The Asia InsurTech Podcast spoke with Michelle Chan, a co-founder and managing partner at The Phygital and the FinTech Association of Hong Kong co-chair of InsurTech, about how to connect the physical world and the digital world.
Want to learn more about InsurTech in Hong Kong? Listen to our episode with Lapman Lee, aProfessor of Practice with a focus on and passion for ESG and FinTech and a Board Member of the FinTech Association of Hong Kong, where he founded the InsurTech Committee. You can find the episode here.
Find the transcript of our conversation with Michelle below.
Michael Waitze 0:04
Hi, this is Michael Waitze and welcome back to the Asia InsurTech Podcast. Today we are joined by Michelle Chan, a co-founder and managing partner at the Phygital. Love the name of this company, by the way, and the FinTech Association of Hong Kong co-chair of InsurTech. Did I did I get that right, Michelle?
Michelle Chan 0:20
Yes, I know the title a little bit long, but
Michael Waitze 0:24
It’s good to have a long title. It’s great to have you on the show. By the way, how are you doing today?
Michelle Chan 0:29
Oh, great. I feel excited to be able to join this podcast. Finally.
Michael Waitze 0:34
I feel like that’s my fault. Anyway.
Michelle Chan 0:35
I guess we keep rescheduling
Michael Waitze 0:39
A a little bit of backand forth. It’s like a little bit of ping pong, which I played a lot when I was a kid. Before we get into the main part of our conversation. We’d like to ask people this question, though. What do you think is the biggest trend in insurance and InsurTech innovation in Asia right now?
Michelle Chan 0:51
Well, I guess it is actually very popular in Asia talking about InsurTech. But I see a lot of development at the back end, at the very beginning to be honest, I used to worry. And after reading insurance a few years ago, when I was in the insurance company, actually a lot of people are talking about to spend more resources on the backend than on the frontend. And now just after the COVID, I guess already, insurers are more aware about the alternative distribution. And so I can see overall, it is much more mature in already ecosystem value chain on issues like from underwriting automation from the distribution side as well. So I guess it is more exciting than it used to be because other insurance companies are more willing to spend some money and spend more resources on the automation using InsurTech. Nowadays,
Michael Waitze 1:40
Do you think that there is a move away from alternative forms of distribution? I mean, just based on your time at FWD, maybe you can talk just in general terms, not so specific, but like, what was the focus then to change the distribution mechanism to more digital, and I can even walk you through my experience as well. But I’m curious what your perspective was.
Michelle Chan 1:59
My company was the major company actually focusing on alternative distribution, I would say because already other traditional insurer apart from those pure digital one actually focus very much on the traditional channel, I would say, or of those who actually spend on exploring the alternative distribution channel are quite purely digital, they actually haven’t trying to leveraging on other channel build up any crossover among those channels. So I guess FWD, back then was really quite advanced in the market trying to explore different ways to distribute insurance products. Well, of course, that would probably be related to the market situation by then and also the market share, because it was a relatively new company back then versus all the other traditional insurer already have a very big bancassurance distribution network, very big brokerage network, and also a very strong agency force.
Michael Waitze 2:54
Yeah. So the reason why I like to talk about this is because at the beginning of this year, I bought my own health insurance for the first time in my life, right? Because previously, I just received health insurance from the companies with whom I was working, right. And I’ve said this actually on the air, but I actually bought my health insurance from FWD and I found it. And I found the experience to be like a really highly optimized hybrid experience. So I want to talk about this a little bit, if you don’t mind, right, because I do think that there’s this mixture of the way and maybe this gets back to the phygital. We can talk about in this context, too, if you want, right, I hadn’t thought about this before this idea of like, I do want to sit with an agent, I want to talk to her, I want to learn, I want to be able to ask questions in real time by someone that like I can look into their eye and that I trust, but I don’t want them to have to fill out reams of paper. And I don’t want to have to do it either. Do you think there’s been a movement away from just like a pure digital distribution and pure agency distribution to this hybrid distribution? And that that’s actually a better way to do this?
