The Insurtech Industry is Thriving, and APAC Startups Are Tapping In

The insurtech market in the APAC region is big enough for players of all sizes, as long as their value proposition checks out, says Coherent Co-Founder and CEO.

Now’s a good time for insurtech startups.

The APAC region is marked by large swathes of uninsured people, families, and businesses. The mortality protection gap in the APAC region stands at $83 trillion as of 2019. Its two mega-economies, China and India, are the most vulnerable.

John Brisco, Co-Founder and CEO of Hong Kong-based insurtech startup Coherent, notes that insurtech will play a vital role in unfolding the growth story of insurance in Asia.

“The simple fact is most insurers are looking for ways to evolve their business models and ways to get access to those customers. We see a tremendous opportunity for insurtechs such as Coherent to provide the platforms to enable them to evolve different ways to engage, develop products, and sell solutions to customers,” Brisco says.

In addition to the insurance gap in the APAC region, insurance penetration is also extremely disparate country-to-country. Insurance penetration in Taiwan reached about 20% of the population in 2019. In China, it stood at just 4.3%. And yet, in less than a decade from now, the APAC region is expected to account for 42% of global premiums.

The APAC opportunity for insurtechs

Insurtech only recently received a vote of confidence from investors worldwide: investments into this space reached a record high in Q3 2020, raising US$2.5 billion across 104 deals. This represents an increase of 63% in funding from the previous quarter.

The insurance industry in the APAC region is already looking at an opportunity of $292 billion in premiums for life cover alone.

Additionally, the global insurance industry is expected to enjoy a strong post-COVID-19 recovery. Despite the pandemic-induced market shock, premium growth rates are expected to bounce back to 2019 levels by next year. China and other emerging markets in Asia are predicted to recover faster.

The industry is only going to get bigger and bigger, Brisco notes, and that will come with a slice of digital transformation. He expects that insurers will embrace product innovation not only to convert new customers, but to also up-sell their existing customers.

Startups have been quick to capitalize on this growth. Companies such as PasarPolis, Qoala, and Acko have raised significant rounds this year. Chinese insurtech company Waterdrop raised $230 million in potential pre-IPO financing.

Brisco’s startup Coherent, too, closed its Series A round of funding earlier this week, bagging US$14 million. The company will focus the funds on hiring tech and actuarial talent, and build teams in Japan, U.S. and Thailand.

Coherent is also looking to expand its presence and customer reach, with Asia as a primary focus. Its headquarters are in Hong Kong. The startup also has offices in Singapore, Shanghai and Manila, and does business in other parts of Southeast Asia as well as Brazil.

The end of an era: Retiring legacy systems

Institutional insurers are not far behind in the race to adopt new technologies. Brisco notes that insurers have traditionally relied on agents and banks for distribution. The rise of social platforms and new retail brands in the APAC region can potentially upend this, he says, as insurers will now look for new ways to engage with customers.

“What we expect is insurers wanting to integrate more into ecosystems, and [access] ways to embed themselves into those ecosystems,” Brisco says. This is precisely the opportunity that Coherent is targeting.

For instance, legacy systems affect Hong Kong insurers across verticals including tech and operational risks, and compliance. They drive up policy maintenance and customer acquisition costs. They also make product development a time-consuming affair, and reduce these companies’ capability to integrate with digital ecosystems.

Incumbent players already have a tremendous customer and brand history, Brisco notes. Growth is not the problem. Their challenge is in going digital. This is where Coherent has positioned itself – in enabling incumbents to tap into a digital future.

As a B2B insurtech, Coherent helps clients with product development, sales solutions and social messaging campaigns.

Its suite of insurtech products optimizes the digitalization process for insurers looking for an upgrade. This is significant for the APAC region, since many of its emerging markets are already producing digitally native companies. On the other hand, its more mature markets are looking to move on from legacy systems.

“[Insurers] are not short of ideas about wanting to do new things with new partners or build new products,” Brisco explains. “But what holds them back is the legacy technology pain that they experience. And that has an impact on the whole process operations of the business as well.”

Moreover, new insurtechs that operate on a D2C model have already emerged globally. They compete directly with institutional insurers, leveraging being digitally-native and agile startups. London-based Marshmallow, for instance, uses algorithms and data to challenge the services offered by incumbent insurers.

In this sense, the competitive weight balances on both sides. But the beauty of the insurance industry, Brisco says, is that insurtechs can tap into several different roles in the transformation of this industry.

Brisco believes that the market has enough space for companies, whether young or institutional, as long as they have the right value proposition. And to Brisco, Coherent is on the winning side of the equation.

“Insurance in Asia is a trillion-dollar industry and it’s going to go to $2 trillion. And we as Coherent believe that we’re going to be at the heart of helping that transformation. So, we’re ready,” he says.

Header image courtesy of Coherent

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