“Embracing Technology and Innovation in Health Insurance” - Speech by Mr Daniel Wang, Executive Director (Insurance Department), Monetary Authority of Singapore at Thailand Insurance Expo 2019 on 27 September 2019

Published Date: 27 September 2019  Monetary Authority of Singapore

 Monetary Authority of Singapore

Dr Suthiphon Thaveechaiyagarn, Secretary General of the Office of Insurance Commission
Distinguished guests
Ladies and gentlemen

1.     Good afternoon. I would like to thank the Office of Insurance Commission (OIC) for inviting me to speak at this year’s Insurance Expo.

2.     The focus of today’s seminar is a timely one. The impact of technology and digitalisation on the insurance industry is no longer a new phenomenon. There are many exciting healthcare and technological innovations that not only have the potential to improve lives, but also to provide a discerning insurer with new opportunities to grow its business.

3.     For my remarks today, I would like to share my perspective on why this has tremendous potential for countries such as Thailand and Singapore, how I see the roles of insurers evolving, and to highlight the need for responsible use of data.

The world is ageing; ASEAN is ageing even faster

4.     Our societies are getting older. According to the United Nations (“UN”), there were 382 million persons in the world aged 60 and above  in 1980. By 2017, this figure had more than doubled to 962 million1. By 2050, another doubling is projected to bring this figure to almost 2.1 billion persons [1] .  Put another way, about 1 in 12 persons was aged 60 and above in 1980. By 2050, 1 in 5 persons will be aged 60 and above.

5.     This demographic tide has already reached ASEAN. In fact, ASEAN countries are ageing much more rapidly than the rest of the world. In 2016, the proportion of those aged 60 and above in ASEAN was 9.6 percent and the UN estimates this will more than double to 21.1 percent in 2050 [2] .  The UN further estimates that Thailand will become an aged society in 2024, where “aged is defined as having at least 14 percent of the population aged 65 and above [3] ”. Singapore on the other hand, just became an aged society, as so defined, since last year. 

6.     We in ASEAN are not just getting older, we are also living longer. ASEAN’s average life expectancy has increased from 61.1 years in 1980 to 70.9 years in 2016 [4] .  As our citizens live longer, they also deserve and aspire to age gracefully and enjoy peace of mind in their silver years. For these seniors, it is not just about adding more years to life, but about adding life to those years, and living them well.

7.     Ageing well adds value to society -  indeed, the adages of “old is gold”, and “age is but a number” are truer than ever before.  Seniors today are better educated than their parents and grandparents before them. Many seniors have accumulated a wealth of experience and skills over the course of their lives and can pass these on to younger ones. Although greying, many seniors remain healthy enough in their silver years to continue making meaningful contributions to our economy and society.

8.     Having said that, a greying society also increases the need to guard against life’s unpredictable events. This is where risk pooling via insurance schemes can complement medical advances and quality healthcare systems to give people peace of mind over future healthcare costs, while helping them to stay active and healthy, ultimately freeing people to live meaningful lives in their silver years. A dynamic, and forward-looking health insurance industry has a crucial role to play in such an inclusive society. It is worth remembering that the life and health insurance business is fundamentally about enabling policyholders to live better and more independent lives as they grow older, even as these contribute to less claims and lowers the long-term care costs of insurers.

Technology is transforming the health insurance industry

9.     The onset of the fourth industrial revolution now provides the enhanced technological and data capabilities for the insurance industry to perform this important socio-economic function in a more efficient and effective manner. Here, I would like to share three encouraging trends that MAS has observed.

10.    First, the shift in business model from protection to prevention. As the lives of more people become intertwined with smart devices and the internet of things, insurers now have new platforms to engage their customers more frequently; thereby availing themselves to richer customer data on a more real-time basis.

11.    Customer data allows insurers to make tangible the promise of protection through ‘prevention first’ strategies. Insurers can now better understand customer risk profiles and move from simply paying medical claims to helping customers pursue healthier life choices. For example, we have seen insurers actively offering programmes that incentivise customers to stay healthy by offering vouchers or premium discounts on their life policies when they achieve exercise targets. These include AIA’s Vitality, Great Eastern’s GetGreat and Manulife’s Move.

