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In 2015, Thailand’s insurance sector was valued as the 8th largest in Asia, with an annual growth rate of 4.5%. Thai residents spent approximately $334 on insurance every year, accounting for an overall penetration rate of 5.5%.

Life insurance accounts for the largest segment within the insurance industry in Thailand. These are annualized premiums paid out in the event of death or permanent disability; or after reaching a certain age. If you subtract life insurance from the overall industry pie, premiums decline considerably to $100/capita.

Photo credit: Thaire.

And this is where the largest potential for growth lies.

Thailand is already considered to be an upper-middle income country by the World Bank, with a GDP per capita of $6,033. When you combine that with a rosy economic outlook, it’s straightforward to predict that the size of motor and travel insurance will rise, too. Higher disposable incomes will lead to a greater outlay on cars and vacations – and the insurance industry is bound to benefit.

But one of the problems currently plaguing Thailand’s insurance sector is that distribution channels are antiquated and riddled with inefficiencies. To purchase an insurance plan, you normally have to arrange for a broker to meet you, prepare an unwieldy amount of paperwork, and wait for the bureaucratic red tape to churn its wheels.

The entire process is frustrating from a consumer standpoint and expensive for insurance companies too; broker commissions can eat into premiums and the process is only scalable by hiring a greater number of agents.

In 2016, a total of $5.1 billion in non-life insurance premiums were solicited via brokers, agents, and bancassurance channels. Precise figures for online distribution aren’t available, but the channel did grow by 25% as compared to 2015.

One of the startups that’s trying to simplify the insurance acquisition process is Frank. It offers motorcycle, car, and travel insurance direct to consumers in Thailand via its website. Consumers apply for their insurance product of choice, receive an instant quote, and for certain products, can have the policy in a few seconds. It’s fairly hassle-free.

Frank’s co-founder Harprem Doowa admits they’re still a small player in a very “traditional industry” but he affirms their product is largely positioned towards millennials and future Thai generations who are far more comfortable transacting online and will continue to carry these preferences along with them.

“This will take time,” he adds, referring to overall adoption of Frank’s product.

Harprem ecommerceIQ

Harprem Doowa, Co-founder and MD of frank.co.th

Innovating the insurance value chain

Another key challenge for Frank is ensuring that all parties involved in the transaction are equally adept and comfortable with technology. At the end of the day, it’s another distribution channel and isn’t inherently marketing its own product.

Frank’s policies are underwritten by companies like Bangkok Insurance and AXA – large, unwieldy, and geriatric organizations resistant to systemic change and constant reinvention.

“Insurance companies themselves are still not ready with the backend to underwrite policies immediately. Most still require manual approvals,” explains Harprem.

Another problem is that many potential customers opt out of the process because they’re unfamiliar and uncomfortable with scanning and uploading documents. They require the support of an agent or customer support advisor to complete the transaction – driving up costs and somewhat negating Frank’s value proposition in the first place.

The third aspect hampering progress in insurtech are Thai regulations: Harprem explains that while they protect consumers, there’s a real bottleneck towards online conversions because of the multiple in-person verifications required.

Value-add Partnerships

The fledgling insurtech company has experimented with a number of ways to make it more visible and enticing to customers. One of these is partnerships with popular ecommerce players like Lazada, Grab, honestbee, and foodpanda.

ecommerceIQThis may seem like a contrasting list of partners – how does quick food delivery equate to online insurance? – but Harprem is upbeat about the benefits its brought to the table.

“Doing partnerships with many companies increases our exposure 30X and when [consumers] go and search online for insurance, they see Frank. It wouldn’t be the first time and therefore they are more likely to buy from us,” he explains.

That’s a critical takeaway – startups aren’t flush with the kind of cash that large organizations have, they have to stay lean. By leveraging relationships with online companies, even something unsexy like insurtech can be galvanized into a winning brand.

“The more customers see your brand, the more likely they are to buy insurance from you at a later stage,” exhorts Harprem.

Where do the opportunities and threats lie?

Of course, it’s possible that large insurance companies eventually sidestep players like Frank and start selling direct to consumers via web channels but this will involve channel conflict.

Specifically, it will alienate the vast number of brokers who currently provide the bulk of insurance revenues. Another complication is the sheer time insurance companies take to make decisions, hampered by bureaucracy and lengthy internal approvals processes.

Harprem says the team is completely aware of this but isn’t overly worried. Frank’s nimbleness means it can continue innovating and pivoting as and when the need arises.

“It took one of our partners two years to update their home page.”

There are two additional areas which, if done right, could provide considerable value in the coming years. One is ‘microinsurance’, or insurance for low-income households that provides protection for health risks, property damage, or other specific perils.

Harprem says there’s definitely a business case for it in Thailand but adds that it’s not a priority for Frank right now.

The other opportunity is changing fintech from just another distribution channel to overhauling the entire product in itself. That’s where technologies like blockchain have the greatest potential.

In Singapore, this is already becoming a reality. Electrify, which allows users to buy electricity on the blockchain, closed a $30 million ICO yesterday. Insurtech company PolicyPal, which is powered by blockchain technology, allows underbanked consumers to purchase products like agriculture, property, life, and personal insurance.

“This, in my humble opinion is true fintech,” says Harprem.

