Disrupting the Status Quo

Photo: istock.com/DKosig

Some say that perseverance, motivation and confidence are the three main ingredients necessary to start and grow a successful business. This interview with Fred Ngan, FSA, shows how he, his co-founders and employees tied a bow around these attributes and created a much-needed insurance startup. 

Tell us about yourself. How did your work and personal experience prompt a change in your career?
I am an entrepreneur who was born in the 1980s. Life before Bowtie was as ordinary as one could imagine—I heeded to my parents’ advice to become a business professional. I studied actuarial science at the University of Waterloo, took all the necessary exams to get qualified, received fellowship, and landed in consulting and had a relatively stable life.

I fulfilled a promise to my family and was living what many would consider a comfortable life. The stability was decent, but not satisfying, as I knew deep down that I wanted something different, something exciting that would challenge me. The uncertainty that comes with disrupting the status quo never really crossed my mind.

Change was a constant theme for me since my school days. I often transferred between schools, had to skip grades, tried to start my own business five times before becoming a consultant, and worked abroad in Toronto, Chicago and London throughout my consultancy career. Looking back, I think I was waiting for something to push me back into the startup field again. This reason came five years ago.

I was diagnosed with a heart condition and needed a cardiac operation, but I was shocked to discover my company’s medical insurance was insufficient to cover my operation at a private hospital—so I ended up at a public hospital. It never occurred to me that this could happen. I assumed working at a large firm would provide security and enough insurance coverage.

Despite the challenges, I survived the operation, as well as Hong Kong’s health care system. After my recovery, I realized life is too uncertain for me to live a life that others wanted of me. I decided not to hesitate further and was determined to do what I am truly passionate about: starting my own business.

Although I have an actuarial background, I let my intuition take the lead. Experiencing firsthand being rushed out of the hospital the day after surgery given a shortage of hospital beds led me to notice there is a gap in the medical insurance coverage that most people have. Whether it is a personal or group medical plan provided by the employer, there often remains a gap between coverage and the actual medical protection needed.

People often don’t know how much protection they have (or the lack of) until the doctor hands them the diagnosis—and that may be the same moment they realize they don’t know where their insurance policy leaflet is. Insurance is an everyday protection; yet we often treat it as a once-in-a-lifetime purchasing decision.

Having personally experienced this mismatch of concepts and consequence, my mission was to provide every Hong Konger with a simple and basic medical plan that allows them to benefit from private medical care and the public health care system. My experience was the motivation I needed to start my own business in the insurance industry. 

Tell us about your journey and starting your own company.
My cardiac operation and my personal experience were the main reasons I left my consultancy job and partnered with other insurance visionaries, including a fellow actuary, to venture into the startup field. Together, we set up two startups: Coherent Capital Advisors, an InsurTech startup, and Seasonalife, a platform for consumers to compare insurance products. We saw potential in the tech sector and were fortunate enough to recruit great talent.

We never thought of setting up our own insurance brand until I bumped into the CEO of an insurance company, a respected veteran in the industry. I told him my vision of what insurance should be like and my wish to go back to the root of insurance—protection. He offered his views and advised us to establish our own brand. In fact, he would have given it a go himself if he was my age and free from technological barriers. I took it lightly when I first heard his idea, as the entry barrier is extremely high and starting an insurance company from scratch is unheard of in Hong Kong. However, the more I thought about it, the more the idea grew on me. Eventually it hit home.

What is the startup process like?
In September 2017, our team decided to apply for a virtual insurance company license from Hong Kong’s Insurance Authority. As anxious as we were, we were excited to be considered Hong Kong’s first-ever virtual insurer. Considering our belief of making insurance accessible to everyone and the burgeoning technological advancement in the city, virtual insurance was the perfect solution for us to achieve our goal.

Consumers can insure instantly, undergo underwriting, and file claims online with their smartphones or computers anywhere and anytime they want. Agents are not required, hence cutting out commission and lowering the cost significantly. Not only is it the ideal channel to carry out our mission, it is also the practical and sustainable solution for a startup. Our team saw an opportunity to build something exciting and meaningful. Within a short period of time, we were able to recruit young talent who shared the same vision from either the corporate or startup worlds.

The composition of our team is diverse. Actuaries add a lot of value to Bowtie because they really understand the fundamental core of the insurance business, from the back-office balance sheet and risk management to the front-office product development and partnership distribution. Actuaries at our company spend less time on valuation and pricing and more time on customer experience, which involves design and engineering (we call them actuarial engineers). The young actuaries I know are intellectually curious, and I’m constantly amazed with how fast they acquire new skill sets and apply them to our daily work. I believe they can be a strong disruptive force for the InsurTech industry.

