Cleo Randing of PasarPolis
IndoTekno Podcast, 14 July 2020
Welcome to Episode Ketujuh Kami; our seventh episode of Indo Tekno. I'm Alan Hellawell, Founder of startup advisory firm Gizmo Advisors and Venture Partner at Alpha JWC Ventures. As always, pendengar Indonesia dapat membaca transkrip Bahasa Indonesia kami. In our continuing quest to uncover the most fascinating and dynamic parts of the Indonesian technology ecosystem, we are pleased to have as our guest Cleosent Randing, Founder of PasarPolis. PasarPolis is a leader in Indonesia's online insurance movement. I personally find this space fascinating because unlike say ride sharing, or online video, where we are talking about taking well established offline behaviours, whether that's grabbing a taxi or watching a movie, and simply migrating them online, Indonesia is not a market with much history of basic insurance adoption; neither online nor, more fundamentally, offline. Cleo, really pleased to have you here to walk us through this very dynamic area. Could you first share with our audience, your background and the origin story of PasarPolis?
CLEO RANDING 1:19
Thank you very much, Alan, for having me today. It's great to be here and to speak to your audience. A little bit about myself: my name is Cleo Randing, Founder and CEO of PasarPolis. What started me to go into insurance was that previously I was in digital marketing, and a lot of insurance companies have started to go digital. And we do see that there is a strong movement towards how digital can be, not only a channel of distribution, but actually become a very important way of how people buy and experience insurance. So since then, I started PasarPolis at the end of 2015, early-2016. And since then, in 2018, we partnered with the three largest unicorns; Gojek, Tokopedia and Traveloka; to really democratise insurance for all. We make insurance accessible for a majority of people in Indonesia. And we've just started, so there's still a long way to go.
Cleo. Let's dive right into it. Indonesia's insurance penetration relative to GDP remains very low. According to the OECD, Indonesia's insurance spending in 2018 was only 1.79% of its GDP, lower for instance, than Malaysia at 4.4%, and much lower than the OECD average of 8.92%. Moreover, growth seems to have been very slow. Between 2011 and 2018, Indonesian spending on insurance only grew by 0.16 percentage points, from 1.63% of GDP in 2011. The insurance growth in Singapore, on the other hand, grew by 2.66 percentage points to 9.02%. Can you provide some context here Cleo?
CLEO RANDING 3:15
I think that basically Indonesian insurance has vast potential. But as you rightly mentioned, it has been dragged down by inefficiency. For example, agencies have been the number one channel to buy insurance. But it has not been perfect. So there's inefficiency, and also high cost structure, because there is a lack of distribution of infrastructure of the traditional insurers. I think it remains to be a challenge to us, and an area for us to solve. So I think that if we can do that well, given all those challenges, to be honest, the market has vast potential. It has in aggregate, maybe close to about $20 billion, $ billion in general insurance and about $13.2 billion in life insurance. So I think the market has started to grow. InsureTech especially has grown very, very fast. So we think that the right industry support and the right customer experience will be a key catalyst to how we can make insurance become more accessible. And also, if we can make the distribution channel more efficient, that way, the price of insurance will also go down.
Cleo, would you agree with my introductory remarks that, unlike ride sharing, where you're simply cutting over from years of taking a Bluebird taxi, to maybe a Gojek or a Grab car; or taking your movie-watching from the movie theatre to online; we don't have some of the basic insurance purchasing behaviours to begin with. So, are you faced with a much more manifold educational and behavioural change challenge than a lot of the rest of the Internet economy?
CLEO RANDING 5:01
That's a very good question, Alan. We do think about how we can make sure that insurance becomes part of people's day-to-day life. And what we do at PasarPolis, for example, is that when you click and you send your items through GoSend, for example, you are being offered insurance right there and then. So, to make sure that buying insurance becomes as frictionless as possible, it's extremely important in this market to fractionalize, or make buying insurance, not a big event, but instead something that is frictionless. And we want to create a way for people to buy insurance that is accessible, because it is affordable, on a piecemeal basis. So that's what we do on multiple millions and millions of transactions on Tokopedia or Gojek or CityLink, where we now do about 50 million policies a month. So it shows that actually the education is there. For example, people are being educated about insurance, but the way people buy insurance has a lot of friction. And that's where we see there is opportunity. Maybe I'll give an example: when we started selling protection insurance for Gojek drivers, actually, right now PasarPolis has over 100,000 drivers that pay every month. And when we see this, we see that actually people understand insurance, and they like to have that protection, that peace of mind. But if in buying insurance, you have to speak to an agent, or it involves a lot of friction in terms of buying, and at the same time also in terms of claims. We can remove the friction of those areas on one side, making it easy to buy with just a checkbox or something very simple. And on the other hand, we make the claim very fast, and PasarPolis has been able to reduce claim time from traditionally, maybe more than a week, to right now we can give claims instantly. So within seconds of the trigger, or the loss, happening we can create insurance where the FNOL, which is the "First Notice of Loss", is close to zero, by using technology to really make claim experience vastly different. And I think that's where we see opportunity. The third area is about how we can create better underwriting through data and utilising data to then be able to figure out the right pricing. We see insurance as a data-driven exercise, where the underwriting can be done dynamically with data from a lot of digital platforms.
