Hong Kong digital insurers such as OneDegree, Bowtie Life expand offering to tap tech-savvy clients, but yet to challenge traditional firms

Hong Kong’s digital insurers are expanding their product ranges to tap tech-savvy customers who buy their policies online, but are years away from mounting a challenge to the city’s traditional insurers with their armies of agents and brokers.

Currently, five such digital players – four were issued licences by the Insurance Authority over the past two years and one, Blue, turned into a digital insurer from a traditional firm in 2018 – must compete in Hong Kong’s crowded market with 160 tradition insurance companies.

“As of today, the weight of virtual insurers in the Hong Kong landscape is still extremely low, in terms of premium and claims, compared to traditional insurers,” said Arthur Roiret, manager at Sia Partners. “Virtual Insurance models will remain limited for years to come as insurance agents and brokerages are still a dominant distribution method.”

Digital or virtual insurers are being encouraged in Hong Kong as part of efforts by the city’s government to promote fintech development in tandem with innovations globally. And the trend is catching on.

“We have seen our customers grow by 30 per cent every month, as tech-savvy customers like to buy products online,” said Alvin Kwock Yin-lun, a former JPMorgan banker and co-founder of OneDegree, which is among the four digital insurers launched in Hong Kong over the past two years.

Last week, the digital insurer expanded to offer critical illness cover. In November, it partnered with cryptocurrency exchange Hong Kong Digital Asset Exchange to offer insurance for cryptocurrencies. It also offers pet insurance and fire cover.

OneDegree is expanding its product range with the ambition of becoming a top three general insurer in Hong Kong in the “medium term”, the company said. Currently, it is not even in the top 10.

Bowtie Life Insurance, another digital insurer, raised US$22.6 million from investors led by Mitsui and Co in October, getting both financial backing and strategic inputs from one of Japan’s largest conglomerates on growing its medical insurance products. The insurer focuses on life and medical policies, and opened a cafe and health centre in Wan Chai this year.

Avo Insurance and ZA Insurance are the other two firms that have entered the market under the new licence regime. Along with Blue, these digital insurers can capture certain customers as they can sell products at a cheaper price, because they do not need to share commission with agents, which may get 50 per cent to 70 per cent of the first year’s premium.

The other benefits include speedy claims, said OneDegree’s Kwock, as technology allows for quick claims settlement in a few days, in the absence of the paperwork associated with traditional insurers.

But these digital insurers have some ground to cover. For example, OneDegree, the largest of Hong Kong’s online insurers, has 100,000 customers, while Bowtie Life said it had 45,000 customers as of September.

These numbers are far less than their overseas peers. In the US, Bright HealthCare said it had 660,000 customers, while Oscar Health had 600,000 customers and Lemonade had 1.4 million customers. In the UK, Cuvva had 250,000 and Bought By Many had 350,000. In China, online broker WeSure had about 50 million users, according to data compiled by Sia Partners.

Hong Kong’s traditional insurers, in turn, have been on a hiring spree to expand their sales force. They hired flight attendants laid off after Covid-19 brought the airline industry to a standstill, for example. As of October, the city had 125,817 insurance agents, 14 per cent than two years ago, before the digital insurers entered the market, the Insurance Authority’s data shows.

This expansion in the sales force has contributed to a 24 per cent year-on-year growth in sales of new life insurance policies in the first nine months of this year to HK$122.5 billion (US$15.7 billion). The sales of new general insurance policies increased by 0.6 per cent to HK$48.8 billion.

OneDegree’s Kwock, however, remained optimistic. In the US market, 50 per cent of many general insurance products are sold online, instead through agents or brokers, he said. In Hong Kong, this number stood at about 20 per cent. “We believe Hong Kong will soon catch up with this trend,” he said.

Moreover, digital insurers were not competitors, but partners for traditional insurers, he said. Both OneDegree and ZA Life have provided insurance technology services to help traditional insurers develop their digital platforms.

“We have a lot of requests from traditional insurance companies in Southeast Asia and Europe for our technology services, to build up their digital platforms, boost their sales and speed-up claims processes,” Kwock said. “This will push the insurance industry as a whole to provide better services to customers.”