Asia InsurTech Podcast had the pleasure of speaking with Sherry Du, a Managing Director of RGAX APAC at Reinsurance Group of America in Hong Kong.
We had a great conversation during which we discussed:
- How access to new data streams can provide better products and services
- Sherry’s extensive experience in the insurance industry
- The importance of data analysis and deep personalization in closing the coverage gap
- Building new, lower-priced products on legacy platforms
- Alternative forms of distribution
- Customer engagement and greater customer education
- COVID’s impact on the speed of Digital Transformation in the Insurance Industry
- The role startup companies play in RGAX’s strategy
Below, please find a transcript of our conversation.
Michael Waitze 0:00
Okay, we’re on. Hi, this is Michael Waitze and welcome back to the Asia InsurTech Podcast. This is the only podcast in Asia focused on insurance that gives entrepreneurs, thought leaders and investors a platform to discuss how technology is reshaping the insurance industry in Asia, and frankly in the rest of the world. Today, I am honored to be joined by Sherry Du a Managing Director RGAX Asia Pacific. Sherry, you’ve been insanely patient. It’s so great to have you on the show. How are you doing today?
Sherry Du 0:34
I’m very good. I’m very glad to meeting you here. Michael, my pleasure to join the show.
Michael Waitze 0:40
It’s a pleasure for me as well. Look, let’s just jump right in. What do you think is the biggest trend in InsurTech in Asia today?
Sherry Du 0:51
Yeah, so , InsurTech technology is widely used in Asia nowadays as everyone can see the impact. I see the clear trend of using the new technology to get access to different data to provide the better products and services to our end customer and also improve the efficiency of the insurance industry.
Michael Waitze 1:08
Okay, can you give us and our listeners a little bit of your background for context?
Sherry Du 1:20
Sure, my pleasure. I’m the Managing Director of RGAX Asia Pacific. RGAX is the transformation engine of RGA. That’s the Reinsurance Group of America. So what do we do? We are developing the industry wise cutting edge innovation solutions by leveraging the latest technology, data and customer insight, and also integrate to RGA’s core strengths, like our insurance and risk knowledge. Our business spans across Asia Pacific, from Beijing to Tokyo, from Hong Kong to Mumbai.
Before joining RGAX, I was the Director and Head of Accelerator Group in Swiss Re leading the technology innovation activities in Asia Pacific. Prior to that I was the Regional Director in Willis Towers Watson. So I work for the insurance and actuarial functions. I was there for a long time. 13 years. My background, I am an actuary by education. And I studied in the University of New South Wales in Sydney, for my Actuarial Science, Master Degree.
Michael Waitze 2:22
Just really, my grandmother was an actuary. Just so you know. Yeah, a lot of people don’t know that. But and she was well before her time, obviously. She was an actuary, like in the 60s and 70s. So.
Sherry Du 2:30
That’s amazing. Yeah.
Michael Waitze 2:35
Kind of amazing right, particularly at that time. Amazing for a bunch of different reasons. But yeah, so good for you, I’m really impressed. And I love the fact that you’ve been in the insurance industry, essentially, for your entire career brings a lot of credibility and gravitas into this position. Yeah.
Sherry Du 2:31
Well, yeah, it is a long time. 20 years now.
Michael Waitze 2:36
One of the things you mentioned, was using the data assets, right, to create efficiency, but also to create more interesting and better products, can you talk a little bit about how insurance companies can solve this immense challenge of how to use these big datasets to generate new business?
Sherry Du 2:53
You make a very good point here, like how we use data. So insurance industry now, we have very new opportunities because of the data. So we can move from the old school style, to more modern style, from the benefit of the technology and data, it’s not uncommon for insurance today, to use the various data set, not only the traditional insurance policy data, but much wider data set from social media, from your communication, from Facebook, etc, etc, we can get the data with the technology, and also, digital usage, connection to millions of people. With that technology, we can really get understanding, much better understanding of the end customer, like their individual level protection gap, for example. Their particular insurance needs, their risk profile, and their willingness to pay for the coverage, for example, and also, you know, their living standards, their style, their lifestyle, all this kind of thing can help us the insurance industry to build and design, and customize the product coverage, and also the easy onboard underwriting process to largely improve the engagement and the conversion rate from the sales process. So that’s the way we see many insurance company now approaching to generate the new business.
