Insurtech, is one of the latest buzzwords that has entered into the fintech lexicon. For those unfamiliar with the field, one might reasonably question whether it genuinely adds value to society or it’s just another buzzword whose sole purpose is to help startups raise funds and to help highly paid consultants to sound fancy during their conference presentations.
While insurtech in Malaysia is still nascent, there is much value it can add to the Malaysian society. Here are a few ways:
Making Information More Accessible
Insurtech can make insurance a lot more accessible by enabling customers, for instance, to educate themselves. Insurance policies are largely framed in complex terminology, creating a language barrier which can cut a consumer off from buying a product simply because they may not understand what they are buying. This is especially true for first time insurance buyers who may find the entire process and swathes of jargon to be highly intimidating.
The gap is bridged in part by insurtech providers who provide platforms for consumers to access information. Aggregators like Ringgitplus and GoBear, for instance, presents the information for customers to compare in manner that’s more layman friendly.
They also enable consumers to contrast policy schemes, according to factors such as coverage terms and payments plans. Because most of the numbers are broken down for customers, this effectively also breaks down the information barriers.
Lowering Price Barriers
According to the Department of Statistics of Malaysia, the average Malaysian earns RM2,880 per month, and with income being at a relatively low level, Malaysians find it to be increasingly difficult have enough income set aside to be able to purchase insurance.
Which is why it made sense that a survey conducted in 2017 by iMoney and The Edge, found that around 70% of survey respondents desired more affordable insurance premiums.
However, the traditional heavily agent distribution model of insurance in Malaysia, disincentivises insurance agents to sell insurance packages that are too low in price points, as it results in lower commissions.
Insurtech companies that are focused on digital distribution like PolicyStreet by design are a good fit for mass distribution of insurance products that are more affordable. This model when executed correctly will likely increase the ratio of Malaysians covered by insurance.
However this game is not exclusive to startups, we have observed that insurance companies are beginning to shift some of their distribution to be more digitally focused, in addition to that we’ve also observed more partnerships emerging between traditional insurance players and insurtech companies and even telcos. Sun Life’s collaboration with U Mobile, for instance, is one example of a partnership which has the effect of offering a purely mobile health insurance product for an affordable sum.
Unbundling Insurance Products
Micro insurances that are offered contextually are becoming more popular abroad, as consumers our protection needs are sometimes very specific and does not necessarily fit within the comprehensive policies offered by insurance companies.
Again due to the pricing model of these insurance products, they are not necessarily well suited for the traditional distribution. Companies like Neosurance are attempting to suggest the right policies at the right time using push notifications. For example, a consumer who is travelling abroad will receive a notification asking if they would like be insured for their travels.
In doing so in the example mentioned and beyond, this effectively ensures that consumers receive wider range of coverage to protect them against financial uncertainties. It is also interesting to note that Neosurance was part of the Supercharger 2017 cohort in KL and is now attempting to introduce this concept in Malaysia as well.
Shaping Healthier Behaviours
Future consumer behaviour is likely to be shaped by the current direction insurtech is already taking in promoting healthier lifestyles.
Better driving habits, or instance, are encouraged through AXA’s use of telematics in its ongoing FlexiDrive product, which rewards auto insurance holders with a 20% discount on premiums should they be considered safe drivers. Allianz Malaysia, along with Etiqa Insurance and Etiqa Takaful have also signed a memorandum of understanding with telematics company Katsana to develop Katsana’s telematics app, DriveMark. Ultimately the aim is for drivers to be incentivised enough by the rewards to keep within certain safety benchmarks.
Incentives to promote better wellbeing are also being offered by insurance providers through their products. One example is AIA’s Vitality plan, which allow customers to earn app-based points from fulfilling a checklist of healthy activities. This earns them discounts on a variety of products and services offered through AIA’s partners. The higher the points they earn, the better the rewards.
Through all these insurtech initiatives, Bank Negara might closer to its goal of a 75% insurance penetration rate among Malaysians by 2020. Insurtech, after all, helps to achieve Bank Negara’s slated objectives of gradual removal of operating costs, diversification of distribution channels and strengthening of the insurance market practices. This can only benefit customers more in the long-term.
Featured Image Via: Freepik