The Promise of InsurTech

Photo: iStock.com/inkoly

How did you come up with the idea of starting a digital insurance company? Where did you get your inspiration?
Since the advent of the smartphone, I started exploring the idea of using technology as a customer engagement tool. The Korean life insurance market has several insurance products with high commissions designed for the benefit of the sales agents. As a result of this market practice over a long period of time, consumers had an extremely negative view of life insurance.

There was a dire need to provide products that were focused on the customer. My aim was to change the landscape of the life insurance market in Korea from a seller’s market to a market based on the buyer’s needs.

Where did you work before starting your own company? How did you know you were ready to start your own business?
Before joining Kyobo Life in 2001, I had 10 years of experience as an actuary at multiple insurance companies and consulting firms in the United States. At Kyobo Life, I held multiple roles over 13 years, including head of Product Development, Risk Management and Financial Research Center.

When I founded Lifeplanet, I was head of the e-Business Task Force at Kyobo Life and had witnessed changes in customers’ needs, consumption patterns and the business environment followed by advances in technology. Customers became more tech-savvy and wanted to purchase cost-efficient products anytime and anywhere. I knew we had the capability to serve their needs online and believed it was the time to start an online insurance business.

Tell us about your company.
I started Lifeplanet in December 2013. The idea of digital insurance was new at that time, and I was one of the pioneers to introduce this idea in the Korean market.

We are currently offering simple life and health products so our corresponding frontend system stays simple and easy to understand. We also offer a chatbot and access to our customer service center 24 hours a day, 365 days a year, for any additional assistance our customers might need.

What is your academic background? What skill sets are a must for running an InsurTech company like yours?
I have a master’s degree in science in mathematics. In addition, I am an Associate of the Society of Actuaries (ASA) and a Member of the American Academy of Actuaries (MAAA).

Quantitative skills, such as knowledge of technology, data analysis and processing capabilities, are key to success. Furthermore, qualitative skills, such as teamwork, ability to collaborate with other market players, entrepreneurship and fast decision-making, are essential as well.

Right now, digital insurance is innovative and gaining traction. Do you think most insurance companies—if not all insurers—will convert to a digital-only model in the future?
I believe collaboration and partnerships among insurance and technology companies will increase, leading to a bigger and deeper ecosystem on a national and global scale. The ever-increasing use of mobile devices and enhancements in high-speed information technology (IT) infrastructure will provide further stimulus for growth.

I believe both models will have a place in the future, as consumers’ needs are neither met 100 percent offline nor 100 percent online. Traditional insurance models will continue to be the main distribution channel. However, digital insurance will continue its growth and be an important distribution channel as technology continues to advance.

Finally, financial attractiveness will play a role in the growth of digital insurers, as they require lower overall capital, incur lower operational expenses and attract higher potential valuations. On average, digital insurance companies have experienced a 10 percent improvement in persistency experience in Korea compared to their traditional counterparts, which also makes them an attractive long-term proposition.

Are regulators encouraging and embracing innovative ideas such as your company?
They are responding positively, but slowly, and this is the situation across the globe. Current insurance regulations are extremely traditional, offline and follow an agency model. In comparison, a lot more work has been done on new regulatory changes in the FinTech space, so if InsurTech regulations can follow suit and enjoy similar levels of growth, it would be very beneficial for the industry.

What are the key differences between traditional and digital insurance models?
Although InsurTech is an insurance business, it operates similarly to technology companies. While traditional insurers focus mainly on hiring and training agents to sell products, our focus is more on the content, platform, data analytics and customer value propositions. In reality, the InsurTech model is different in every aspect, including product development, policy maintenance, benefit claim and customer service.

A few key differences are:

• InsurTech’s online products need to be simple and intuitive.
• The look and feel of frontend InsurTech systems need to be presented and visualized like those of technology companies. The traditional insurance purchase process is time-consuming, confusing and complicated because these companies’ websites were seller- or product-oriented. We are transforming this process to one that provides a hassle-free and seamless experience by introducing new technologies, such as biometric authentication and coverage analysis services.
• An InsurTech company’s marketing tools should be similar to those of technology companies. The customer engagement process should reflect the individual financial status and gather big data from the open-source market. The analysis should be quickly processed and presented in a simple and intuitive form. Dealing with big data with a quick optimization process is a necessary step in various areas of the InsurTech value chain.

Do you think actuaries are better suited to work in InsurTech than data scientists? Do you hire actuaries in your company?
Actuaries have exceptional quantitative skill sets and are already performing a vital role in running insurance and InsurTech companies. I believe they will continue to develop and expand their skill sets, including data science knowledge, and will continue to be in high demand in future. Yes, we are hiring actuaries in our company.

When hiring actuaries, what do you normally look for that may be different from the hiring requirements of traditional insurance companies?
Actuaries who wish to work at digital insurance companies should have both the quantitative and qualitative skills that are expected of those who work in traditional insurance companies. In addition to that, not only do we anticipate an innovative mindset, we also expect some basic knowledge of programming and IT, including data science, FinTech, InsurTech and so on.

Are you making use of customers’ social media data? Have regulators started to allow usage of such information?
None of the insurance companies in Korea are using customers’ social media information at this moment—it is not allowed yet under the regulations in Korea. However, the revision of the Credit Information Use and Protection Act in the second half of 2020 will allow it, so we are preparing to leverage this information accordingly.

How are insurers expected to leverage social media information (once it is allowed by the regulator)?
If it is allowed, it may not be limited to social data only, and regulators would allow usage of various kinds of nonfinancial data. There would be three ways to leverage such data:

1. Marketing
2. Underwriting
3. Customer interactions

For marketing, insurers would be able to send marketing messages that are catered to customers’ interests based on their social media posts. Also, companies may be willing to enhance and complement their underwriting system through utilizing various nonfinancial and/or unstructured information. For example, underwriters could collect social data to detect undisclosed medical information. Or, in the case of a credit loan, we could analyze the behavior pattern when customers read the loan contract and offer a greater credit line to those who read thoroughly. Updating frequently asked questions (FAQs) and content based on search trends could facilitate better interactions between insurers and their customers, especially in this kind of situation where numerous people are suffering from simultaneous catastrophic events (COVID-19, heavy rain, forest fires and so on).

How has COVID-19 affected digital insurance growth?
Korean traditional insurers are enhancing their digital channels in response to COVID-19. This will likely accelerate more growth going forward, both in Korea as well as globally.

What advice do you have for young actuaries aspiring to become entrepreneurs?
Continue exploring and challenging yourself to achieve new levels of excellence.

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