Listening to part of your description, in many ways, the analogy is: not waiting for the consumer to close on his or her first "big ticket" insurance purchase (whether it's home or life), but actually bringing the opportunity to them with smaller ticket more frictionless insurance opportunities. Is that right?
CLEO RANDING 8:15
Yeah, absolutely, Alan. I think it's about how we can make insurance a part of people's lives. I think that the next generation, the millennials, how they buy insurance is no longer like when I was 30: I bought my first life insurance and that was a big event. But in everything you do, you have peace-of-mind being offered. And you can check on it. You can click on it, and it also is very, very affordable. And by utilising data, you can actually reduce the price of the premium. By reducing the cost of distribution, you would lower down the premium, and at the same time utilising technology to really make claims super simple and frictionless. So it becomes like a gift. And if you see that that claim is actually very simple, you would be buying more product. So most of our customers are first time insurance buyers, and most customers, more than 60%, buy again. So it is more than one product that they have. And we do about 50 million policies a month. So we see that there is a significant opportunity in Indonesia's digital economy to create a solid ecosystem for online insurance, whether it is in e-commerce, online travel, ride hailing, online delivery or anything, because we think that the Indonesia market for digital goods can reach about $100 billion by 2025. If we can take about, say 3% of that, where people start buying insurance in every single aspect of their purchases, then that can be a $3 billion insurance potential. And I do believe that Indonesia is a very large home-based market, but throughout Southeast Asia, we see a lot of inefficiency, in terms of where we can actually make people buy insurance. So, making it frictionless for them is extremely important in my mind: to be able to buy insurance in a very simple way, and offer a simple way to claim. So when we talk about micro-insurance, it's actually micro policies, because it has micro benefits, it has a very simple benefit. But we also refer to micro claim, because claim is becoming very fast and very simple.
Cleo, I heard you reference regional opportunities. Is that part of the game plan at all? Or do you see the Indonesian market as more than enough as the focus of your next few years?
CLEO RANDING 10:41
We see Indonesia as enough. It is a big market. But having said that, naturally, insurance is not an Indonesia problem. It is a general problem. And we do believe that traditional insurance in the Southeast Asia region remains a challenge. When we are in Vietnam, we see that there are significant challenges there. When we are in Thailand, we see significant challenges there. We think that there are areas where we can create a presence where the incumbents do not have a strong foothold. So traditionally, that has been a challenge and we do believe that there are opportunities. Being a Southeast Asian company, we think about how we can actually drive Southeast Asia forward so they can live a more worry-free life. And we are excited for that opportunity, because we think that Southeast Asia has a lot to offer. It is a growing economy, and we feel that the opportunity in insurance is actually very, very big.
Now Cleo, if I'm not mistaken, offline insurance channels still currently contribute more than 95% of insurance premiums. How should we think about the growth of online as a channel?
CLEO RANDING 11:51
I think you are right. Of course, even moving forward, we do see that the offline channel will be a large part of insurance because, with large ticket size items, we do think that offline will be prevalent. So we see a lot of opportunity in more bite-sized insurance, in more micro insurance. Think of the digital consumers. As more people, such as the millennials, prefer to buy insurance digitally, we do believe that insurance technology, or digital insurance, will grow at an incredible speed because of a much more efficient distribution channel, a much more data-driven underwriting, and also a much easier and simpler instant claim technology that's available. So we think those are the three areas, and when we think about how the millennials prefer to buy insurance, actually a lot of them prefer to buy online. How we can create a frictionless way to buy insurance will become an interesting factor in how the growth of insurance throughout Southeast Asia will move, in my mind, at an incredible growth potential.
You mentioned earlier that PasarPolis partners with many of the larger Indonesian platforms such as Gojek, Tokopedia, and Traveloka. Can you give us an example of one of the more popular products that you have jointly developed with one of these partners?
CLEO RANDING 13:18
We developed with Gojek for example, a "contextual insurance". There are different types of contextual insurance, such as if you send your item through Gosend, there is an insurance built in there. And also if you want to buy the premium insurance, which has much larger coverage, much better coverage, you can also check that checkbox. So we see "contextual" as big, because we think buying it very simple, buying this type of insurance where it covers that particular context, is very important. We have the same thing on Tokopedia. For a lot of products, whether you buy clothing, or whether you buy a lot of different items such as furniture, we have what we call "total loss insurance", or total loss damage, which covers two things: in the case that the the item is damaged, as well as in the case of wear-and-tear, if that item has being damaged. So we create an additional protection, where people have peace-of-mind; when they buy something, it lasts for a certain period of time. So, that has been very, very promising. We sell millions and millions of these policies creating a new economy and a new source of distribution for large digital businesses. Other than that, we also partner with large channels For example, with Gojek we are building "GoSure" with them, where we now sell a lot of consumer insurance online in a way where buying it will be within two clicks and within seconds. We also partner with DANA in creating Dana Siaga, and in that it's super easy where you can click to buy health insurance, COVID insurance, any type of insurance in Dana Siaga. And it takes maybe less than a minute to just buy your insurance product so that you are protected. So we see multiple products as we continuously develop more and more innovative products. We truly believe that there is significant opportunity on these large platforms to make sure that we can reach the customers at the right time offering the right product that really fits to their needs.
