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Banking & Finance

Tech expanding reach of insurance

Released at: 13:51, 01/06/2019

Tech expanding reach of insurance

Photo: Viet Tuan

Insurtech continues to offer new opportunities to non-life insurers in Vietnam and change the face of the local insurance sector.

by Hung Cao

With just a few simple clicks or swipes on a mobile app, travelers can now take out flight delay or cancellation insurance just a few hours before departure. The latest product in Vietnam’s non-life insurance market in general and among travel insurance products in particular, flight delay or cancellation insurance products are expected to follow the rapid growth of commercial airlines in the country. This has triggered competition between digital insurers, especially insurance startups, who are racing to use technologies to change the face of the local non-life insurance industry.

NEW DEMAND, NEW SUPPLY

OPES Insurance, a non-life insurance joint stock company with capital contributed by the Vietnam Prosperity Joint Stock Commercial Bank (VPBank) and other shareholders, officially introduced itself to the local insurance market with a launch ceremony in Hanoi in mid-March. At the same time, it announced its first digital insurance products, including the new flight delay coverage. These products are integrated with technology so that OPES and other non-life insurers can reach clients directly without involving intermediaries such as insurance agents.

The flight delay insurance is expected to attract the most customers. Up to three hours before departure, customers who have already installed the OPES app will be able to purchase in-app coverage for about $1.70. If the flight is at least 31 minutes late, the insurer will reimburse them up to $6.45. In cases where the flight is delayed for four hours, the payout is up to $64.50. Aiming to become a digital insurer, OPES is embracing its ambition of exploring the potential in Vietnam’s insurance market, with a desire to apply digital technology in the insurance field.

OPES is not the first insurance company to penetrate into this market segment. In December last year, another Hanoi-based insurer, INSO, also introduced flight delay or cancellation insurance, compensating customers with $69 when flights are delayed six hours. “At the moment, we are distributing three types of non-life insurance products, including motor vehicle (car), flight delay or cancellation, and love insurance,” said Ms. Vu Nguyen Thuy Van, CEO of INSO. “Acceptance among customers of our products has been positive and encouraging, because it’s simple to purchase a policy and receive a payout within 30 minutes.”

She also noted that it would normally be time-consuming and troublesome for passengers to receive compensation from airlines when flights are delayed or cancelled, so most don’t seek such remedies. “Buying delay insurance, on the other hand, is easier and quicker,” she explained. “With hundreds of millions of passengers each year, flight delay or cancellation insurance can help expand the current market, the value of which is forecast at over $129 million. I think this type of insurance is beneficial for passengers, as proven in the surging demand since we introduced it last December. It’s also an opportunity for local airlines to improve their customer satisfaction.”

Meanwhile, despite not offering a separate flight delay or cancellation insurance product like these startups, traditional insurers like Liberty and the Posts and Telecommunications Insurance Company (PTI) have included this type of product in their travel insurance line. “Most customers don’t know that this benefit has always been included in Liberty’s travel insurance package, or that Liberty’s compensation benefits are the highest,” said Mr. Nguyen Ngoc Duc, Director of Direct Distribution, Renewal & Corporate Marketing at Liberty Insurance Vietnam.

He revealed that one of Liberty’s key products in its online sales channel is travel insurance, with sales leading the market. Products have expanded into sales channels like e-wallets and have attractive cooperative promotions that reach millions of customers. As a result, its travel insurance product has continued to grow over the last year and will be promoted through other e-commerce platforms in the near future.

TECHNOLOGICAL INVESTMENT

This method of competition is leading to rapid changes in Vietnam’s insurance industry thanks to the development of digital technologies and the so-called insurance technology (Insurtech) revolution.

Liberty has been developing its online sales channels for Insurtech products with leading mobile partners in Vietnam such as MoMo, Zalo, and Tiki. “Customers can easily choose to take out convenient insurance packages on their mobile phone screen,” said Mr. Duc. “The company has also invested heavily in its technology platforms and infrastructure systems since its inception. With such preparations, we have gained a solid technology foundation and a wealth of experience to further advance in the Insurtech revolution.”

