Insurtech Propels Distribution in Asia
November 23, 2020 — Singapore
Online platforms are catching on, but funds distribution through investment-linked products is still limited
Changing customer expectations, the availability of financial infrastructure services, and the COVID-19 pandemic are driving the rise of insurtech adoption in Asia’s major markets. As restrictions and lockdowns restrict face-to-face interactions, digital platforms have become the safest and most convenient way to sell and buy insurance.
China remains Asia’s leading insurtech market in terms of innovation and level of activity. Many customers have embraced insurtech, thanks to the ease of subscribing to and investing in insurance plans. On insurers’ own platforms alone—which accounted for 12.8% of total online life insurance premium income in 2019—the total number of customers who signed up for life plans reached 10.4 million in the same year. Online life insurance premium income reached RMB185.8 billion (US$26.6 billion) in 2019, up 55.7% and accounting for nearly 5% of China’s total life premiums.
However, the potential for fund distribution remains limited, given that life plans sold online are typically savings-type or participating policies, which are easier to sell. Furthermore, investment-oriented plans have suffered since regulators started cracking down on short-term universal life insurance products in 2016. Investment-linked products (ILPs) in the country accounted for only 1.0% of total life premiums in 2019. This trend is unlikely to change soon as regulators continue to emphasize financial risk management and protection-type products. Opportunities to manage life insurance assets will continue to come from insurers’ general accounts.
Singapore has become a hub for insurtech, attributed partly to the regulatory sandbox launched by the Monetary Authority of Singapore for fintech services. However, insurtech players are mostly conducting marketing and distribution. As a highly regulated industry, it is not easy to get into the underwriting business. So far, Singlife is Singapore’s only purely digital life insurer.
Hong Kong now has at least five digital insurers, but none of them offer ILPs, locally known as investment-linked assurance schemes (ILAS). This means there are currently no opportunities for fund houses to distribute products through these firms. The lack of ILAS in Hong Kong digital insurers’ product suites could be because they are not authorized to offer them, or they have consciously avoided them. Sales of ILAS involve more disclosure requirements and a more regulated process than pure protection products due to previous cases of mis-selling. It is difficult to meet disclosure and other requirements when a sale is done purely online.
Indonesia’s vibrant technology startup scene, its market size, young population, and rising middle class has made it a market to watch. There are opportunities for fund distribution through ILPs, which account for an estimated 40% of life insurance assets. However, there are restrictions on ILP sales conducted online. In May 2020, the regulator allowed insurers to sell ILPs through video calls and use electronic signatures for executing documents, but this is a temporary measure in response to the COVID-19 pandemic. Officially allowing insurers to sell ILPs purely online is needed to create more sales activity.
“There is a lot of potential for Asia’s insurtech players to reach large numbers of uninsured customers in the region and make insurance more affordable. However, this opportunity is largely limited to product marketing and distribution. Activity is also more in the non-life business, given the greater complexity of life insurance products and their highly regulated nature,” said Ye Kangting, senior analyst with Cerulli.
“This means the opportunity for fund distribution to grow through this channel is small at this point. However, insurtech is still evolving, and it can eventually open up as innovative practices become more accepted, including by regulators,” she added.