Michelle Chan 3:49
Well, to be honest, I think this should be a more ideal way from the customer point of view as well to purchase insurance because when we think back what makes us hesitate when we choose which channel to buy our insurance policy, it actually is about the claim process when I leave it, will it be smooth? How about if I need someone to help me in the claim process so that probably is one very big obstacle to stop people who are willing to purchase their insurance policy online. So alternative distribution already hybrid distribution model actually helped to solve that problem or the regulatory requirement. We can’t really make the customer journey offer online pure online insurance distribution really as simple as customer may want because there are a lot of regulation requires to put many information upfront to keep the customer informed about all the things confirm and double confirm tripple confirm that they understand all the terms and conditions. So it makes actually pure digital distribution quite difficult and not very user friendly in my terms. The hybrid model actually can solve this struggle when the customer needed after the purchasing process been over, or when the customer want some clarification on the terms and conditions, they can simply ask the servicing agent, I would say in in my time to have it Rado actually involve online to generate a lead to just draw the customer’s attention. And then we will pause to lead to someone called recall servicing agent to follow up so they can have real time dialogue, explanation to the customer in case the customer have any thing unclear. And then the process can be done or in a very simple way. And most importantly, because the servicing agent actually is not earning commission or through the sales of the insurance benefit would actually go to the customer because they can buy the insurance in a cheaper price than in the traditional channel.
Michael Waitze 5:47
So is it the case that a servicing agent like that does not get a commission so that if the lead is generated on a digital basis, but the hybrid service is coming from a servicing agent, that that agent doesn’t get a calm?
Michelle Chan 5:57
Yeah this is the model back then I’m not quite sure about now. But this is the beauty of the crossover, all hybrid model, I would say
Michael Waitze 6:03
Interesting, really interesting. Can I ask you this, too? How long have you been the co-chair of the InsurTech kind of wing of the FinTech association of Hong Kong?
Michelle Chan 6:10
Well, it is almost two years. I joined FinTech Association five years ago, as a founding member, I firstly joined one of the committee to AI and big data committee serve as co chair for two years. And now I just switched to the InsurTech. Committee. This year is almost end of the second year, I am sitting on the place.
Michael Waitze 6:29
Right? So you’ve been on the InsurTech committee at the FinTech Association of Hong Kong almost entirely through COVID. I’m really curious, like, what the conversations were like, or what the mentality was like, during this whole period. And if attitudes have changed from like, the beginning of that time towards the it’s, we’re not done yet, but we’re getting closer to being done than we are to being at the beginning, if that makes sense, right? Has people’s mindset changed about the way insurance and inshore tech work and then work together as well?
Michelle Chan 6:57
Well, definitely, just before COVID, I always say when we talk with a lot of the senior management that are driven insurance company, as I sat, they feel a little bit hesitate to invest that much into those technology, things, that they all those automation, they think is important, but not necessary to do it now, because after all, they have a lot of business. So they better hire more agents to capture as much money as possible is just staring COVID Because the traditional model, I mean, the agency model may not really work as well as before. And so they be willing to actually spend some money to just we do the infrastructure and to facilitate some kind of hybrid model to happen even to the agency force.
Michael Waitze 7:40
So if you look at the conversations that we had on the Asia InsurTech Podcasts, sort of during the meat of the of the COVID pandemic, a lot of the insurance incumbents and but also the insurance insurtechs had were telling us that digital transformation was happening at a speed that they had never seen before that it was accelerating, and they COVID accelerated that and we saw this happen in other industries as well. Right. And some of that was manifested in stock prices. I don’t want to I don’t want to make like a clear equivalency. But I’m wondering, you know, you saw like Shopify business and stock price reflect it just explode during the two years. But now it’s kind of reverted to the mean, right? It’s kind of come back to its regular growth rate. Do we see the same thing happening in the insurance industry? Do we think the same thing is gonna happen? And particularly from your perch at the phygital? Right, where you’re talking to people about these topics? Is that acceleration of digital transformation slowing down? Or is it continuing a pace, you think?
Michelle Chan 8:32
According to my interaction with my client, and also my observation to what is happening in the association members feedback? Actually, I didn’t sense any slowdown in digital transformation. Things keep moving, aren’t they keep explore different new way actually, to facilitate the growth even more.
Michael Waitze 8:50
So what are those topics that they’re trying to go through now? Right? In other words, if through COVID, they were focusing on distribution, what are the big topics now that people are talking to you about? And how are those problems getting solved? And I guess the follow on to that is, is there now a different perception from an incumbent insurance perspective, these of the insurtechs in the sense that they’re no longer perceived as competition but more feel like cooperative in a way?
Michelle Chan 9:14
Well, cooperative ecosystem partnership actually is the core alternative distribution, I would say online offline how to collaborate each other to improve the customer experience, I would say at first, or at the very beginning, when people are talking about InsurTech, we are actually focusing on something basic because the whole insurance industry basically was lacking behind before for quite a while, they didn’t really invest very much on upgrading the infrastructure, the IT system, and then COVID, as you just mentioned, facilitate the whole process and I would say know the basic infrastructure upgrade and then more people are actually focusing on how to actually fine tune the whole customer journey to make sure the cars I can actually feel it and changes to make sure the customer can feel comfortable to purchase the product to enjoy the surveys to engage with the insurer through the hybrid, or the digital tool channel, I would say.