Part of the Nexttech Group’s digitized-commerce ecosystem, INSO is backed with strong and sustainable technology development, according to Ms. Van. “We are also equipped with know-how from the insurance sector’s highly-experienced professionals,” she said. “Most importantly, we build up our platform based on a deep understanding of the challenges that end-users have to deal with when it comes to buying insurance and getting compensated. Moreover, we are currently deploying OCR (Optical Character Recognition), Computer Vision, and Deep Learning and Big Data, to help us get closer to our goal of optimizing the buying and selling of insurance and claims procedures for our customers, making insurance easier to access and easier to purchase.”

In the context of Industry 4.0 disrupting traditional practices and changing the economy’s operations, OPES’s CEO Mr. Mai Anh Vu told the launch ceremony, the company has been embracing its ambition of exploring the potential of the country’s insurance market and becoming a leading and innovative digital insurer in Vietnam. It has integrated technology into insurance products to bring insurance products and services directly to customers.

The company aims to apply digital technology, diversifying sales channels and agile working methods to design insurance products in accordance with user experiences. In particular, its smart service product is a technology system that allows for high interaction with and understanding of customers. OPES is now providing many insurance product lines, including health, travel, motor vehicle, and property. The application of AI and Big Data is a step forward for the company to increase customer understanding and promote information to the right customers with the right content.

BOOSTING EXPANSION

Flight delays are, in fact, opening up opportunities for many insurers. Local airlines have to inform passengers if their flight is delayed by 15 minutes or more, according to Circular No. 27/2017 on the quality of passenger services at airports and Circular No. 14/2015 on non-refundable advances for air transportation, both issued by the Ministry of Transport. The ministry also regulates different compensation levels for domestic and international flights based on the distance travelled.
However, airlines can be exempt from compensation obligations if the trip is delayed due to weather conditions or technical or security reasons. Airlines are therefore likely to spend modest amounts of money on flight delay compensation. This has created ample opportunities for insurance companies to establish a firm foothold in this niche market segment.

According to the Insurance Association of Vietnam (IAV) and the Asia-Pacific Risk and Insurance Association (APRIA), Vietnam’s insurance market is growing strongly, with the non-life segment accounting for 12 per cent of the compound annual growth rate (CAGR) per annum over the last three years. “But we are still in the early stages of development and Vietnam has the lowest insurance penetration among regional countries,” Ms. Van told VET.

Along with robust growth in smartphone use, she went on, Insurtech is the right answer to Vietnam’s under-penetration problems in both the life and non-life segments, because traditional sales channels aren’t able to approach such a huge population of mobile phone owners within a short period of time. “Insurtech remains a fairly new concept, and technology application at local insurance companies is still not efficient,” she said. “This is why INSO wants to support these companies with technology solutions to optimize online selling and buying as well as compensation procedures. It is essential for not only the insurance sector but also for other fields to start digging into how to implement digital technologies in current business models, to ultimately grow in line with global trends.”

She added that local insurance companies are in the process of educating people about insurance and life security. “We are working together with our partners to offer micro-insurance products, for example delay insurance, so that customers can become familiar with the concept and then later on be more willing to consider buying bigger insurance products,” she explained. “We are also working with leading local insurance firms to launch more non-life products this year. Online distribution of existing insurance products on e-commerce platforms and partnerships with large e-commerce players who possess a large of number of customers is also within the plan. We are also looking to raise capital from regional investors to speed up our progress and invest in R&D and technology expansion.”

OPES, meanwhile, is providing insurance packages to drivers and customers of the ride-hailing app be and expects a new product package will be launched in the near future. It will also continue to expand online sales channels through cooperation with leading digital partners in Vietnam to continuously grow and expand access channels. Meanwhile, with a long-term strategy, heavy investment, and strong technology infrastructure, Liberty aims to continue leading Insurtech in Vietnam in the non-life sector. 

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