Microinsurance Trend in
Southeast Asia

October 7, 2022

5 Global Trends in the Insurance Industry

The trends, including microinsurance, exist not only in Europe and the U.S. but also in Southeast Asia

Today, the insurance industry faces a various challenges, just like any other industry. For example, utilization of big data based on the digitization and mobilization of customer touchpoints, inter-company collaboration (expanding ecosystems) with platformers for the developing new channels, and development of products and services according to individual characteristics, etc.
Given these challenges, there are five global trends in the insurance industry: (1) Direct to Consumer: a trend represented by Go Digit General Insurance Limited, a digital insurance company in India that provides insurance products directly to consumers without intermediaries. (2) Vertical Domination: seen in a case by NEXT (U.S.), which focuses on the SME business market and offers a wide range of products. (3) Microinsurance or Pay-per-use Insurance: represented by LAKA (UK) which focuses on coverage for the duration of a bicycle rider's ride. (4) Data-driven Personalization: the use of big data processing to identify personal characteristics through the spread of IoT devices, including smartphones. (5) Simplicity and Transparency to Customers: exemplified by Lemonade (U.S.).

These trends can be seen not only in Europe and the U.S. but also in Southeast Asia. In this paper, we will explain microinsurance trends in Southeast Asia. We believe that the traditional microinsurance model is transforming through our project support for the insurance industry in Southeast Asia.

5 Global Trends in the Insurance Industry

Current Status of Microinsurance in Southeast Asia

The widespread adoption of mobile phones plays a role for insurers in attracting more customers and lowering their fixed cost ratios

According to a survey conducted by The Foundation for the Advancement of Life & Insurance Around the world (FALIA) for Southeast Asian countries (e.g., the Philippines and Indonesia), microinsurance is defined as a simple product, low in unit price and margin. However, recently an accelerated trend to reduce fixed cost ratio by simplifying underwriting and using mobile devices to reduce costs has been seen.  

＜Popularity of the country＞
Regarding purchase rates and the number of policyholders, for example, about one in four citizens in the Philippines is purchasing microinsurance, while in Indonesia, the figure is relatively low, at just under 2% of the population.  

＜Distribution channel＞
Banks and agents are the most prevalent channels, with other physical channels that have close contact with consumers – such as mutual aid associations, retailers, and telecom companies. 

＜Product＞
The most popular types of microinsurance are compulsory and simple insurance, such as credit life insurance attached to term deposits and loans, followed by personal accident insurance. For example, CARD Pioneer in the Philippines sells an insurance product called SAGIP Plan, which combines personal accident insurance, burial benefit, and calamity aid.  

＜Purchase method＞
Products are designed to be simple so that Micro-insurers and partners can easily handle purchasing procedures and payment administration without medical selection at the time of underwriting, from the perspective of operational cost reduction. While most products do not require a disclosure statement and allow purchasing with only a checklist for pre-screening, and technology is used for paperless purchasing procedures and reducing administrative workload, the use of mobile phones is also helping insurers to attract more customers and lower their fixed cost ratios. In recent years, mobile-accelerated microinsurance has been prominent in Southeast Asia.  

Recent Examples of Micro-insurance in Southeast Asia

SNACK by Income greatly lowers the psychological hurdle for consumers to purchase insurance by realizing the purchase into small, accumulable amounts

The latest trend in microinsurance is to appeal to various demographics through mobile apps. In this section, we will introduce two examples of microinsurance to describe the trend in detail. The first case is SNACK, developed by NTUC income Singapore, and the second is the case of the partnership between AmMetLife and BIMA, an Insurtech company based in Malaysia. 

(1) SNACK by Income
SNACK is an insurance product launched by NTUC Income as a mobile app in 2020. with its innovative concept that ties insurance purchase triggers to daily activities (ex: using public transportation, exercising, eating, Etc.). Coverage is automatically and concurrently accumulated in small amounts as consumers purchase insurance through their daily activities. Committing to a small amount greatly lowers the psychological hurdle for consumers to purchase insurance.
Currently, SNACK offers three basic insurance products: 1. term life protection, 2. critical illness protection, and 3. personal accident protection.
The app also has a simple, user-friendly customer interface (UI) and customer experience (UX), allowing anyone to download and register easily.
 

Simple UI/UX of SNACK by NUTC Income

BIMA makes simple and affordable death protection for the family of low-income/middle class using a mobile phone-based digital payment channel

(2)    BIMA (InsurTech) x Mobile Telecom Companies x AmMetLife Takaful
Founded in the UK in 2010, BIMA provides microinsurance and telemedicine services in emerging countries. It offers its platform to insurance and telecom companies with solutions to automate insurance purchase and premium payments. Now, in Malaysia, AmMetLife Takaful and BIMA have collaborated to launch the BIMA Life Takaful Plan, simple and affordable death protection for low-income/middle-class families using a mobile phone-based digital payment channel.

The product concept is designed to address the challenges in the Malaysian insurance market, such as the lack of affordable and simple insurance for the low-income/middle class and the low level of knowledge and awareness of the need for insurance. In addition to the easy-to-understand and low-cost product concept, the product also solves the hurdles to purchase and payment by providing various payment methods, such as allowing premium payment when paying mobile phone bills.

Another unique feature of BIMA's sales strategy is that it not only sells microinsurance through mobile devices but also mandates the use of dedicated agents to explain the product to customers before they purchase, which is also considered a method to increase purchase rates.
 

Product Overview and Purchase Methods

Summary: Suggestions and Actions to be Taken

We need to find answers to these issues: what customers insurers want to appeal to, what kind of product concepts, and which partners should collaborate with to make this happen

By observing the trend of microinsurance in Southeast Asia, we can understand that the traditional concept of providing such insurance to low-income targets is changing. We are seeing a shift in the positioning of microinsurance as it is accepted in the market as more affordable and easier to purchase - especially for young consumers. This target segment which was more challenging to reach in the past.
These shifts were made possible by taking advantage of the smart and catch UI and UX of mobile phones and through partnerships (e.g., with payment companies, telecom companies, transportation companies, Etc.) to establish customer contacts.

Given the current situation in Southeast Asia, where insurance penetration is lower than in developed countries and where the use of mobile phones is rapidly spreading region-wide, the trend of offering small amounts of insurance through mobile apps is expected to continue in the future to reach all segments of the population. At the same time, mobile channels would provide insurers with access to each user’s personal data Thus, the trend of promoting optimized products for individual needs is also expected to continue.
 

Based on our study, the below chart presents possible actions and areas where we can assist insurers in how they should respond to this trend.

Finally, including the examples we have seen, there is also a trend that insurers are now collaborating with a variety of companies, especially in new initiatives (expanding ecosystems). Though the percentage of complete online insurance channels is small at present, given the trend toward non-face-to-face channels in all industries, we can also expect to see this trend rise in the insurance industry. Thus, we need to find answers to these issues:  

• What customers insurers want to appeal to with what kind of product concepts?
• Which partners should collaborate with to make this happen.
• What kind of UI/UX is required.

ABeam Consulting will assist you and your organization on these initiatives, - including support in the search for the right partnerships for the implementation phase. With our rich experience in the insurance industry in Japan and Asia, we can assist your company in developing business strategies and designing the implementation
processes for data integration with external companies. We would be happy to hear from you.