12.    Some insurers go even further by helping customers to prevent and postpone the onset of diseases. For instance, Prudential launched its health management app, Pulse, in Malaysia last month [5] and it has a Symptom Checker which provides an interactive diagram of a user’s body, also known as the ‘digital twin’. Powered by artificial intelligence supported with over 50 million data points, users are able to get suggestions of potential causes and recommendations to visit a doctor if their ‘digital twins’ are unwell.

13.    Second, the shift in business proposition from exclusion to inclusion. Traditionally, pre-existing conditions and exclusions form the basis of medical underwriting for health insurance. This meant that inevitably, there exists groups of consumers who are under-served or remain uncovered.

14.    The insurability gap for these consumers is narrowing as technology allows insurers to leverage insights from real-time health data to augment their underwriting capabilities. By more accurately quantifying risk, they are able to offer more customised premiums, thus improving the accessibility of insurance to those previously considered “uninsurable”.

15.    For instance, South African insurer AllLife has partnered with Royal London, the UK’s largest mutual insurer, to offer life and disability coverage to diabetics. AllLife’s algorithmic pricing platform allows premiums to be adjusted based on users’ response to its prompts, ranging from taking medication to going for a run.

16.    Besides catering for the previously “uninsurable” groups of customers, insurers can also take advantage of machine learning to better serve existing under-served customers in terms of offering more competitive premiums. Machine learning can help to identify patterns or new relationships from various data sources such as fixed data fields in application forms and unstructured data in medical reports. This allows actuaries to detect new variables that are not previously thought of as important rating factors and can help to improve predictive modelling and pricing capabilities.

17.    An example of a new approach to underwriting is SCOR’s Biological Age Model [6] which shifts away from single point underwriting to dynamic repricing. This is made possible by predictive technologies and new correlations between growing numbers of response variables. Such emerging technologies give insurers the confidence to be more inclusive by venturing into previously under-served or uncovered segments of the population, while developing new revenue streams. 

18.    Third, the shift in business focus from corporate orientation to customer-centricity. Technology can help improve internal processes as well as enhance the overall customer experience. For instance, a typical pain point faced by customers is the claims process. It is not unusual for customers to fill up multiple forms and be inundated with paperwork just to submit a claim. A customer may also have to physically visit the insurer just to have his claims validated. In addition to the tedious claims submission process, the subsequent claims approval can often be lengthy and even result in a delayed pay-out.

19.    We have seen insurers leverage mobile services and the internet of things to improve the consumer experience by offering direct-to-consumer solutions. In 2018, FWD Hong Kong partnered 7-Eleven to launch a new claims service that seamlessly integrated the claims submission, approval and pay-out process through a mobile app. Customers can submit claims and conduct other policy transactions which are quickly routed to FWD’s Insurance Solutions Centre and these claims are approved within 30 minutes [7] . Customers can then choose to collect their pay-out in 7-Eleven stores across the city or through direct credit to their bank accounts.

And regulators have their part to play too

20.    The wider access to technology and a greater ability to store and process data have also re-shaped the role that insurance regulators play in this brave new world. For example, many regulators are actively facilitating insurers and insurtechs in testing new innovations and products. The OIC and MAS are examples of regulators who had early head-starts in setting up Fintech Regulatory Sandboxes, which deepened our understanding of new technologies and the risks they pose, even as these sandboxes allowed innovative product ideas and designs to be tested in an environment that does not compromise consumer protection and the stability of the financial system.