Michael Waitze 4:05
So this whole idea, a little bit of a deviation, right? But this whole idea of personalization, like almost hyper personalization, it sounds like you’re talking about is very interesting, right? And if you’re using these massive datasets to generate these new products into new top line, are we suggesting that it’s different even by country and maybe even by city? And then you can potentially look at, like you said, social media, communication tools, meaning probably WhatsApp or Line or things like that, that people use every day to then be able to customize? And I love the term you use the personal coverage gap. It’s so interesting.
The level of technology usage in the insurance industry, vary by, different markets, and also by different companies. Nowaday, the digital players, the tech giant companies also play a good role in the insurance industry, they play a role to connect insurance companies with the end customer, by their touching point, like we know, in China, the Zhong An Technology, AliPay, Tencent, Ping An Technology, they spend millions of dollars on to just build up those connection with their end customer, and with a much better understanding at the individual level. So that should largely improve our offers from the insurance industry to the end customer.
Michael Waitze 5:20
Can you talk about how potentially newer, as you mentioned, new products, but low priced products? How can these new low priced products get built on what I think some people may perceive as these legacy platforms? And if they can, like, what is the solution to that?
I will say there’s a kind of argument to say, well so whether or not like nowaday, we talk about technology and linking to the digital distribution, that the product and the price is really at the low end, I will say, it should be like the suitable level of the price of the product. Because once we know better of the end customer, we know their individual risk profile better so we can design the product, and the pricing much better to be suitable for their needs, rather than only compared with the price and make the price fight, that’s the different argument there. But I get your point to say, Okay, if we have to offer something to largely benefit the end the customer, if we can reduce our kind of in-house costs, so move that kind of the profit margin, and reduce the price somehow to benefit the end customer, whether or not the technology or legacy platform can really play a good role to help. Right. So I think, yeah, so I think this is a good question. We do see in the industry, some companies, especially with a long history, they have, like many different types of legacy platform, and using that kind of platform to achieve today’s needs might be a little bit tough and too heavy, so those kind of legacy platform, you need to do more to make it extendable to with the new product design new underwriting process. etc., etc. And the maintenance costs might be high. And sometimes it just has the limitation the technology limitation doesn’t allow you to do more and more. So, our observations from the industry we have seen many examples, like some companies, they just entirely replace the old system by the new one to really get the benefit from the latest technology, so in long run it gonna to be really achieved the cost saving. But we also see other companies they choose to do kind of combined way, some smarter way was to replace the underlying technology platform without have to rebuild every customized model on that platform. You just replaced the old legacy platform with the new technology. But with all this customized modules and models still working and easily integrate to the new technology, that is also some popular way that we can see from the industry.
Michael Waitze 7:47
What you’re suggesting here is a hybrid model over replacing some pieces of that technology with the sort of modernization in the software, the user experience or the user interface?
That’s right. That’s right. Yeah,
Michael Waitze 7:59
We did a lot of this actually, I think I mentioned to you offline that I worked at Goldman Sachs before, when we were building trading applications, we had to make the same type of decision, can we really replace what you would probably call sort of the customer admin system? or what we call it the back office? Or do we just sort of combine a new front end super speedy trading application? And then connect that via an API or some other connection to the back office? Yeah, you know, we have 50 years of data on that, and we don’t want to mess with it. Because we felt a little bit nervous that if we, you know, mucked up 35 years of data that would be problematic for us. I understand that. Yeah, hybrid view on this, right. That makes sense.
Yes, that’s true, especially when you know, the technology or the kind of the user interface has been used by the end customer, or your, maybe like, 1000s of millions to have the agency, so they get used to about like the front end. So it could be smart, you just replace the back office and the back ground technology, without really, totally change the design of the front end.
Michael Waitze 9:08
Yeah, I completely understand. Let’s switch gears a little bit, and talk about something that’s near and dear to my heart. And that’s engagement. How does RGAX view engagement as a way, let’s just say to retain their existing customers? Excuse me customers? And how does that engagement work do you think?
