Fintech puts insurance on mobile apps from Indonesia to Vietnam

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 don’t know,” said the waitress in Ho Chi Minh City, unlocking her smartphone to view the ad, which offers insurance against a cracked screen.

His reaction illustrates the challenge faced by companies as they try to shake up the insurance market in Southeast Asia. Insurance penetration remains low 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, peddling motorcycle policies that cost as little as a dollar a year.

Fintech startups are trying to win over customers by offering new products and new ways to sell, including through platforms Thu and millions like her use every day, as well as new ethical debates about privacy and d other problems.

The question is whether the emerging field of “insurtech” has found the right business model for the region.

PasarPolis in Indonesia thinks so.

The bulk of its sales, the company says, come from “small bites” insurance sold through transactions made on third-party platforms. When people drive for Gojek or order a backpack from Shopee, for example, they can add insurance with the click of a button. If there is a problem, they are reimbursed within minutes.

To win loyal customers, the company makes a point of paying claims quickly, according to PasarPolis CEO Cleosent Randing. The stereotype of insurers resisting such payments because it hurts profit is short-sighted, he says.

“The word assurance and the word love are so far apart,” he said. Nikkei Asiaadding, “We want to make insurance a popular consumer product.”

With investors like smartphone maker Xiaomi and megaphone Gojek, PasarPolis has expanded to Thailand and Vietnam and will launch a mobile app allowing people to purchase 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 radical change for the insurance industry, with trends ranging from longer lifespans to electric and self-driving cars making the work of actuaries increasingly complex.

There’s also the question of whether companies can make a profit selling, in Randing’s words, “bite-sized” insurance policies. PasarPolis claims to have a database of 20 million customers and hopes the volume will work in its favor.

But industry analyst Christian Konig says that while selling many small fonts may work for some businesses, larger fonts are likely to have higher margins. The Fintech News Network CEO gave the example of a flight he booked between Singapore and Dubai, which cost $200 to insure.

Some of Asia’s insurtech players, analysts say, have found a model in selling policies through 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 into massive user bases.

“Asia, in some ways, is leading in the ecosystem space, and it’s really led by China and some…in Southeast Asia. They’re really big players in daily active use, where people use the platform seven, eight, 10 times a day,” McKinsey partner Alex Kimura said in a podcast from his company.

Southeast Asia, China and India account for 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 Global Insurance Report, the Zurich-based company said: “We expect online platforms combined with broader sources like social media (e.g. Facebook, WeChat in China and Grab in Southeast Asia) or health tracking apps are becoming a key source of life insurance sales, especially as consumers who use digital channels to purchase insurance are likely to use again the same channel.

The downside, Kimura said, is that “I think a lot of insurers are now at the mercy of these platform players.”

Another common way for insurtechs to save money is to use machine learning to calculate risk. Better predictions help companies align expenses and revenue, but like relying on third-party platforms, relying on algorithms and big data also presents possible pitfalls.

Armed with vast amounts of user data, insurers could create 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, according to the analysts.

“There is great potential for abuse because the data exists and the user profiles are there,” said David Tuffley, senior lecturer in technology at Australia’s Griffith University, of insurance companies. . “And the algorithms that can use these large datasets are getting smarter and smarter.”

Concerns for the industry in general, Tuffley said, include discrimination, opportunistic or “dynamic” pricing and the loss of individual privacy.

New technologies can create other ethical gray areas. People who use apps to count their steps or measure other health metrics, for example, may be eligible for lower health insurance premiums. Medical insurers call it a discount, but those who can’t or don’t use these apps may see it as a penalty.

“There’s no clear line between raising prices and just letting the market decide prices,” Tuffley said in an interview, recommending insurers put terms of service “in plain language.” so people know what happens to their data. “Some people don’t care. Others think, ‘No, it’s an intrusion.’

This article was first published on Nikkei Asia. It has been republished here as part of 36Kr’s ongoing partnership with Nikkei.