Asia’s insurance ‘marketplace’

It is one of the largest and most diverse insurance markets. Singapore leads the charge on distribution innovation, as well as product variety. With its neighbours such as Indonesia, Thailand and Vietnam, following the trend.

‘Five clicks’ culture, through the rising dominance of digital platforms, is embedded in its day-to-day living, from food delivery to travel, and this includes insurance.

Since the COVID-19 outbreak, product innovation is in full bloom in Asia and indeed, what a sight and brain stimulation for us in the insurance industry. Whilst this article will not be doing full justice to the diversity and heterogeneity of these product and distribution segments, it will attempt to group the COVID-19 product sets into some key buckets.

Types of coverage and benefits

The basic building blocks of protection benefits in Asia for life and health insurance are:

• Lump sum benefits covering Death, TPD, Accidental Death and Disability and Critical Illness (or in Australia, this is called ‘Trauma’)

• Annuity style benefits with limited periods covering temporary disability (more classic IP style definition) or hospitalisation that requires an extended stay (aka ‘hospital cash’). Hospital cash benefits are unlinked to salary and on fixed value basis e.g., 100 SGD per day after a waiting period of ‘x’ days and payable for up to maximum ‘y’ days per hospital admittance

• Medical reimbursement benefits of actual medical costs for medical services rendered, with annual limits, typically covering inpatient and/or outpatient benefits, can be triggered by limited definition e.g., five Critical Illness definitions, or based on all major illnesses and accidents

Using the above building blocks, we add in ‘COVID-19’ product enhancements. It is often on a standalone basis, but at times, they also come as a rider e.g., where original policy excludes pandemic coverage. Common enhancements are as follows, usually linked to COVID-19 diagnosis and/or hospitalisation:

• Lump sum benefits: often very small benefit levels (e.g., 5,000-10,000 SGD)
  • Vaccine complication top-up Lump Sum
  • Quarantine top-up Lump Sum

• Annuity style benefits: usually in the form of hospital cash payable per day, linked to hospital admittance, with a few days initial waiting period and up to maximum duration e.g. <10 days, and typically up to a maximum cash limit per day e.g. <200 SGD per day

• Medical reimbursement benefits: generally inpatient only and top-up to what the Government already pays, up to a pre-agreed limit, with (increased) sub-limits were admitted into ICU or whilst overseas

At the moment, with the everchanging COVID-19 disease profile, including mutations, it is an enormous challenge for actuaries to set appropriate premiums. At the moment, premium guarantees for COVID-19-related coverage is often quite short, some as short as only 30 days’ rate guarantee, and generally up to a maximum of one-year rate guarantee. They also come with an extensive set of exclusions and limitations.

Here are some of the more common ones below:

• Deductibles or co-payments for medical reimbursement products

• Waiting periods for lump sum and annuity style benefits

• Exclusions, e.g.
  • Previously having had COVID-19
  • COVID-19 complications
  • COVID-19 vaccine complications
  • Recent hospital admittance due to all sickness
  • Already in quarantine
  • Geographical (e.g. additional restrictions in coverage for high risk countries, some countries excluded from coverage)

Insurance is only a few clicks away

So, what are these products and are they worth it?

Sitting in the waiting room to be released from the vaccine facility due to the mandatory 30 minutes observation period after receiving the shot. Behind every chair, directly in front of my eyesight, is an advertisement for complimentary COVID-19 products[1], for up to 5,000 SGD for hospitalisation. After scanning the QR code, it prompts the user to download an app, and the picture becomes clearer. The coverage is quite limited in both amounts and duration, for the more comprehensive versions, this is no longer free. Same concept subscribing to a newspaper; the first few articles are free, then it’s payable via a monthly subscription.

After staring at the COVID-19 insurance ad for a few minutes, I decide to do some internet banking to take my mind away from COVID-19 for a change, and the ‘teaser’ model strikes again. As I investigate why my spending percentage has yet again increased in the ‘food and beverages’ category, an ad for a ‘free’ COVID-19 hospital cash policy[2] comes up. As I keep reading, it comes with a lump sum payout for ICU and no age limits. My eyes light up and heart races. After reading the fine print, my excitement subsides. The premium is only free for the first 30 days, and at this point, the cover automatically lapses. If a customer wishes to continue this cover, then (likely), some light form of medical underwriting is required with the opportunity to buy its upgraded product.