21.    We have since had graduates from these sandboxes. In Singapore, we had Vitana by MetLife which was our first dedicated insurance product for gestational diabetes [8] . Vitana allows expectant mothers to automatically receive pay-out upon diagnosis of this diabetic condition without needing to make a claim. This is possible through the use of blockchain technology to connect the customer’s electronic medical records via mobile devices. The OIC’s own sandbox has seen a number of promising graduates in the general insurance space, such as the development of an i-drive system by MuangThai Insurance and Inzura [9] , which employs telematics to incentivise good driving habits. A Singapore-based insurtech firm Vouch, has also launched in Thailand as Fairdee and was the first startup to be approved by the OIC to take part in its insurance regulatory sandbox [10] . More recently, MAS launched our Sandbox Express on 7 August 2019 to complement our current FinTech Regulatory Sandbox. As the name implies, the Sandbox Express shortens the approval process for entry into the sandbox. For certain license categories [11] , successful applicants can begin market testing within 21 days of applying to MAS.

Building the currency of data – trust

22.    One area where regulators are increasingly focusing on concerns the use of personal data. Data is the life blood that drives the conveniences of today’s digital world and the potential behind these technologies. Beyond creating pre-determined boundaries within which entrepreneurs and mainstream insurers can experiment with their innovative ideas, it is incumbent on regulators to proactively consider putting in place guidance on data use. This can help safeguard the use of data to alleviate the concerns of consumers, and  also build the trust needed for your companies to acquire and retain customers in this digital age.

23.    The relationship between consumers and data sharing can be complex. On one hand, the widespread adoption of technology and various incentives by corporates (e.g. price discounts) have encouraged greater data sharing by consumers. On the other hand, consumers are increasingly aware and concerned about the amount of personal information firms are collecting about them, how such data are used and whether such use will somehow disadvantage them. If safeguards are not implemented in a timely manner, this could lead to a growing trust deficit between consumers and corporates.

24.    Although not a problem unique to the insurance industry, the risks arising from data misuse can be particularly serious for this sector. For instance, as insurers rely more heavily on complex algorithms, artificial intelligence and machine learning, there could be decisions and outcomes which are unexplainable and opaque, or in the worst case, even unfair. Another risk is the potential level of segmentation that can be enabled by big data. The concept of insurance has always been premised on risk pooling and thus, a fine balance has to be struck between over-segmentation and sufficient risk sharing among policyholders.

25.    Therefore, it is important that consumers are assured that insurers will continue to safeguard their interests throughout their digitalisation journey. To this end, MAS collaborated with the industry to develop principle-based guidance on the responsible use of artificial intelligence and data analytics (AIDA) in financial services. These principles promote Fairness, Ethics, Accountability and Transparency, or FEAT, in the use of AIDA.  Let me elaborate on each area and why we think they are important.

a)     First, fairness. This requires AIDA-driven decisions used by insurers to be explainable, accurate and justifiable. It prevents spurious or biased relationships picked up by clever analytics from being used to inadvertently and unfairly discriminate against customers.

b)     Second, ethical. This requires AIDA-driven decisions to be aligned with the firm’s existing ethical standards and minimally be held to the same standards as human driven decisions.

c)     Third, accountability. This requires insurers to have appropriate internal approving authorities for the use of AIDA so as to assure consumers that insurers continue to maintain clear responsibility for and ownership of their AIDA-driven decisions. 

d)     Finally, transparency. This requires insurers to be transparent about the use of AIDA. This means proactively disclosing to customers as part of general communication, providing explanations of what the data is used for and its consequences for policyholders.

Conclusion

26.    I started this afternoon by noting how societies such as Thailand and Singapore, are living longer and getting older.  This presents profound challenges and also opportunities for the insurance sector, particularly for life and health insurers. What is encouraging is that many of you are wisely and increasingly tapping technology and big data to help meet these challenges and to seize new opportunities. As you embrace what this fast evolving digital age has to offer, I strongly encourage you to aim high, to work with the healthcare sector, the regulator, and your industry peers to continue to do good and to do right. We should leverage technology to close the insurability gap and offer protection to those who need it most, and to use data sensibly and responsibly. This will serve to benefit not just your clients but also your companies, and help bring about a more inclusive society.

27.    On this note, I would like to wish you a fruitful and successful Expo.