PasarPolis could reshape the Indonesian insurance market
Founded in 2015, PasarPolis has established a reputation for customer-centric operations fused with a technology-driven outlook. It currently creates over two million new policies each day and takes an average time of just 18 seconds to process claims.
A rising trend in the insurance industry, microinsurance can be a cheap and effective safety net for those who could typically not afford regular insurance premiums. It is the development of digital technology that has enabled this trend to grow, and PasarPolis’ simplified interface could see its popularity within Indonesia increase significantly.
A recent by Bloomberg stated that Cleosent Randing, CEO of PasarPolis, was seeking to use the generated capital to develop the company’s AI (artificial intelligence) capabilities, which would enable policies to become more bespoke and therefore more accomodating to customers’ unique requirements.
“Some big insurance companies are more than a hundred years old and there hasn’t been a lot of innovation in the industry,” he said.
“As Amazon is building innovation against the likes of Macy’s, we want to ultimately make insurance a delightful experience where you don’t need to make claims but they will be made automatically.”
This innovative thinking will be crucial to developing the Indonesian insurance market; a study by found a large-scale problem with ‘insurance literacy’ among the population, with a mere 15.8% of adults reportedly familiar with the concept.
The same study found that a general lack of digital and financial literacy, combined with an ingrained mistrust of domestic financial institutions from the , amounted to a malaise in the Indonesian insurance market.
However, with 43% of the population now officially above the poverty threshold, companies like PasarPolis, which pride themselves on a simplified, affordable and fast-paced level of service, could finally win over the public and reshape the industry accordingly.
Insurtechs are winning the race with legacy system companies
Nestled in its own place within the world of financial services, insurance is arguably more unpopular than retail banking.
That’s hardly surprising given that, from a customer service perspective, insurance is something of an off-kilter transaction. You pay a sizable premium in exchange for a service you hope you will never have to use. This image problem is exacerbated by ubiquitous tales of insurers not paying out when it is time to make a claim.
The insurance sector has long been due to an overhaul, and this is where the disruptive force of insurtech comes in - one of fintech’s most upwardly mobile subcategories. Accordingly, last year, insurtech in the UK alone attracted £262m in investment, a growth of 60% on 2019, according to Tech Nation. Insurtech’s momentous growth has been captured in a new report by The AI Journal exploring this burgeoning sector.
What exactly is insurtech?
Put simply, insurtech refers to technological innovations that seek to make insurance cheaper to buy and more efficient to use. In a similar vein to fintech, the large, established institutions have been dipping their toes into insurtech, but it’s the disruptors who are genuinely looking to shake up the status quo, diving into and exploiting those areas that traditionalists have little imperative to explore.
Examples are price comparison sites (one of the earliest forms of insurtech that was eventually snapped up by the insurers it initially sought to disrupt), claims software, customisable policies, or even smart-tech-enabled dynamic policies whose premiums can fluctuate depending on changing circumstances.
The latter, for instance, could use someone’s fitness tracker or smartwatch to monitor fitness levels, thus reducing the premium of a life insurance policy; or track a GPS system that records the location of a car and assesses risk levels accordingly.
Most consumers tend to shop around for their insurance needs and perhaps end up buying their contents insurance with one provider, their car insurance with someone else, and their pet insurance with yet another underwriter. Managing all these different policies, with their varying renewal dates and payment terms can be complex. This has led to the increase in apps that pull everything together.
More prosaically, insurtechs are developing AI that uses machine learning to act as an insurance broker, eliminating the need for a human intermediary and therefore offering more cost-effective and impartial advice.
Insurtechs and risk
But there are some obstacles in the way of insurtech’s continued evolution.
Insurance companies are averse to risk. Understandably so, as at the crux of the industry is the role of the actuary, whose job it is to analyse and measure the probability and risk of future events. So it’s little wonder that there’s a reluctance among the traditional players to welcome the disruption that insurtech brings.
Insurance is heavily regulated, a minefield of legality and labyrinthine jurisdiction, which means the idea of shaking it up can be anathema. And why would they, when their old-school business models are working perfectly fine?
There’s an understandable nervousness and unwillingness to work with startups, who themselves need to work with the bigger firms in order to underwrite risk.
While it seems like a catch-22 situation, there is growing, if cautious, interest from insurance companies, who can see the benefits of insurance with a friendlier face, innovative solutions, and a competitive edge through differentiation. As that tentativeness dissipates, the growth of insurtech will gather even more momentum.
Tom Allen's analysis is based on the findings of a new report on the fintech and insurtech industries produced by The AI Journal.