While new virtual insurers may leapfrog in the market, established insurers' answer is increased technology investment. Oswald Chan reports.

Bowtie Life Insurance Company is the city's first virtual insurer approved under the Fast Track pilot scheme of the Hong Kong Insurance Authority. As a homegrown insurance technology startup, Bowtie will offer insurance products solely through its digital channels without involving conventional channels, such as insurance agents, banks or insurance brokers.

The insurance startup offers three Voluntary Health Insurance Scheme (VHIS) products with benefit limits ranging from HK$420,000 ($53,573) to HK$1 million.

The AIA Central building, which houses the headquarters of AIA Group, one of the traditional insurance brands, stands between Cheung Kong Center (left) and CCB Tower in Hong Kong. Billy H.C. Kwok / Bloomberg

Up to 70 percent of the company's clients are first-time insurance buyers, with another 80 percent of them having made online submissions to purchase insurance products.

Since Bowtie began operating in April this year, its website has drawn some 300,000 visits, whereas potential clients can make and compare product prices, and conduct online underwriting without having to submit personal particulars, on the company's webpage.

Subject to regulatory approval, the startup will introduce term life insurance and supplementary VHIS products this year to cover customers' basic term life and more healthcare insurance needs. It will also team up with some local medical healthcare services groups to sell its basic healthcare insurance plans through medical checkup schemes provided by these medical services groups.

"Initially, Bowtie's business development strategy will focus on introducing basic healthcare and term insurance products. After gaining a foothold in the market, we'll cooperate with ecosystem partners to launch innovative insurance products. Using product bundling techniques, we strive to make insurance sales a part of the consumption process," Fred Ngan, co-founder and co-chief executive officer at Bowtie, told China Daily.

Target younger generation

"We're targeting those 30-year-old technology-savvy customers seeking cheap and convenient insurance products. After buying our products, these clients are also eager to promote our products among their relatives and friends," he said.

With a 50-strong team, one-third of the virtual insurer's business staff are technology experts, while others are actuaries, engineers, designers and customer representatives. Bowtie even has a doctor and a nurse to provide medical consultation and referral services since the company does not have insurance agents to provide follow-up services.

"Our strategy is to offer simplicity, value-for-money and innovative insurance services to the younger generation," Ngan said. "Once we've set up our entry point in the market, we'll leverage technologies to differentiate our brand in the market."

Traditional insurance brands in the SAR, such as AIA Hong Kong, AXA Hong Kong, Prudential Hong Kong, Manulife Hong Kong, Bank of China Group Insurance Company and China Life Group Insurance (Overseas) Company, are investing in manpower with a total agency force exceeding 100,000, giving Hong Kong one of the world's highest insurance-agent ratios to total population.

"Less than 1 percent of life and health insurance sales are made through digital channels in Hong Kong, so there's ample market potential for us to explore," noted Ngan.

Sun Life Hong Kong - a subsidiary of Canada-based insurer Sun Life Financial - made a strategic investment of HK$234 million ($30 million) in Bowtie late last year. The virtual insurer has also secured funding from Hong Kong X Technology Fund and angel investors.

Though Sun Life Hong Kong is an investor in Bowtie, the two companies remain separate entities, and the latter will operate independently from Sun Life Hong Kong.

"Sun Life Hong Kong would like to get a better understanding of the virtual insurance business by investing in Bowtie. At present, it'll not start a virtual insurance business, and will concentrate on its existing insurance setup," said Ngan.

Bowtie may launch another round of fund-raising from synergistic partners and use the proceeds to invest in customer service and technology, and develop digital channels. The amount to be raised in the new fund-raising round may be the same as the Series A round from Sun Life Hong Kong.

"The value propositions of virtual insurers are likely to be different from those of its traditional peers in the sense that the usage of technology innovations is heavily emphasized. This provides a unique competitive advantage in terms of increased agility to disrupt the market and the nimbleness of the operations," Deloitte China Consulting Partner Joanna Wong told China Daily.

The global auditing services firm expects simple products, such as health and personal lines products that are suitable for direct distribution, are preferred by virtual insurers. Whilst the technology-savvy segments would be the primary focus for many virtual insurers, some are looking to expand their reach beyond the obvious customer segments. They can grab market share by finding the white space in the market and develop a niche for disruption.

With Bowtie heralding the age of virtual insurance in Hong Kong, traditional insurers are beefing up their investments in insurance technology.

Insurance tech investment

FWD - the insurance business arm of Pacific Century Group controlled by tycoon Li Ka-shing's second son Richard Li Tzar-kai - said in 2017 it will invest HK$500 million in insurance technology in the next five years.

"Looking forward, in the area of digital innovation and digital commerce, we'll adopt artificial intelligence to simplify the insurance claim procedure for providing better customer experience," said Paul Tse, chief marketing officer at FWD Hong Kong and Macao.

FWD has launched eServices that help customers submit claim applications for personal accident item under its life insurance policies within one business day.

Leveraging on AI, webpage and mobile apps, these technologies are embedded with FWD's chatbox function that facilitates all day-round responses to deal with customer enquiries. A sensual analysis function has been installed in the robotics chatbox. When clients express discontent, make complaints or the chatbox robotics cannot understand clients' enquiries, customer engagement representatives will intervene and help solve their enquiries.

"Traditional insurers and virtual insurers could co-exist as long as traditional insurers have a good understanding of their own competitiveness edge. Digitally enabling traditional distribution channels, such as agency and bancassurance, for example, will allow these insurers to take advantage of its core strengths," said Wong.

"By inviting non-financial institution insurance players and insurance technology into the market, unconventional ideas could be unleashed to disrupt - from products, distribution to operations within the technical boundaries of the insurance market in Hong Kong," she said.

Last year, FWD teamed up with 7-Eleven - the city's largest grocery chain network - in providing instant insurance claim services. FWD customers can make their insurance claims at the 135 7-Eleven retail outlets in MTR stations besides receiving checks or direct account credit by FWD.

Contact the writer at oswald@chinadailyhk.com

(HK Edition 09/06/2019 page8)