expenses and revenues, but like relying on third-party platforms, relying on algorithms and big data has possible pitfalls, too.
Armed with vast amounts of user data, insurers could build a customer profile with hundreds of traits, charging higher premiums for someone who frequents a certain restaurant, for example, or has a certain genetic makeup, analysts say.
“There’s great potential for abuse because the data exists and the user profiles are there,” David Tuffley, senior tech lecturer at Australia’s Griffith University, said of insurance companies. “And the algorithms that can use these big data sets are getting smarter all the time.”
Concerns about the industry in general, Tuffley said, include discrimination, opportunistic or “dynamic” pricing, and a loss of individual privacy.
New tech can create other ethical gray zones. People who use apps to count their steps or measure other health metrics, for example, may be eligible for lower premiums on health insurance. Medical insurers call this a discount, but those who can’t or don’t use such apps may see it as a penalty.