During the height of the pandemic, my wife bought a health insurance coverage for my mother that included unlimited consultations, may it be physical or virtual, and unlimited laboratory tests, all for P13,000 annual premium. She did this without setting foot on the insurer’s office or meet face-to-face with an agent.
When dengue started to rise in 2021, my wife also bought us dengue insurance with free Covid -19 coverage through GInsure of GCash, through its partnership with Singlife.
This is how the insurance in the country should be – frictionless and convenient – all driven by digital technologies. Just like how the financial services industry has been disrupted by the global health crisis, the insurance industry has been shaken by the need of people to be at home. But more than this, there was a realization on the preciousness of life and the need to take care of ones. Health; hence, resulting in the increased demand for life and health insurance during the last three years.
These drivers are pushing insurance industry players to adopt digital technologies to automate their processes, employ digital channels, and provide seamless customer experience. The industry is “not immune to the tech-based disruptions facing other industries — customer demands are changing, traditional operating models are under pressure, and new players are emerging,” according to McKinsey.
One obvious drive is that customer demands have substantially changed. I cited my wife’s behavior of buying health insurance through online means. She was not just looking for ways to transact digital, but also how seamless and integrated the customer experience is. It’s no longer enough for industry players to digitize the buying process or the storefront, but there is now a need from consumers to move from one tough point to another in a seamless uninterrupted fashion.
Moreover, the digital natives – millennials and Generation-Zs – who now have the awareness and purchasing power to buy insurance, are demanding the same seamless customer experience, which the traditional insurers are not able to meet.
This is why the insurance industry is now being disrupted by insurtech (insurance technology) players. Apart from GCash that partnered with an insurance player to integrate an insurance offering in its app, insurtech companies provide the digital platform to which established insurers serve as underwriters instead of competing against them.
As an example, Bima, an insurance and fintech company founded in Sweden and operating in the country since 2014, aims to serve emerging middle-class consumers through subscription model payments for as low as P120 per month, which can be purchased online. Its underwriter is Pioneer Life Inc., an established insurer which provides the trust and credibility with the fintech player.
Another example is Igloo, a regional insurtech player, which partners with insurance companies in each country where it operates to obtain a product that they have already produced, digitize it, upload it to Igloo’s system, integrate it into the e-commerce ecosystem and distribute the insurance product online. In the Philippines, it is designing insurance products for small and medium enterprises as well as microinsurance products.
In these models, the insurtech provides the customer access through a digital channel, while the insurer serves as the risk carrier. What the fintech company enables is an integrated customer experience, that otherwise cannot be enjoyed buy the insurance buyer from traditional models. McKinsey refers to this the insurtech in these cases as the “ecosystem orchestrator” which “owns the customer relationship and offers a broad range of ecosystem-driven services beyond insurance, such as mobility as a service and activity tracking”.
But there are other business models that traditional insurers and insuretch firms can move into to meet the growing demand for insurance products.
One model, according to McKinsey is the “B2B2C operator or product and back-office provider.” This “applies to insurers that run a highly efficient operating model built on large, internal scale efficiencies or market-leading levels of digitalization.”
Another model is the “enabler and provider of value-added services,”,where the player “provides selected enablers and value-added services at scale.” Examples cited by McKinsey include “core-system providers (such as Guidewire and msg global solutions), large service and tech providers (such as Cognizant, HCL, and Infosys), insurers entering this space (such as Syncier), and specialists (for example, in sales or claims, such as ControlExpert).”
There is a huge potential for the insurance industry in the Philippines to witness spectacular growth in the coming years through digital technologies. Incumbent players and fintech firms need to collaborate and create new business models to create new insurance products for specific market segments.
The author is CEO of Hungry Workhorse Consulting, a digital and culture transformation consulting firm. He is Institute Fellow at the US-based Institute for Digital Transformation. He teaches strategic management in the MBA Program of De La Salle University. The author may be emailed at email@example.com