Sherry Du 9:29
The high level of customer engagement and managing their life experience is so important to almost every single insurance company in our industry, right. So, this is really important. From RGAX, so what we do is we leverage in the technology and we built the B2B2C model to use that to help our clients, the carriers, and from there actually, eventually, we have the end customer. So what we do is we continue to develop and enhance our technology platform, and also the product and establish ecosystem that we build up together with the insurance company. We want to improve continuous engagement point and touching point with existing customer, so not only like you pay me the money and wait for 50 years, we give you a one lump sum payment, which is too kind of cold way to do the business. But instead of that, nowadays, because of technology, we can have like a many level of touching point to our existing customer through probably you heard about, like maybe the wellness program. You know, the health wellness program, the value added services, we can link into some telemedical consultation, especially for the COVID time is so popular, and also if that’s some senior level customers, then there are other value added services to look after their needs. Not only focus on their physical needs, but also mental needs. You know, sometimes the senior people, they feel lonely after retirement, so how we can continue engage them and make them feel, they’re looked after, they take care by the insurance industry, so that they feel happy to be with you for the long term. I think that’s what we do through the technology to make it happen.
Michael Waitze 10:54
Very interesting. So, if we consider the entire insurance value chain, what role do you think alternative distribution plays? And is it different across the product portfolio meaning is it different for life and health and home and auto? How does that play out?
Sherry Du 11:09
Alternative distribution is such a hot topic now in the insurance industry, not only in Asia, but actually globally. So, we can talk about like, from the traditional, you know, pure agency channel, and in some stage that more extended to the bancassurance channel, but nowadays, more and more the digital brokers, the digital distribution channel, they are kind of aggregator. So, they play quite important role now. If you look at, for example, China market, so the large players really making the big sales every year and that the growth rate is so high, and especially during COVID, we see that not a small number of the large, digital aggregator, they doubled their sales in 2020 even with COVID impact, they play a very important role. Beyond China, if you look at the rest of Asia, I think the alternative distribution, doing special good work in those market with the high penetration of the digital usage, right, so you look at probably Southeast Asia markets as well India market. All this alternative distribution, they’re very active in the insurance market. As you mentioning, this kind of online sales thing, they started from the car insurance auto right. So on the PA product etc where you know, the product is relatively simple and straightforward. But nowadays, it has been largely improved for the Life and Health insurance product, quite a few typical product has been successfully selling in this kind of digital channel, we talk about, , term insurance, some of the medical reimbursement, some of the CI products, but also, you know, quite popular is what they call, million dollar medical reimbursement product quite popular nowadays, on the Life in Health product portfolio. I can see that some of the good point from this digital channel bring to the insurance industry, which including much wider services, not only insurance coverage, but also they have the value added services online. So if you are their customer, even you don’t buy their product, but you can get the free support from them to see some of the insurance education, some of the interesting articles and also the insurance product comparison, they do have those kind of engine for you if you’re searching for like cancer protection, they jump out with the product features comparison apple to apple, by different company at the price and what is the benefit? And also they have some users comment on that whether they enjoying this company, enjoying this protection etc., etc. So you can feel like you really been looked after in the good way with all this technology and support behind so that’s something we see is gonna to continue in the near future.
Michael Waitze 13:46
It sure seems like it, doesn’t it. So you mentioned earlier about the sort of individual coverage gap and penetration gap as well. How can the insurance product knowledge gap get closed in Asia? You mentioned that a little bit just now and then accelerate the closing of this penetration gap.
Sherry Du 13:40
Yeah, in the past, when we look at the protection gap, we can easily find from the very high level, how many people buy their insurance, and how much they cover like if the worst things happening, then the financial losses there so we can easily see, okay, so this is roughly something as a protection gap. But without a deep understanding at the individual level, it’s very hard for us to really design some product, which can offer at an affordable level to those individual, right. So, for example, in the past, we talk about it’s a huge protection gap for the senior customers, when the people getting older, they are kind of less healthy, they need more protection, but usually, the product will be very, very expensive. So, how we can like close the protection gap, what is the product and needs itself, the second one will be affordability, whether we can just design a product, where the customer can accept it, they are willing to pay for it, so this is also the some of the challenges in the past. But now, with all this new technology and data that we can see, we can get a lot more insight at the individual level. As I mentioning, like in our earlier conversation, the technology and large data pool really can provide a lot of information on some of the individuals that is like Michael, you, for example, once you really got a new job, or you got a promotion, you have a new family member, for example. So all this kind of a particular moment in one person’s life journey trigger some needs on the insurance protection part. And from there that we can see, okay, maybe we can design some just customized coverage for the individual at the risk and they can afford, and also because if we know more about the background data, we have better understanding of the risk profile, we can better segment the risk. So we offer them, like less expensive product for more healthy person, so it’s some way to better address their needs. I see in that way, we have seen that the industry as a whole, make a good progress, to offer more and sell more. If you look at the Asia insurance industry, the insurance sales and premium really grows at a very rapid speed that we can see contributed by those data and technology.
