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.
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.
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.
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.
This 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.