Joachim Michaely, Munich Re, Hong Kong
Axel Furderer, Munich Re, Munich
Since mid-2010, the Whittington Insurance Group has been represented in Singapore by its direct insurance unit, DirectAsia. Supported and reinsured by Munich Re, DirectAsia got off to a perfect start.
2010 marked a reform in the history of Singapore’s insurance market. Within a few months not one, but two direct insurers started their operations focusing on motor insurance: Aviva and DirectAsia. After five-year absence from writing liability, accident, and property insurance business, Aviva returned to Singapore in April 2010 and set up a direct insurance unit. DirectAsia, established as a pure direct insurer by the Whittington Insurance Group, was launched in June 2010.
Singapore, whose land area is roughly equivalent to that of the city of Hamburg in Germany, has an estimated population of 4.8 million. Due to the city state’s restrictive traffic policy, private car ownership is subject to strict regulations. Levies on imported motor vehicles amount to over 200% in some cases, while driving in the downtown district can be a very costly business due to the electronic toll system. Given that there are only about 550,000 registered passenger vehicles, the Singapore market is reasonably transparent and also an ideal platform for transferring the experience gained here with processes, systems and marketing activities to other Southeast Asian markets.
Direct motor insurance in Singapore: Perfect timing and many good arguments
As the population is receptive to and heavily reliant on the internet, Singapore may be regarded as a perfect test market because of its leading position in Southeast Asia. According to market research institute Internet Stats, there are 3.55 million internet users in Singapore, corresponding to 77% of the entire population. Only Japan and South Korea, at 78% and 81% respectively, boast a higher user concentration. And it is precisely in these markets that direct insurance business has been booming for years.
The motor insurance market in Singapore is dominated by brokers commanding high level of commission that, among other issues, affect premium rates. Direct insurers take advantage of this situation by not charging commission, offering leaner processes and carefully selecting their customer base. In this way, they can pass on a portion of their cost advantage to insureds. DirectAsia was launched in the belief that a real direct insurer can take over significant market shares and that customer support via the internet and hone will be widely accepted in Southeast Asia.
The Whittington Insurance Group and Munich Re – a great team
The Whittington Insurance Group began preparing to launch DirectAsia in Singapore at the beginning of 2009. From the outset, the international team of experts included specialists familiar with the intricacies of the local market, with direct insurance business and local market and product launches.
Munich Re acted as a solution provider, supporting DirectAsia through its local market knowledge, access to an international network of experts and comprehensive motor insurance expertise. This strong cooperation led DirectAsia and Munich Re to negotiate a tailor-made reinsurance solution.
Besides knowledge and experience, solvency was a strategic factor behind DirectAsia’s decision to cooperate with Munich Re. Particularly with insurance startups, clients and the local insurance supervisory authority keep a close eye on an insurer’s reliability. Munich Re’s financial strength and rating were key elements in DirectAsia’s decision to select Munich Re as a risk carrier. Impressed by the professionalism of the Whittington/DirectAsia team, Munich Re was in turn happy to enter into this new business relationship.
More than reinsurance: Munich Re as a cross-line partner for products, ideas and processes
Munich Re put together a project team for DirectAsia consisting of employees from Munich Re in Singapore and Munich and from the Motor Consulting Unit (MCU). DirectAsia had already acquired above-average expertise and drafted a very solid business plan. Over the course of the entire project phase, Munich Re provided support for products, ideas, and processes across several classes of business.
In particular, the MCU’s many years of experience with internet startups of motor insurers in Europe – one MCU expert was involved in the direct insurance launch team of a major German primary insurance company – helped DirectAsia to refine its processes, such as the ability to precisely plan the number of call centre and IT employees. Measures like these have a direct effect on revenue, employee response time and of course customer satisfaction.
DirectAsia identifies with Singapore
DirectAsia was firmly committed to identifying with Singapore right from the start. Besides creating approach to promoting its advertising messages using guerrilla marketing tactics, DirectAsia launched a variety of campaigns, such as a series of TV ads about traffic safety with a famous actor and his family highlighting dangerous situations, for example driving without a seat belt.
Great start and even better prospects for the future
The formula was successful – DirectAsia is progressing in line with its ambitious business plan. Charless Burgess, Managing Director of Whittington, is satisfied: “After six months we believe that DirectAsia is a proven model. It has achieved traction. Sales are strong and getting stronger every week, the system is stable, claims are as expected and the team culture is excellent.”
The outlook is encouragingly optimistic: DirectAsia is planning to expand into new markets and wants to service the entire region in the long run. Burgess: “The business was called DirectAsia for a reason. We would not have started down this line if our ambitions had not extended beyond Singapore. Each country in Asia has its own opportunities and limitations in both the personal lines space and in the buying habits thereof. Despite this, there are similarities and lessons that can be learnt in one and leveraged in others. Our strategy is to enter one country at a time in a fairly defined order at a fairly brisk pace. By the end of 2012 we would hope to be selling insurance in four Asian territories.” And with Munich Re, DirectAsia can always rely on the service and the reinsurance protection of a strong and experience partner.