Michael Waitze 16:18
What has been the impact of COVID-19? As we look back, you know, from, I guess, sort of February of last year, even to Today, on this speed of digital transformation in the insurance industry, did it put it off? Did it accelerate it?
Sherry Du 16:34
So this is a good question. The COVID does have very heavy impact in the insurance industry. But like different regions, different countries have their own story, right. So, I guess compared with the rest of the world, Asia has been managed okay, and we see the status to say Asia going to recover sooner than the rest of the world from the COVID impact. So, this in general. Especially like when RGA/RGAX we working on the Life and Health insurance industry, so definitely COVID really have the impact on the way you can sell, the way you can engage your customer and also how you deal with the claim etc., etc. We do see that happens. But on the other hand, we see actually the impact has been kind of varying quite significantly by different market and different companies. We do see some of insurance companies, they slow down their investment in the digital transformation during the past 12 months. When they Yeah, when they probably see, okay, I gonna to focus on something more important, so that’s some of the considering behind that. We saw that, we also see some of the startup companies they experienced the financial difficulties, like they told us the fund didn’t really come on the right time so we experienced the difficulties. However, on the other hand, we also see some companies, they really get their like historical high in the new sales volume, right, so some of the digital companies did double their sales in 2020. As I mentioned, it’s not the single company, it’s quite a few of them so really depends on the reaction from the company how they want to address that. We’re also see some large insurance companies they respond to the COVID quickly, they put aside the budget, the resources to focus more on the digital channel. In general, I can see, because of the COVID in most of the Asian markets, the digital distribution, the telemarketing, or the telemedical consultation, digitization services, etc, those really make the rapid progress in this year.
Michael Waitze 18:56
You did mention sort of an interaction with startups as well. And I’m curious, how does RGAX approach working with startups? And like, what’s the strategy there?
Sherry Du 19:05
Because RGAX, we looking at the new technology and innovation, so startup companies play a very important role as a partner with us. We have been actively scanning and seeking the partnership with the kind of the startup company who have the cutting edge new technology, and which we believe can really make a good impact on the insurance industry. We work very closely with them, to jointly build something, work on the joint proposition and try to develop and deliver the good solutions to our end customers.
Michael Waitze 19:42
Because you do spend a lot of time working with startups and have a lot of experience with it at RGAX. What kind of advice would you give to incumbent insurance companies to sort of work better with these startups?
Sherry Du 19:58
It’s an interesting question. I think, it’s quite important actually to really realize, startups, they operate in a very different way, compared with the traditional insurance industry. Startups, they’re very brave in testing some new ideas, sometimes really crazy ideas. If we’re really working with startups, I guess we need to have the similar mindset, to be open-minded to the new ideas, even sometimes, oh, that’s crazy. You know, it’s impossible. But we should be positive and allow those startups to challenge the old school style. Challenge, what do we call sacred cow? So there’s something like we never think it’s going to work. But actually, it works. So we learn quite a lot of good examples from today’s industry, right? So how the technology changed the people’s mindset, change the living standard, their way to do their shopping and purchasing things, that that’s really a good example for us to learn. So my suggestion would be try to understand the different approach different minds and different way that startup working, and give them some of the freedom. But in the meantime, we need to make sure the proper risk control is also in place. Otherwise, sometimes they go too far away from you. Yeah, so that’s quite interesting. The other one will be there are kind of hundreds of the startups, they may tell you that they are doing different technology so that will be important for the insurance players that we have a better understanding on their technology, and also think about how to apply those technology to solve the insurance problem. Right. So this is kind of a bridge thing. If that kind of the bridge thing is missing, then, in many cases we see that technology wouldn’t really make an impact.
Michael Waitze 21:58
Sherry, This has been an incredible conversation. I really appreciate your time today, tons of really great insights and I learned something which is important to me. I want to thank you Sherry Du a Managing Director at RGAX in Asia Pacific. Really fascinating stuff. Thank you so much for your time today.
Sherry Du 22:16
I like to thank you as well. Yeah, that’s good conversation.