|
Dr Dirk Nieder, FSA, MBA This month we speak to Dirk Nieder, Regional Director of Gen Re’s Life/Health business in North East Asia. Dirk has been with Gen Re for 28 years and worked on a range of issues including overseeing marketing for the former Soviet Union and the Baltic States, chairing Gen Re’s Competence Centre for Long Term Care, and responsibility for the product management unit of Gen Re. Dirk is a graduate of the London Business School and a Fellow of the Society of Actuaries. Based in Cologne, Dirk frequently travels to Asia. We have encapsulated his views on key regional trends below.
|
TDI: Japan and Korea are similar markets in the sense that they both have a large and mature life insurance sector, they are both grappling with an ageing population, and they both have relatively few notable InsurTech startups compared to China and Singapore. Why do you think this is? Are there any examples of interesting Japanese or Korean startups that relate to life and health insurance?
Dirk: The life insurance markets of Japan and Korea indeed share some common characteristics:
- mature and developed life insurance market;
- high life insurance penetration rate (measured as premium divided by GDP: Japan
72%, Korea 6.12%, compared to China 2.3%); - ageing populations;
- strong data privacy requirements;
- markets which are highly regulated in terms of products, distribution and pricing;
- a regulator concerned about possible disadvantages for policyholders resulting
from innovations
There are a number of implications:
First, before working with startups, life insurers want to ensure that all regulatory and data privacy requirements are met and that new technology/approaches are reliable and work without fail.
Second, many life insurance companies are also running old administration systems, which create bottlenecks for cooperation with startups, at least in the short-term.
On the other hand, a typical startup is under pressure to earn quick wins to raise further capital. The life insurance market is hence not an attractive target for most startups. We see more activity in other segments in the insurance market, e.g. the so-called Small Amount and Short Term Insurance companies (SASTI) in Japan, which insure only limited sums insured and which are less regulated. JustInCase is such an InsurTech startup that provides cover for smartphones using Artificial Intelligence and a peer-2-peer concept.
Having said this, one company, which was set up to disrupt the life insurance market in Japan, should qualify as an InsurTech startup but would most likely not be considered in this respect because it was set up ‘too early’: LifeNet Insurance. The company was founded in 2006 with the goal of offering simple, convenient and competitively priced products and services directly to customers over the Internet. Whilst the company has achieved tremendous growth in the past years, it still only accounts for a small portion of the Japanese life insurance market.
TDI: One of the key developments in the Asian InsurTech scene in recent years has been the emergence of online ecosystems including Ping An Good Doctor, WeChat, Grab and many others. What is your view regarding the development of ecosystems in Korea and Japan? Are there good examples of ecosystems with digital insurance use cases in North-East Asia?
Dirk: Line in Japan and Kakao in Korea are social networking services (SNS) which, similar to WeChat, started as chat services and have also achieved a high market penetration in their respective markets. These SNSs have in the meantime expanded into food delivery services, transportation, but also financial services, e.g. mobile payments using a smartphone. A push into the insurance sector is a consequent next step. Strict local data privacy requirements will, however, impact the network effects of these platforms, and I would expect that the success of these platforms will not match the development which we can see in China.
TDI: In Japan, we saw several interesting partnerships between incumbent insurers and non-incumbent tech players, such as Sompo teaming up with Line to provide earthquake insurance, or MS&AD working with Zhong An Tech to optimise the conversion rate for short-term insurance products online. What is your view regarding the development of an InsurTech scene in Japan, as well as partnerships between incumbent insurers and tech startups? What are the key drivers as well as challenges to the InsurTech sector in Japan?
Dirk: Non-incumbent InsurTech startups can cooperate with incumbent life insurers, or set up their own life insurance company. A cooperation with an existing life insurance company is a more viable proposition than setting up a greenfield operation as the foundation of a new life insurer requires substantial capital, resources, and time.
For cooperation with a life insurance company, startups need to convince life insurers about a mutual win-win situation, e.g. they need to demonstrate that technology or know-how allows the company to extend its services for policyholders or that new target groups can be explored. The life insurers also want to ensure that all regulatory and data protection requirements are met. It will be easier to convince incumbent life insurers with a proven concept, rather than concepts which are still at an experimental stage.
An example of an InsurTech startup which entered into cooperation with life insurers is DeSC Health Care (DHC), a subsidiary of DeNA that provides mobile and online services. DHC provides a mobile platform for health monitoring and promotion. It has entered into cooperation with life insurers such as MetLife and Asahi Life. The cooperation allowed MetLife to launch a new group insurance scheme that provides lower cost for the group insurance cover for the employer if employees are physically active (measured by step count).
TDI: How is Gen Re responding to the increasing demand for digital insurance experiences in Asia in general, and Korea/Japan in particular? What has been the key learning from working in the digital space with Gen Re’s clients in the region?
Dirk: Gen Re has identified the need to engage with InsurTechs at an early stage. We have set up a team within our R&D department dedicated to digitalisation initiatives. The team is tasked to identify and work with promising tech companies that can offer something effective in digital risk management.
We have introduced selected startups to the markets for a number of years, for example at our annual market seminar in Japan which attracts senior executives from life insurance companies but also representatives from the media. Our focus has been on startups which offer value-added services or technology for underwriting or health promotion, e.g. Lapetus and PAI.
Gen Re has also developed iOS apps, called NOW and QUP, which provide a much faster and more consumer-friendly application experience. Facial analytics, which is implemented in these apps, allows us to speed up the underwriting process, but also improves client engagement. The apps have attracted significant attention in the media and even on TV.
We observe that companies have recognised the need to employ technology and innovation for the development of attractive and innovative products and services. Large life insurers, such as Dai-ichi Life, Sumitomo Life or Aflac have set up ‘labs’, such as the Aflac Innovation Lab, to actively source startups and explore their suitability for cooperation. Smaller life insurers also have appetite for such cooperation but will rely to a larger extent on third parties, e.g. reinsurers, to introduce attractive partners.
We experience that startups can quickly attract the attention of life insurance companies if they have an attractive value proposition. The implementation of new features into life and health insurance products, however, needs to pass many hurdles, which also includes compatibility with the capabilities of existing IT systems. This process stretches the patience of startups which are under pressure to produce success stories for future rounds of funding.
TDI: Many industry observers have noted that reinsurers will need to move closer to distribution and owning the customer relationship in the coming years. How do you see the role of reinsurers changing as the industry evolves?
Dirk: We’ve certainly been approached by startups focusing on distribution with the suggestion of accepting life insurance business generated by them directly, rather than going through a life insurer. The basic idea to ‘cut out the middleman’ to reduce costs, simplify processes and reduce turn-around time is understandable. However, life insurance companies have valuable expertise important to the success of a product, particularly in the areas of distribution, marketing and systems.
There may well be reinsurance companies that desire to move closer to distribution, but, doing so would imply giving up the very DNA which makes a reinsurer. Indeed, professional risk management was the key motivation for the foundation of the first professional reinsurance company in 1846 (the historical Cologne Re, which today operates under the name Gen Re).
Technology is also driving change within the reinsurance industry and life reinsurers have received credit for supporting the transformation challenges of direct insurers in other respects. The use of blockchains for the placement and administration of reinsurance, and the use of artificial intelligence to accelerate underwriting processes are both examples of how reinsurers are innovating to help their clients operate more efficiently.
I believe the optimal role for reinsurers is to identify promising tech companies that can enhance digital risk management, then work together with them and primary insurers to co-create solutions and support the integration of these ideas into business models. For us, it’s about strengthening the relationship with our life insurance clients, rather than competing with them.