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Hong Kong virtual insurer Bowtie eyes disruption amid HKMA’s fintech push in securities and insurance sectors


The HKMA, Hong Kong’s de facto central bank, said in August that it would team up with the Insurance Authority (IA) and the Securities and Futures Commission (SFC) to encourage financial firms to invest in technology to enhance their wealth management, insurance and green finance services.

“[The move] means that different regulators will work together to build up an ecosystem for banks, insurance companies, financial firms and other tech start-ups,” Fred Ngan Yiu-fai, the co-founder and co-CEO of virtual insurer Bowtie, said in an interview. “[They will] tackle infrastructural challenges to make financial services even more accessible to underserved segments.”

“The adoption of new technology can support insurance companies in disrupting how insurance is bought,” Ngan said.

The use of new technology could potentially lead to faster claims processing and a personalised customer experience, he added. Insurance companies could also use generative artificial intelligence to write educational content faster and better, which is a critical part of the online insurance journey.

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The Bowtie executive hoped that the regulators will help financial firms work with the wider ecosystem to exchange learning and promote each other’s products.

Even after the Covid-19 pandemic, customers’ buying behaviour continues to shift from offline to online channels. “Virtual insurers cannot use agents, but they have seen new opportunities to team up with a digital platform of banks and brokers to identify needs and sell products,” Ngan said. “There is still tremendous room for growth in ecosystem partnership.”

Bowtie is among four digital insurers that were launched under a new licensing regime introduced by the IA in 2019. These firms do not employ agents and sell policies online only.

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After operating for four years, Bowtie has the biggest market share as far as direct sales channels are concerned, representing about a third of all direct sales. About 8.5 per cent of all life or medical policies sold in Hong Kong last year were bought through direct channels, compared with 2.9 per cent in 2018, before the virtual insurers joined the market.

Traditional insurers such as Prudential, HSBC Life, Manulife and AIA have all invested in technology in recent years, but Ngan said digital insurers can compete as they do not have any legacy systems or distribution channel conflicts, allowing them to be more innovative.

Bowtie is supported by Sun Life Hong Kong, a traditional insurer that last month joined Mitsui & Co in the virtual insurer’s latest funding round and invested US$34.9 million. Sun Life also took part in Bowtie’s previous funding round. The virtual insurer has now raised a total of US$87 million.

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Bowtie has challenged the myth of “insurance is sold, not bought” by encouraging policyholders to buy its products online, said Clement Lam, Sun Life’s CEO. Sun Life supports Bowtie because it is “pioneering a new category of health insurer”.

“Together, we are dedicated to making insurance more affordable and accessible to all,” Lam said.

Securities brokers have offered online trading for a while now, said Robert Lee Wai-wang, the lawmaker for Hong Kong’s financial services sector and CEO of local brokerage Grand Capital Holdings.

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“Besides providing online trading, many brokerage firms can also adopt technology to improve their risk management, checking on clients’ background and enhancing their payments to clients,” he said.

Moreover, the introduction of a new digitalised platform for initial public offerings by bourse operator Hong Kong Exchanges and Clearing on November 22 is expected to speed up the listing process by cutting the time between pricing and the start of trading from five business days to two.

The city has many financial firms offering banking, securities and insurance services, said Wilson Chan Fung-cheung, the associate director of City University of Hong Kong’s master of business administration programme.

“The HKMA’s move to work with the IA and SFC can develop more guidelines and training to support these financial firms as far as using fintech for cutting costs and enhancing services is concerned,” he said.

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