The insurance industry sees Asia as perhaps its biggest opportunity for growth. As insurers jockey for position, many are betting on new technologies to gain competitive advantage and adapt to the region’s unique challenges. While some are importing “insurtech” ideas from developed countries, other innovative solutions are tailor-made for Asia’s emerging markets. Startups, too, are targeting Asia.
They’re all going after a massive business opportunity. Asia’s emerging markets accounted for only 11.6% of total insurance premiums in 2015, but that could grow to 21.7% in 2025, according to a study by Munich Re, a leading global reinsurance firm. The study predicts China will see the greatest progress, but also expects high growth in Indonesia, India, and elsewhere in Asia.
Rapidly-growing consumer wealth will drive these changes. As millions join the Asian middle class each year, they want insurance to protect their families, businesses, health, and newfound property. But while many emerging countries in the region have public health insurance or social security, most offer paltry benefits that leave people at serious risk of financial catastrophe.
Traditional insurance companies and traditional business models are not likely to thrive in these markets. Most rely on armies of brokers, claims processors, customer support staff, and other professionals. Their business models are operationally complex and frequently don’t scale well in low-resource settings. They often fail to meet the needs of customers, even in more developed markets.
Insurtech innovators want to change that. Armed with an array of new technologies, they envision better insurance products and operating models. They want insurance to be less expensive, easier to use, and more widely available to the countless people worldwide who lack access to high-quality insurance products.
Many see Asia as an ideal testing ground for innovation. “Emerging Asia has the opportunity to potentially to show us new business models,” Zia Zamin, MetLife Asia’s Chief Innovation Officer, told an insurtech conference in Singapore last September. “In fact, we don’t have an innovation center anywhere in the world except here in Singapore.”
China is already a hotspot for insurtech. One of China’s most storied startups is Zhong An. Launched in 2013 as an online-only insurance carrier, it is backed by internet giants Alibaba and Tencent as well as Ping An Insurance, a Chinese financial services behemoth. Zhong An raised $934 million in 2015, making it the world’s most well-funded insurtech startup.
One of the world’s most tech-centric insurers, Zhong An works through digital channels to provide low-cost insurance at massive scale. It initially focused on delivery insurance for products shipped through Taobao, Alibaba’s nation-dominating online shopping platform. But it now offers a wide range of policies from health insurance to more offbeat products for the Chinese market, like policies covering self-inflicted liver damage for heavy drinkers.
Singapore also has an active insurtech ecosystem. While its domestic market is tiny in comparison to China, the city-state serves as a hub for companies operating across the region. As in healthtech and other high-tech sectors, insurtech companies are attracted by Singapore’s density of talent, reliable legal framework, proximity to fast-growing markets, and other advantages.
One of Singapore’s local tech champions is CXA, which runs a novel platform for employee benefits management. It pulls together insurers, healthcare providers, disease management programs, and wellness services. It allows employers to provide personalized benefits and wellness programs to their employees, which helps reduce costs and improve workplace wellbeing.
“Employers around Asia are getting slammed by skyrocketing health insurance costs,” says Rosaline Koo, CXA’s founder and CEO. “We’re using advanced analytics to shift benefits spending away from treatment and towards prevention and disease management.” Founded in 2013, CXA recently raised $25 million to scale up its brokerage and software-as-a-service platforms in 11 Asian countries.
Singapore’s innovation ecosystem also benefits from active government support. For example, the Monetary Authority of Singapore (MAS) recently set up a “regulatory sandbox” for financial technology experimentation. The sandbox provides a contained environment in which companies can test new ideas with small groups of customers. PolicyPal, a startup offering an app to help people manage their insurance policies, was the first to be approved for the sandbox. MAS representatives say they are currently in the process of approving others.
Insurtech startups are popping up in other parts of Asia too. Hong Kong is another regional hub for the insurance industry and an attractive base for insurtech entrepreneurs. India is a massive potential market with a deep pool of entrepreneurial talent. Even smaller countries like Indonesia and Thailand have emerging insurtech ecosystems.
For all this, only 8% of total insurtech equity investments since 2010 went to Asia-based companies, according to Financial Technology Partners, a fintech-focused investment bank. Yet that will almost surely change. Asia’s emerging markets may be where insurtech investment takes firmest hold in coming years. Soon we may even see some Asian insurtech companies making waves in Western markets.
Will Greene is a writer and strategy consultant focused on Asia’s emerging R&D ecosystems. You can find him on LinkedIn.