What is Foodpanda? 

Foodpanda is Rocket Internet’s global food delivery service, present in 22 countries, 500 cities with a strong footprint in Asia. The company has raised $318 million in funding since its inception and will now be sold to rival Delivery Hero.

The company had already shut down its Indonesian arm a few months ago and sold its branch Vietnam in 2015 after struggling to compete with local rivals.

What does Rocket Internet get for Foodpanda? 

Stock in Delivery Hero, which gives the German conglomerate a total of 37.7%. They previously paid $586 million for a 30% stock in February of last year.

If calculations are done backwards:

  1. $586 million for 30% = 19.5% million per 1%
  2. Foodpanda sold to Delivery Hero for 7.7% additional stake roughly equals $150 million
  3. The company was sold for half the price of its total $318 million funding

Rocket Internet SE said the combined business will process more than 20 million orders a month and operate in 47 countries.

What is Delivery Hero?

Delivery Hero Holding GmbH is an online food-delivery service based in Berlin, Germany. The company launched in 2011 and now operates in 33 countries internationally in Europe, Asia, Latin America and the Middle East and partners with 300,000 restaurants.

Why did they sell Foodpanda? 

According to TechCrunch source,

Foodpanda has slashed the asking price for its Indonesia operations to basically zero after more than a year of unsuccessfully trying to offload it.

The company is reevaluating its entire business across [Southeast Asia], and it has already made tentative efforts to sell in some countries. The company expanded in Asia via a series of acquisitions, which, in many cases, ironically leaves it without obvious suitors.

With more on-demand services like Go-Jek and LINE Man offering delivery services, how will the combined company fare? Tweet us with your answer @ecomIQ.

1. Grab to start delivering Foodpanda meals in Bangkok

Food delivery in Bangkok is getting a little easier as Foodpanda just announced a partnership with ride-hailer Grab for the Thai capital. The startup is aiming to decrease food delivery time to 36 minutes.

Read the rest of the story here

 

2. Facebook has connected 40M people with Internet.org

Today on Facebook’s blockbuster Q3 earnings call, Mark Zuckerberg said Internet.org has helped 40 million people get online. Indeed, 0.5% percent of the world’s population is now connected to the internet thanks to Facebook’s accessibility initiatives.

Read the rest of the story here

3. Bangkok Venture Club to raise $20m Southeast Asia fund

Our goal will be to partner local countries with angels in making investments. We will provide the seed capital and with the local people we will also mentor these startups,” Bangkok Venture Club co-founder Mark Wolf told DEALSTREETASIA.

Read the rest of the story here

Rocket Internet SE said losses have narrowed at several of its key startups in the second quarter, reports Bloomberg.

Chief Executive Officer Oliver Samwer is seeking to prove he can turn at least three of them into profitable businesses by the end of next year, the company announced today.

Sales rose at clothing retailer Global Fashion Group, food-delivery startup Foodpanda and home-furnishing business Westwing, while adjusted losses before interest, tax, depreciation and amortization narrowed.

Rocket overall lost $692.5 million in the first half of this year.

Analysts have criticized the company’s reporting for a lack of transparency and questioned its ability to wring profitable growth out of companies that operate in commodity sectors in unproven markets.

As Tech in Asia reported, most of Rocket’s troubles were blamed squarely on under performing companies in its Global Fashion Group (GFG), of which Zalora is a part. Rocket reiterated this stance in a statement released today, explaining that “impairments at GFG weighed in on consolidated results.”

But it’s not all bad. Online food delivery startup Foodpanda witnessed a 72% increase in net revenue compared to the corresponding period last year. It announced a gross profit of $23 million, an increase of 72.5%.

“We are on track to meet our profitability targets, with at least three of our key portfolio companies turning profitable until the end of 2017,” adds Oliver Samwer in a statement today.

Rocket climbed 2.7% to 19.69 euros at 9:05 a.m. in Frankfurt, giving the company a market value of 3.3 billion euros.

Versions of this appeared in Bloomberg and Tech in Asia on September 22. Read the rest of the stories here and here.  

Rocket Internet’s food delivery startup Foodpanda has announced that it is acquiring local competitor, Hungerstation in Saudi Arabia, reports Tech in Asia.

The terms of the acquisition are not disclosed.

Foodpanda operates in Saudi Arabia under the ‘Hellofood’ name, and has been active since 2013. Hungerstation, which was founded in 2012, will continue to operate as a standalone site.

The combined business will cater to an inventory of over 2,000 restaurants spread across 30 cities in the country. It claims its entire Middle Eastern business will now turn profitable as a result of the acquisition.

Just last month, Foodpanda has announced that it was on its way to profitability in Southeast Asia, namely with thriving business in Singapore.

“Along with our other businesses in the Middle East, Hungerstation and Hellofood consolidate our market leadership in the region and we are proud to have achieved overall profitability just three years after launch,” says Raf Wenzel, CEO of Foodpanda.

Foodpanda’s latest funding round came in March 2015, when it received $110 million in funding. The startup also went on an acquisition spree in the same year, where it acquired rival sites in seven countries. It seems that Foodpanda is continuing the move quickly through acquisition, this time targeting local competitors in the Middle East.

A version of this appeared in Tech in Asia on August 9. Read the full version here.