In the current environment where social distancing is enforced to combat Covid-19, insurance companies have had to tweak their business models to be nimbler online. What was once seen as an interpersonal profession is getting a significant facelift.
Insurance product distribution is going virtual with videoconferencing becoming popular among insurers who need to continue engaging with clients, according to a Moody’s Investor Service research report,.
“Technologically advanced life insurers that make doing business simple and easy, will likely be the winners in terms of sales, revenue, and profit growth over time,” predicts Moody's vice president Laura Bazer. “The losers will be those with rigid product and business models that fall technologically behind their peers. Although we do not expect rating changes due to technology alone in the near term, firms that are the least tech-savvy will likely have weaker credit profiles over time.”
The urgency of adapting to the “new normal” has drawn investor attention to several insurtech (insurance technology) firms particularly active in Southeast Asia, where insurance penetration is relatively low compared to other parts of the world.
In Indonesia, insurtech company PasarPolis has been attempting to democratize the insurance process by making it seamless for users to apply and have their claims processed digitally. “It’s quite amazing when you look at a country like Indonesia where the insurance penetration is still quite low. We were looking at how we could tackle this issue,” shares Cleosent Randing, founder and chief executive officer of PasarPolis.
Working alongside leading Indonesian new economy entities such as ride-hailing company Gojek and e-commerce firm Tokopedia, PasarPolis has been able to provide insurance coverage ranging from life insurance for drivers to mobile device protection. According to Randing, his company issued around 650 million policies in 2019 alone and as of June 2020 served over four million unique customers in Southeast Asia.
In September 2020, PasarPolis hit a new milestone generating US$54 million for its Series B fundraising exercise from investors such as LeapFrog Investments, SBI Investment and Xiaomi, showcasing the growing interest among investors to get involved in the highly promising market. “We have been quite fortunate raising in a time like this, which has not been easy. We are aiming to work with people who have the experiences and resources to bring some impact and scale to our business,” says Randing. For instance, Xiaomi's involvement has the potential to enrich his company’s mobile insurance experience due to the company’s strong track record in its home market of China.
A similar sentiment is felt by full-stack insurtech company Igloo which has seen growing interest from investors, particularly in the solutions it offers to the overall insurance industry such as a real-time risk engine.
“We’ve seen interest from venture capital, family offices, high-net-worth individuals and, of course, insurance companies who are always looking to partner up with us,” explains Raunak Mehta, chief commercial officer at Igloo. “We put emphasis on working with investors who understand the insurance space because that is very critical. Insurance is a highly regulated field and it has entry barriers. You need investors who have that kind of DNA in terms of understanding the industry and how it moves.” In April 2020, the company closed its series A+ fundraising round, generating approximately US$16 million.
Founded in 2016, Igloo has already forged partnerships with both established insurers and new economy companies. Just recently Igloo announced a partnership with UnionBank in the Philippines and Foodpanda’s unit in Thailand to provide insurance solutions within their ecosystems. “We generally look for partners who give us a network effect, providing data which could be used to come up with insurance solutions. e-commerce and telecom partners, for instance, are a natural choice for us.”
The two insurtech companies represent just the tip of the iceberg when it comes to dramatically changing the insurance industry in Southeast Asia, which for the time being has to grow accustomed to conducting business via electronic channels. If there is one unifying factor out there when it comes to insurance, it is that the pandemic has drastically raised awareness over possible growth in insurance services in these trying times.