Yih-Fen Tseng, General Manager, Gen Re Taiwan
Yih-Fen joined Gen Re in Cologne in 1996 and has been the General Manager of the company’s Taiwan Branch since July 2016. During her tenure as a client manager in the Taiwan branch, her primary focus was on new business identification and development. She was responsible for contract negotiation and technical discussions on pricing and reinsurance conditions, as well as being involved in product development, pricing and other technical aspects of reinsurance business. She was also previously Gen Re’s appointed Compliance Officer for the Taiwan branch.
Yih-Fen holds a Masters in statistics from The University Dortmund (Germany) and an Executive MBA from National Taiwan University.
Taiwan has the highest insurance penetration in the world but lags behind other countries in the region when it comes to innovation. We speak with Yih-Fen Tseng, Gen Re’s General Manager, about the development of regulation in Taiwan, and the effect it is having on the InsurTech and online insurance sectors.
TDI: Taiwan is one of the most mature life insurance markets in Asia yet contains relatively few insurance startups. What do you think explains this, and how can the regulator encourage more new companies to enter the market?
Yih-Fen Tseng: There are two explanations for this. Compliance is the first challenge. To work with startups, insurance companies need to ensure that all regulatory requirements are fully complied with. Regulations such as, for example, those surrounding data security can make outsourcing to startups particularly difficult. In certain situations, outsourcing needs prior approval by the regulator before work with external parties can begin.
Secondly, larger Taiwanese insurance companies tend to establish their own functions or services, instead of working with startups. Small and medium-sized companies work with startups more often, but applications using new technology or innovative approaches are usually not their priority.
The Taiwanese authorities approved three purely online banks last year. This is the most transformative movement by the banking industry in recent years. However, a purely online insurance company still doesn’t exist. Since insurance products are often more complex than banking products, I think online insurance still has some way to go. It is very difficult for newcomers to compete in our mature market and the industry and regulator need to work together to support these types of new initiatives.
TDI: Although the Taiwanese regulator has stressed the importance of protection orientated products, there is a preference for wealth management products given Taiwan’s middle-aged and relatively affluent population. How are Taiwan’s life insurers dealing with this push/pull effect, and how are reinsurers such as Gen Re supporting new product development in Taiwan?
Yih-Fen Tseng: There are two main motives for purchasing life insurance: protection and saving. The life insurance products currently sold in Taiwan are, to a large extent, savings products, for which interest rates, guaranteed or non-guaranteed, directly compete with returns offered by banks. Customers are often approached about purchasing a product through distribution channels, agent/bank/broker, rather than customers asking to do so. As the saying goes, insurance is sold, not bought!
However, due to a reduction in interest rates and the implementation of a ‘corridor rule’ on individual life policies from 1 July 2020, the situation may change. The reduction in interest rates will increase insurance premium, and the corridor rule will increase the protection element, so that an insurance policy will not just be for saving purposes.
Gen Re’s focus has always been insurance protection on mortality and morbidity. Recently, we’ve worked with clients to develop health products focusing on areas including long-term care and dementia. We’ve also collaborated with clients on life/health products that promote healthy behaviour – the so called ‘spillover effect’. Such products offer extra benefits or premium discounts if insureds achieve exercise targets.
TDI: Are there any Taiwanese InsurTechs having a particularly notable impact on life and health insurance? What do you think is the next phase of development for online insurance in Taiwan?
Yih-Fen Tseng: The spillover effect insurance policies mentioned above have become popular in Taiwan. In the first quarter of 2020, sales of spillover policies related to sports increased around twenty-fold compared with a year earlier. This is possibly attributable to COVID-19, which has led to an increased focus on health and wellbeing.
As of 31 March 2020, there were 33 spillover insurance policies being offered by eight life insurers in the Taiwanese market. Among these, ‘walker policies’, which reward policyholders who implement a walking regime, showed significant growth. One reason for this is that steps can now be tracked by mobile phones directly. In the past, such products had to be combined with wearable devices to gain the extra benefits, creating extra cost to the insurer or the insured.
COVID-19 is certainly having an impact on business models. We expect online insurance and spillover products to become trends as people forgo face-to-face contact for buying insurance online and may be attracted by products that encourage them to stay healthy in the future.
TDI: Mobile payments are often seen as a precursor to digital insurance innovation. In Taiwan, messenger app Line has 21m users and its digital wallet Line Pay is the market leader, it also recently gained a virtual bank license. How do you think this will affect the development of non-traditional online platforms selling insurance?
Yih-Fen Tseng: Due to regulatory requirements, online insurance products can currently only be sold through insurers’ official websites, or brokers’ official websites (with the regulator’s prior approval). No other online platforms can sell insurance products directly to consumers. While Line is the most popular social messaging app in Taiwan, to sell insurance products directly through their platform, it would need to first apply for a broker’s license, and then get the regulator’s approval to sell insurance online.
Interestingly, in 2019, the regulator approved an InsurTech sandbox experiment, allowing travel website, ezTravel, to sell travel insurance policies provided by Cathay Life, exempting it from the regulation limitation. The purpose of the experiment was to allow people to buy travel insurance policies when booking trips or flights. While, ezTravel is not allowed to sell other types of insurance, the collaboration may be a sign of things to come.
TDI: Taiwan has become an attractive growth market for South East Asian InsurTechs, including Igloo (formerly Axinan) and OneDegree. What factors make Taiwan an attractive expansion market and how can reinsurers like Gen Re facilitate these expansion efforts?
Yih-Fen Tseng: Taiwan has the highest insurance penetration in the world. People here are risk conscious and like to buy insurance for both protection and saving purposes. InsurTech has the potential to accelerate the selling process, improve service quality, and may even enhance risk selection. There is an expectation that the regulator will allow more flexibility in the future to realise this potential.
As mentioned earlier, Taiwan’s Financial Supervisory Commission (FSC) approved three applications for internet-only banks in 2019:
- Line Bank, whose major shareholder is Line Financial Taiwan, the parent company of the successful Line messaging app.
- Next Bank, led by Taiwan telecom operator Chunghwa Telecom.
- Rakuten Bank, whose key shareholder is Japanese e-commerce firm, Rakuten Inc.
These online-only banks can sell online insurance products provided by insurance companies and we expect them to become a very attractive distribution channel. With our global expertise in online products, Gen Re is well positioned, and ready, to work with our clients to develop innovative insurance offerings for the Taiwanese market.