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The Rise of Virtual Insurance in Hong Kong

Virtual Insurance, also known as “Internet insurance,” is a branch of the rising industry Insurtech, a crossover between insurance and technology. Virtual insurance specifies companies or products that operate without the need of a physical branch – the entire experience starting from application, getting insured, and claiming coverage, can be done via an online system. Virtual insurance has been around as early as 2013 in countries such as the US and Germany but is still considered a new field of insurance in Hong Kong that has yet to be widely exposed to the public.

The insurance industry in Hong Kong is expanding at an unprecedented pace. In 2017, the total gross premiums of the Hong Kong insurance industry had increased by 8.3% to $489.2 billion[1], and Hong Kong residents has the highest insurance premiums-per-capita (17% by GDP percentage). Driven by income growth and broader old age provisions, InsuranceAsia sees an 8.2% growth per year in the Hong Kong insurance market for the next 10 years[2], providing lucrative opportunities for insurance companies. Among the players include multiple virtual insurance companies that are authorized to provide online products by the Hong Kong Insurance Authority (HKIA).

Bowtie Insurance is the first company to acquire a virtual insurance license in Hong Kong. HKIA gave the nod in December 2018, taking a big step in embracing the era of Insurtech in Hong Kong. Bowtie currently offers medical plans under the Voluntary Health Insurance Scheme (VHIS) by the Hong Kong government, claiming to offer some of the best rates in Hong Kong.

Bringing the whole insurance experience online is beneficial for both the company and the customer. Unlike traditional insurance companies that overwhelm customers with various products and numbers, Bowtie’s website is simple and extremely user-friendly. Rates are available on the website and dynamically priced by taking 3 metrics from the user: gender, age, and smoking habits.  

The application process requires customers to fill in personal information, medical history, and HKID for verification. Customers can be can finish the form and get insured in under 10 minutes, compared to weeks of waiting time with traditional insurance companies. Coverage claims are also processed online, simply file an application online and a coordinator will follow up and guide policy holders through the process. Payments will be transferred into the designated bank account within 3 days once alld the required documents are uploaded.

The founder and CEO of Bowtie, Fred Ngan believes that this simplified process and digital approach will attract younger consumers to purchase insurance under the VIHS. “We do not plan to compete with traditional insurers,” said Ngan. “We want to target a younger generation of customers who are tech savvy and like to do everything by themselves.”

The digital platform allows company agents to handle multiple application cases at the same time. Files and data are stored digitally, which saves up tremendous time and manual work compared to paper-based traditional insurance providers. Bowtie has a small team of less than 50 employees for technology development and customer services.[3] By eliminating unnecessary middlemen such as agents or banks, Bowtie is able to effectively cut down personnel costs and promise its consumers zero-commission fees for all of its products.

Some people might worry about the legitimacy or safety of these virtual insurance companies. But Clement Cheung, CEO of the HKIA assured that “virtual insurers still have to follow the same high-capital and conduct requirements as traditional insurance companies.”[4] To further protect the  interests of policy holders, HKIA listed out principles for virtual banks, including conditions and restrictions on products that are offered. Currently, online insurance providers are restricted to more simple services while sophisticated products remain only available in major insurance companies as they believe that not all insurance products are suitable to be sold online.

Following Bowtie, 3 other companies have also received the virtual insurance license in March 2019, namely the Chinese company ZhongAn Insurance, local startup OneDegree Global, and traditional insurance player Asia Insurance Company. This rising trend implies the digitalization of the insurance industry and manifests the growing interest in the Insurtech industry. Aside from virtual insurance companies, there are also startups like imSure and gobear democratizing the insurance industry and make information accessible. Another company, GenLife is using AI and Machine Learning to intelligently price risks for personalized insurance products.

Despite these developments, the Insurtech industry in Hong Kong is still in its primary stages compared to other developed markets like London or San Francisco, where more complicated fintech products are introduced to optimize insurance processes. Examples include using blockchain to speed up the underwriting process and to prevent fraud, and AI to calculate real-time risks based on multiple parameters. With the growth of Fintech and support for innovation from the HKIA, the outlook of Insurtech in Hong Kong is optimistic and will hopefully bring more benefits for end-customers in the near future. 

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