Michael Waitze 10:13
I feel like there’s like a three legged stool here, right? Where they’re actually it’s more there’s the incumbent insurance companies, the insurtechs, the clients that they’re dealing with, whether it’s b2b or b2c, and then the regulators as well, right, because you mentioned earlier, if the, if some of the regulations don’t change, the employment of technology to solve some of the insurance problems can’t change either. To what extent do you deal with all of those partnerships together, and then try to make an even balance between like, you know, who gets what part and what kind of regulations need to change to
Michelle Chan 10:43
Well I used to have a lot of experience to work with even the regulators in terms of insurance distribution, because back in my road, two years ago, there was a product which causing over between a payment product and an insurance product. And as you can imagine, such a product would need to get approval from Hong Kong, Ma, and Hong Kong. So two different regulatory body, I would say it is not a nothing easy because even regulatory body actually have the expectation and even rules and regulation and different focus on the customer journey, etc. So our way to deal with it actually is to work close with our partner back down, it was autopista and other mobile payment platform, right. And also to have a close communication with the two regulatory body to make sure the product actually first of all fit the customer journey overall between our own system and also our partners own system. And then on parallel Fe bit and pieces with fulfill the regulatory requirements of different regulatory body as well. It was never easy project actually took almost two years to complete, to be very honest. So this is why I say regulation actually play a very critical role on the whole insurance industry innovation, because without the renovation of the regulatory expectation on work, we’re going to percentage customer, while I guess it would be difficult for for insurance over our ecosystem partner to just provide any new way to provide a service to our customers.
Michael Waitze 12:16
Do you think that doing this digital transformation processes well, that whether it’s an incumbent or an insurer tech, or even some kind of combination of both of them, have moved from? What’s the right way to say this product centricity? In other words, developing better products, making sure the products are more appropriate to customer centricity? And trying to make sure that actually what the customer is getting is what they really need, if that makes sense.
Michelle Chan 12:38
Yes, I know because, insurers are now much more aware about the customer centricity much more than before at least. But that was a steal day, we’ve been doing much focusing on the products profitability. So there was always a dynamic in particular, inside the incumbent insurer, I believe how much they have to invest to create a more customer centric insurance product versus how much they have to invest and how much which they have to be faced with for that sort of new product, it is always the risk calculation. That’s the insurance business anyway.
Michael Waitze 13:10
And how about like the way customers find out I always find like, discovery is one of the most interesting things for me for all products, right? In other words, you can have the greatest product in the world. But if the customer doesn’t know about it, right or can’t find it or doesn’t understand it, how does the digital transformation help that process of product discovery and also product information or product literacy?
Michelle Chan 13:28
Well, actually, already, insurance companies probably become much more transparent after the digital transformation. That’s definitely because things are more fun. And all the insurance companies are trying to make the communication materials much more simple, because they would expect the customer would do all this searching on Google on the internet. And so it is the responsibility of the insurance to make sure their communication the product is simple enough to catch the eye catches the attention of the customer, and also to make sure they be able to understand well about the terms offering etc. After all, it is also part of the regulatory requirement.
Michael Waitze 14:05
Do you think that this requires a mindset change and maybe a different type of engagement as well with the end client for these insurance products,
Michelle Chan 14:14
I think it’d be quite additional engagement with the end consumer. And it’s not a fundamental changes because when all the insurer actually relying on the agency model to distribute a product, they just try to left leash or the resources from the agency to explain to the customer the benefit of the product, it emphasizes a lot about the relationship between the agent and the customer. But now, insurers are trying to do up their own customer loyalty. They try to be of the customer relationship management system so they be able to connect to the customer directly. As you can tell a lot of the incumbent insurer or even those new ones, they all have a very beautiful loyalty platform. offering different form of benefit to engage a customer much more free. I used to have a KPI as well, oh, we be able to create new modal to actually engage the customer much more frequent. So meu is one of the KPIs for the alternative distribution channel and also a lot of online, your online insurance or virtual bank as well, because it is the way to actually engage with the customer to keep the customer informed about what kind of product you’re offering, and what sort of service you’re providing.
Michael Waitze 15:31
And what role do you think digital marketing plays in the marketing of these products? Now in a way that’s different? In other words, do you go as far as using things like Instagram? Do you talk to your big clients about this? Like maybe you should consider different channels as opposed to just the traditional way of marketing to them? I wouldn’t even want to say tick tock. But so many products are being talked about there. How do you handle the sort of super rapid changes in the way customers are looking at digital media? And how do you know which ones to use for an effective way to communicate this to clients, you know what I mean?
