Introduction

This article focuses on insurtech in Thailand, which is a sector promoted by the Office of the Board of Investment (BOI)¹. Foreign Investors can fully own a company and are exempted from corporate tax for several years as long as they invest capital worth at least 1 million Thai baht.

What is insurtech?

To disrupt the traditional insurance sector, companies in the insurtech space integrate new technology with traditional insurance services. Overseas, we see insurtech companies using telematics to monitor the driving habits of policy holders, using the collected data to calculate insurance premiums instead of simply asking them questions such as their age during risk assessments. This innovation can make assessments easier for providers and produce fairer premiums.

Other innovations in the space include an app that provides personalized policies, where customers can take pictures of their possessions, ranging from jewelry to cars, and have premium quotations generated instantly. This makes short-term insurance policies much more accessible².

Insurtech developments in Thailand include ‘Fairdee’, a company launched by Singapore-based car insurance company Vouch. Fairdee aims to promote safer driving by offering a 30% annual premium refund for customers who do not make claims within a given policy period. For example, if customers do not claim the policy within a year, they will receive a 15% refund on top of an additional 15% if other members of their group do not make claims as well. The rationale behind this policy is that peers such as colleagues, friends, and family members often have the best insight on an individual’s driving habits. Fairdee also incorporates a sense of community by pooling at least 4 customers of similar driving habits together to motivate them using the 30% cash-back incentive³.

Global growth of Insurtech and Trends

Insurtech is gaining traction, and this is reflected by the total funds raised for the sector, which has reached $2.6 billion so far this year from just $1.7 billion in 2016⁴.  Insurtech companies are making use of new cutting-edge technology such as Artificial Intelligence (AI), blockchain, machine learning, robo-advisory, and the Internet of Things (IoT) to bring novel ideas, such as peer-to-peer and micro-insurance, to the sector.

The growing interest in the adoption of insurtech is also reflected by traditional players acquiring fintech startups to gain access to their innovations. An example of this is when Zurich International acquired Bright Box, a startup which taps into car data to create personalized auto insurance services⁵.

Insurtech’s growth is particularly notable in South East Asia, especially in Singapore and Vietnam⁶.

Advantages and disadvantages when setting up an Insurtech company in Thailand

Advantages

Thailand’s insurance sector is the 8th largest in Asia with a growth rate of 4.5% and an overall penetration rate of just 5.5%⁷. Residents spend roughly $334 on insurance every year, with life insurance having the largest potential for growth as it is currently an underutilized market. This is followed by motor and travel insurance, which coincide with Thailand’s growing economy. Insurtech companies have also began partnering with online vendors such as Lazada to increase their market exposure.

The Thai Office of Insurance Commission established the Center of Insurtech Thailand for research, technological exchange, and insurance product development. It aims to bring together insurance firms and tech startups to encourage technological innovation in the domestic insurance industry⁸. There is also a regulatory sandbox for insurtech, along with a number of benefits for new entrants that reduce the regulatory hurdles they need to face. Insurtech companies are also entitled to apply for BOI promotion as one of the Board of Investment’s targeted industries.

Disadvantages

The industry in Thailand has been hindered by old-fashioned processes which involve plenty of paperwork as well as excessive commissions for brokers, agents, and other intermediaries. Current Thai regulations require vendors to complete multiple in-person verifications, adding to the bureaucracy of obtaining a policy. Instead, selling insurance policies directly to customers using an online platform without intermediaries can make the assessment and application process much simpler. This is what insurance company Frank is attempting to do by offering policies online.

Takeaways

Insurtech is undoubtedly a disruptive technology that can transform the insurance industry for the better by enabling insurers to offer fairer premiums and make insurance more accessible to customers via online platforms and apps. Insurtech’s potential in Thailand is particularly notable because market penetration still remains low, giving prospective companies an opportunity to establish the innovation in the Kingdom. This, coupled with benefits given by the Thai government through BOI promotion, can make investments in Thailand’s young insurtech industry especially rewarding.

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1. Insurtech companies are recognized as a BOI, see “A Guide to the Board of Investment 2017” the General List of Activities Eligible for Investment Promotion on page 44 part 5.9 Digital companies.
2. “Insurance Revolution #1: Where is Thailand at with Insurtech” Baker McKenzie http://bakerxchange.com/cv/8fb16c3b0dfb52f079592805383eee1f0d56e486
3. “Singapore-based insurtech launches in Thailand” https://www.insurancebusinessmag.com/asia/news/regional-news/singaporebased-insurtech-launches-in-thailand-106372.aspx
4. “Insurtech fundraising reaches all-time high” https://www.intelligentinsurer.com/news/insurtech-fundraising-reaches-all-time-high-17110
5. As discussed in the section “what is insurtech?”
6. “Technology high on the agenda for south-east Asia” https://www.intelligentinsurer.com/news/technology-high-on-the-agenda-for-south-east-asia-16893
7. “Challenges with Thailand’s Online Insurtech Play” https://ecommerceiq.asia/thailand-insurtech-challenges/
8. “Insurtech hub in the works to help industry integrate” https://www.bangkokpost.com/business/news/1452594/insurtech-hub-in-the-works-to-help-industry-integrate