We also brought on board industry experts who specialize in insurance, technology, design and marketing. Although we have a diverse team, we share a collective spirit and belief in bringing basic health protection to everyone in Hong Kong. We negotiated with different insurers and eventually teamed up with Sun Life Hong Kong Limited to submit a formal bid for the license. We are honored to have the support from Sun Life—they have helped us bring our vision to life and supported us along the way. Although Sun Life is one of our Shareholder Controllers, we operate as an independent insurance company that is completely separate from Sun Life. 

Why did you pick the name Bowtie, and what would you say is the most challenging part of starting your own company?
People often ask, “Why name your company Bowtie?” to which I usually reply, “When do you tie a bowtie? At your wedding or graduation? Or tying your kid’s shoelaces or your daughter’s ribbon?” These are all special moments in life that you share with the people you treasure most. We want our company to stand for the same special bond and warmth as we provide insurance policy—protection—to people we care about.

Thus, Bowtie was created as a brand that can touch and connect people. Hong Kong is not short on insurers, but the digital sphere is somewhat unexplored. The local market is full of insurance plans with investment components, but there are only a few that focus strictly on pure life and medical insurance. As a result, there are few channels where these simple products can be distributed.

Hong Kong is a heavily agent-driven market, and there are just not enough incentives for agents to offer simple and low-premium products. As an actuary, I noticed the untapped opportunity to provide a simple plan that can be exactly what Hong Kongers need. We want to help address the protection gap problem by using modern technology to make insurance affordable to everyone.

What were the challenges along the way?
The most challenging part of founding our company was building an insurance firm from scratch. After all, we had neither a large team, nor consultancy or outsourcing support. Everything was done within the team. While we did not have it easy, we are fortunate to have reached our target goals sooner than expected. On Dec. 20, 2018, Bowtie became Hong Kong’s first virtual insurance company authorized by the Insurance Authority.

We also want to differentiate ourselves from other virtual insurance companies, which can be viewed on two levels. One is on the business nature, where I believe there are two types of virtual insurance companies. First is the “Tech Insurer,” which refers to technology firms that want to deliver insurance products via existing tech solutions (e.g., shipping return insurance for e-commerce platforms). The second is “InsurTech,” which describes those who leverage technology to redesign the user experience of purchasing insurance products. Bowtie belongs to the latter category, because all of our underwriting and claim services can be conveniently done with just a few clicks. We focus on leveraging modern technology and built an entirely new system and platform to deliver the best user experience that was designed from the customers’ perspective and based on their real protection needs. While different virtual insurers have different product philosophies, we share the same vision of making insurance simple and friendly.

The second level is on brand positioning. Our company is a challenger insurer. As the first virtual insurer in Hong Kong, we disrupted the market in many ways as we strive to bring affordable health protection to all corners of Hong Kong—because we believe insurance is fundamentally good. We are the first and only insurer with a business model that has a Volunteer Health Insurance Scheme (VHIS) at its core and other plans as supplementary products, because we want to focus on bringing an affordable and tailored approach to health protection. All of this is driven by our purpose, where we believe insurance serves an important social role that is meant to provide a safety net and a basic need for all people.

Fast-forward two years, and our company has retained its advantage as a virtual insurer in the market, particularly post-COVID-19. As the pandemic escalated, it heightened consumers’ digital consumption habits. In response, we have been able to offer a simple and convenient option for consumers to purchase pure-protection medical insurance that not only fits current and future consumption habits, but also offers comprehensive medical plans that are affordable.

What advice would you give to other actuaries looking to explore the entrepreneurial route?
Amazon founder Jeff Bezos said: “Good entrepreneurs don’t like risk; they seek to reduce risk … Starting a company is already risky, and then you systematically eliminate risk step by step in those early days.”

I like how he puts this and the idea that you should systematically eliminate risk step by step in the early days. Actuarial training enables you to approach problems from the ground up, and it also allows you to understand how the core insurance system works—so we have a chance to disrupt from within rather than just scratching the surface of the industry pain points. Even Tesla CEO Elon Musk is calling for high-energy actuaries to join him and create a revolutionary insurance company.¹ There’s a much bigger role that actuaries can play with modern technology and big data.

In the early days, we trained some young actuaries as actuarial engineers to design and build the core of our InsurTech systems. Young actuaries entering the market should be open-minded and embrace modern technology. I believe those who understand both the insurance and technology worlds are poised to have an exciting and fulfilling career in the InsurTech industry.

Fate may dictate how we live our early years, but I am a firm believer of creating your own path. There is never a best time to start your own business. Don’t be afraid to take the plunge and cherish every chance to learn. What you have experienced will shape your achievements. Give yourself a chance. We all have the right to choose an extraordinary life. 

Copyright © 2020 by the Society of Actuaries, Chicago, Illinois.