Michelle Chan 16:01
Well, obviously different age groups, different segment of costumer actually have their own preferred digital channel to engage with some customers actually prefer Facebook. So I’m actually a free IG and some, even the younger generation before this court, so all this different social media channel provides a way for ensure actually to understand the customer better to engage with the customer better, but they have to make sure they know their own target segment. So they would be able to spend the right money in the right channel.
Michael Waitze 16:31
And can you talk to me a little bit about Phygital. And what dividuals meant to do when you found it that and what its goals are
Michelle Chan 16:37
The reason why I founded Phygital is just because all along I carry the struggle of pure digital transformation of a business because we have been through a lot when we try to renovate a business model to a pure digital model. When I used to work in Hong Kong telecom when I used to work in FWD at the very beginning, and eventually my my career in the digital banking era as well. So pure digital actually have some difficult to engage with the customer to capture market share to serve the customer and make profit then just before I found this company, I found a lot of company actually is still going through this path to explore the best way to serve the customer to export the best way to transform their business to fit into the market situation. In particular, in Hong Kong, Euro digital, maybe much more easy to build in overseas because to mark out the population is such big, but then in Hong Kong, the population is actually a little bit limited. And people are so well used to to the traditional channel, the physical way to purchase to enjoy different surveys. So it’s such a mature market, in case we need to when over the whole business model pure digital may not really be able to work in particular, when we are talking about all those magic of work fee or things actually is talking about on the virtual world. So how we can provide service to facilitate even company, the insurance company, the agent of finance company, or all the traditional retail all company, hmm, we can actually provide some service to share them with the idea we learned in the past career, oh, we can just create a hybrid model to help them to serve the customer faster to capture the market.
Michael Waitze 18:18
Can we dig a little bit deeper into this web3 thing, I feel like we’re at a tipping point where things are about to get really immersive, like a lot of the conversations that I have right now are talking about, you know, not not sort of like the nascent sea of web3, but just how this technology is gonna get used to build more immersive experiences. And then to build bigger businesses around this virtual world in virtual existence. What does it look like to you? And how are your clients thinking about this?
Michelle Chan 18:42
Well, web3 first of all, definitely, actually, I am someone who owe the idea. And I do believe there is a great potential on web3, but things may not really be able to move in a very rapid way if he just focusing on the virtual world. So how this thing can grow much faster actually need some pitch over. The reason I try to emphasize on digital is physical interaction is important as all we learn over the COVID years. I feel very bored or attending grabbing air only because I really miss the physical interaction and networking with other business partner. And yes, so pure physical actually may not be a long term way for people to engage surveys or solutions. So Phygital to actually is very important. And this is why I think Wi Fi actually have a lot of potential but how we can get the potential out is about how to switch over the physical world and the digital world.
Michael Waitze 19:36
Can I ask you this? Do your clients understand this? Are you introducing this to them? Or are they coming to you and saying what do we need to do with this web three thing we’re reading about? Do you know what I mean?
Michelle Chan 19:45
Well, most of my client actually approached me first trying to understand what is web3 but they never think about VG toe model because they really think digital is something magic, which can help them to solve the current problem. So they is try to rush into the wet free world Washington, the digital things, all things digital, the thing may probably help with their business. And then the most common question they ask is how if I build the digital channel, their business can be improved. But I have my responsibility to tell them actually, if you’re building a digital channels may not really help unless you understand your customer. Well, you know, the customer journey, you know how to bridge over the physical and digital thing, then you can actually win your customer and keep on the engagement.
Michael Waitze 20:31
Yeah, I mean, doesn’t this get back to the conversation we’re having earlier, where even through digital transformation, the elimination of the agent, or the servicing agent relationship is never going to go away. And that new technology is really just an augmentation of that face to face relationship, whether there’s a virtual world or a web three or not that that physical connection is so important to humans as a way to just do anything or build any relationship that it’s augmented or supplementary as opposed to taking over that relationship?
Michelle Chan 20:57
Well, I think as you just mentioned, it is a supplementary to the relationship is never we pacing the relationship between the agent and the client. Yeah, with the digital transformation, definitely the insurer can understand the customer better. But does this really mean the insurer we’re bypassing the agent because the human factor in the insurance distribution in the insurance business actually is very much important?
Michael Waitze 21:18
I think so as well. Okay, Michelle, I’m gonna let you go. That was awesome. Really, really great conversation. Michelle Chan, co founder and managing partner at the phygital and the FinTech association of Hong Kong co chair of InsurTech. Thank you so much for doing this today
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