Virtually all insurers go the same way

Players in Hong Kong's insurance industry step up digitalization to make up for dwindling business as Greater Bay Area brings a ray of hope. Ao Yulu reports from Hong Kong.

Hong Kong's insurance business was in its heyday, buoyed by the huge influx of visitors from the Chinese mainland, before COVID-19 reared its head in early 2020. But with mandatory quarantine measures rigidly enforced on both sides of the border, insurance companies have seen their business with mainland clients tumble from HK$6.5 billion ($834 million) in the first nine months of 2020 to less than HK$1 billion for the same period last year, according to the city's Insurance Authority.

During the drastic slump in business travel amid the pandemic, customers have switched to purchasing insurance products online, forcing many traditional Hong Kong insurers to change their modus operandi - expanding online distribution channels to make up for dwindling sales.

The development of the Guangdong-Hong Kong-Macao Greater Bay Area has brought fresh hope, providing new business opportunities through digital transformation. Players in the insurance sector say there is much support within the 11-city cluster, which includes the Hong Kong and Macao special administrative regions.

So far, four Hong Kong companies have been granted licenses to operate their respective digital insurance businesses. As working online has become the norm during the pandemic, more people are seeking insurance products online, while industry players are eyeing the potential of digital platforms.

Becoming mainstream
OneDegree - a Hong Kong-based insurance technology startup founded in 2016 - won a license in April 2020 to run a digital insurance platform. It's now the city's largest online insurer, with about 100,000 customers as of November. Alvin Kwock Yin-lun, the company's co-founder and CEO, said the number of its clients has grown by 30 percent each month.

The entire market and environment for digital insurance are now vastly different from two years ago, he said. The Insurance Authority launched Fast Track in 2017, and it was not until 2019 that the city's first digital insurer began operating under the virtual insurance program, he said. "The digital insurance market was very much in its infancy initially, but has now been mainstreamed."
Blue is another Hong Kong insurance company that has made the grade. The life insurer, which went digital in 2018, has seen an impressive jump in sales in the past two years. "In 2021, we recorded 100 percent year-on-year growth in our insurance policy sales," said Charles Hung Tak-chow, Blue's CEO and executive director.

Billy Wong, PwC's Hong Kong insurance leader, said that not only virtual insurers are focusing on boosting their online distribution capability; traditional insurers are doing likewise. He said insurance agents, brokers and banks are also more involved in running digital distribution channels.

Kwock expects that up to half of the insurance products sold in Hong Kong will be purchased online by 2025.
The proliferation of digital insurers has made traditional insurance companies, agents and brokers realize the importance of digitalization.

"Traditional insurance companies do have a lot of pain points since the pandemic struck," Kwock said. As a digital insurer, OneDegree has services that are more efficient than those of traditional companies, especially during the pandemic, he added.

"In the past year, we have seen that settling claims in many large traditional insurance companies would take more than two months, as the forms had to be sent to these companies, while their employees were working from home. This has severely disrupted the whole process," he said. "But as a digital company, we can tackle the problem using technology in just a few days."

Wong said there is now a trend for insurers to use technology to enhance the customer experience. "Many insurers are investing in technology to achieve better interactions with clients and provide them with a better customer experience."

"For example, some companies allow their customers to have robotic chats to service their policies. They are also trying to modernize their end-to-end systems so that the processing of policies and claims can be more automatic, faster and more responsive to customers' needs," he said. "It goes beyond distribution channels in using technology to upgrade the overall end-to-end processes of insurance companies to serve customers better."

Insurers are also leveraging technology to tackle business problems. For its best-selling pet insurance products, OneDegree has developed a system for recognizing those pets that are already insured.

Kwock said they are helping traditional insurance companies to solve technological problems and develop their digital platforms. "We can go forward together to build a better ecosystem for Hong Kong's insurance industry," he said.

With a growing number of traditional insurers going digital, Hung said he expects more innovative products to enter the market.
According to Wong, one of the regulatory focuses in Hong Kong includes being technologically neutral as well as embracing. "This means that the principles of regulations apply equally to all insurance companies regardless of whether they are traditional or virtual insurance companies," he said. "There may be new technology that is available to all insurance companies. And there may be technological challenges the regulator needs to respond to."

As digital transformation accelerates and invigorates the market, Wong expects business opportunities to increase after normal travel between Hong Kong and the mainland resumes. "Insurance can support some of the key businesses in the Greater Bay Area. It's a meaningful contributor to the region's overall development."

Cross-border policies
The Hong Kong Federation of Insurers said in November that Hong Kong motorists will soon be able to drive within the Greater Bay Area with only one motor insurance policy instead of three, issued separately in Hong Kong, Macao and the mainland, as in the past.
Wong said introducing cross-border motor insurance policies will support the Greater Bay Area's comprehensive transport system. Likewise, similar marine insurance will support the region's marine economy, and health insurance will support the living quality circle of residents.

"In return, the Greater Bay Area will offer more business opportunities for the insurance sector if an 'Insurance Connect' is launched," he said.

"The opportunities are tangible," said Hung, adding that the need for life insurance is likely to rise to cater to businesspeople traveling regularly in the region.

Kwock sees the Greater Bay Area as a launchpad for expanding operations on the mainland. The company had set up teams dealing in pet insurance in some mainland cities last year and has teamed up with about 7,000 mainland pet clinics.

Through such cooperation, he said, he believes there is room for deeper communication in the insurance business between Hong Kong and the mainland. "Hong Kong is an international city and has a full set of international standards on risk control. For the mainland, there is a leading ecosystem on the internet. They can complement each other."

But Hung said digital insurance has just gotten off the ground and still has a long way to go. "Everyone on the mainland uses a digital wallet, but in Hong Kong, very few people use them," he said, citing the different payment modes between Hong Kong and mainland consumers.

"The other cities in the Greater Bay Area have an edge in developing digital technology, while Hong Kong's healthcare and finance sectors are advanced. We can collaborate in promoting the insurance industry," Hung said. "For digital insurance, Hong Kong can provide more investment options and various types of products for customers, thereby diversifying investment risks."