There are plenty of  examples[3] of the abovementioned ‘teaser’ or ‘promotional’ models, where it utilises a ‘free’ product to generate sales leads and/or improve persistency of existing customers. Cross-selling is at the heart of all these models and it’s always for a limited period of time e.g., up to the first 250,000 customers or during October and November only. This creates urgency, added on top of the urgency to be protected against COVD-19.

Now that I have completed the 30 minutes mandatory observation period after the vaccine, and seemingly unable to escape from this pandemic that has enveloped my whole life, I open my GRAB app (GRAB is the ‘Asian’ version of UBER) to get a ride home. More options come up:

• what’s for dinner tonight? It’s Thai-thyme!
• are you protected against COVID-19 risks? Consider a policy[4] written by Mega Life Insurance (and what a fantastic name for a life insurer!)

At this point, I’m exhausted and I give in to the marketing machine of Asia. I grab some Thai and a comprehensive COVID-19 policy. Can Thursday nights get any more exciting?

I believe I can fly (again…)

I believe I can touch the sky (again…). I think about it every night and day (during lockdown, seems to be every hour, every minute….). As we prepare to pack our bags, as all good actuaries do, our minds wonder towards the risks of travelling during the pandemic. Naturally, the answer is insurance (or don’t go, but that’s not an option).

There are a number of providers who have been thinking ahead and have launched products with COVID-19 coverage in mind. Airlines[5] wanting to ensure its customers can have the confidence back to travel abroad, offers coverage that may include:

• Overseas medical expenses & Emergency Evacuation (note: some come with country exclusions) with e.g. 500,000 USD limit

• Trips cancellation, shortened or abandoned, due to events out of your control in relation to COVID-19 with e.g. 7,500 USD limit

• Quarantine support up to e.g. 150 USD per day, for e.g. 14 days placed unexpectedly in quarantine whilst overseas

• Access to network of hospitals whilst requiring medical assistance overseas

Similar products are being developed with major VISA issuing immigration departments that require a min. level of coverage to enter certain countries.

The traditional international insurers[6] are doing their own versions.

With this, we have renewed hope that travel will be back again, with confidence that appropriate travel products are being developed by industry professionals, in anticipation of the date when borders re-open.  

Regulators & Industry Bodies ensure we play fair and do the right thing!

COVID-19 has had a devasting impact on everyone, mentally, physical and financially. Insurance has a key role to play when in minimising these impacts for its customers. Sticking to policy wordings are important, but beyond this, community expects insurer to ‘do the right thing!’. Regulators, government and/or industry bodies are the watchmen who ensures that the industry ‘does the right thing’!

In Japan and Korea, regulators have come in and asked for appropriate premium grace periods and extending out policyholder loans, to minimise the impacts of financial hardship. In Singapore, the regulator has mandated health insurers to extend coverage to allow both physical and telemedicine claims. In Vietnam, the regulator has asked insurers to reconsider and reduce promotions of COVID-19 products, as it looks into product features and eligibility. 

There are also cases where the industry has come together united in ‘doing the right thing!’ for its policyholders during these difficult times. In Australia, we had the FSC extension of coverage for TPD and initiatives by the industry to apply same concepts to IP and facilitating more appropriate claim processes during lockdowns. In Japan, insurers are not applying certain exclusions for policyholders affected by COVID-19. In Korea, insurers have come to a consensus to pay accidental death claims, at the higher amount (normally in Asia, accident claims are paid at a higher multiple of the sum insured) by classifying ‘COVID-19’ as an accident event.

Conclusion

‘Never waste a good crisis’ – Asia certainly lives up to this mantra. I could be doing the most mundane activities like banking, hailing a ride or just sitting with my iPhone (swiping left or right), and end up with an (COVID-19) insurance product. So far, there’s evidence that at least, risk mitigation features are embedded in the product structuring process i.e., limits are small, relatively strong exclusions and flexible rate guarantee periods. Innovation (and growth) should never come at the cost of risk management. Risk vs. reward needs to remain at the heart of all decision points, for both buyers and sellers.

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