What role does regulation play in PasarPolis's considerations? How does Indonesia's regulatory regime compare with other jurisdictions?
CLEO RANDING 15:36
I think that the regulator in Indonesia has been very, very supportive, largely because they see that technology, and insurance technology, is a clear way where people can democratise insurance. So the democratisation of insurance through technology is probably one of the only ways because the cost of distribution is very low to enable the Class SES BCD to be able to buy insurance. And because, through technology and only through technology, hundreds of thousands of Gojek drivers can buy insurance very affordably, for less than $1. In a normal economy, where you need agents, etc, that would not be possible. So the OJK and the regulator have been very supportive of technology because they clearly see that technology is a way where you can democratise insurance. And, when we say insurance, it's more of a peace-of-mind for a majority of Indonesians. And let me say this, because we do believe that there are millions, maybe hundreds of millions of Indonesians, where they need insurance the most, but they don't have access to insurance. Because, for people like you and I, and our listeners, most of them are blessed with a lot of resources. So, in case that the risk happened, we would be able to sustain our life. But how about people in the rural part of Indonesia. If they, for example, fail in terms of their crops for that time, they would not be able to sustain the family. So we think that there is a lot of opportunity where the regulator can actually do things to help democratise and create a feeling of a safety net or a worry-free feeling through technology and utilising technology as a way to distribute insurance in a much more effective and efficient way.
Now, physical contact restrictions are impacting traditional offline sales of insurance in the COVID era. What changes has the pandemic triggered in terms of insurance adoption, and what other behavioural changes has PasarPolis witnessed during this time?
CLEO RANDING 17:47
The pandemic allows now insurance to be purchased online, which is a really good development. And we do think that digital distribution will be more prevalent in the future rather than meeting agents, insurance agents, for example. We do see that continuing post-COVID. So we are super excited with that development and how insurance can actually be bought digitally. We think that rather than having, for example, just insurance agents, we think that buying the right product online through digital platforms like Gojek, DANA, Tokopedia, Bukalapak, and many of our other partners to be a different way post COVID to buy insurance.
A question for you, Cleo, around the broader competitive space. PasarPolis is an industry leader in online insurance. How do we meanwhile think of platforms that are approaching insurance as an ancillary service to their own core offerings, such as HealthTech companies, online auto platforms, property portals and other players?
CLEO RANDING 18:53
There are actually a lot of these platforms, where insurance becomes more and more prevalent as a way to make ancillary revenue, so we work together with them, be it HealthTech or be it online travel agents...be it any of those businesses. We do believe that probably when they are thinking about ancillary business for themselves, and to answer to the needs of their customer, insurance is a way number one, to create peace of mind for their consumers for all different use cases. And number two, it gives a very large, ancillary business, because the revenue to the GMV (Gross Merchandise Value) from insurance is probably one of the highest, given the nature of insurance being a digital good. So we actually feel that there are a lot of new partners that can sell insurance to the consumer, be they hotels, who want to create a different type insurance, from hotel cancellation to even something that are maybe more remotely related. Maybe a "home-away" insurance, where we work with airlines and build a large ancillary business. PasarPolis works exclusively with CityLink for all their flights, for example, and we see that now, despite the COVID, actually it has started to come back. So it's quite interesting to see a lot of digital businesses that can actually benefit from insurance sales.
And are some of these guys capable of building the solution themselves? Or do you feel that they will necessarily need to partner with domain experts like yourselves?
CLEO RANDING 20:32
Well, I think that your question says it all: it is non core for them, and it is core for us. So we think that we actually are able to deliver a superior product compared to them building everything themselves. We do believe that how we work with large partners like DANA, Gojek, Tokopedia, shows that actually we deliver value in terms of aggregating insurance products; the cheapest, the best insurance products; and also how our insurance panel partners, for example, are able to deliver the end-to-end insights of the insurance business to our partner. So rather than build it themselves, they can really get much better return on their investment and time in partnering with players, for example, like us.
So Cleo, another comparison question. China's overall insurance market has doubled over the past six years. It moreover has seen some of the strongest growth in online insurance adoption globally during this period. The big three platforms - Alibaba, Tencent and Baidu - have played a major role in driving adoption, from their respective leadership positions, in e-commerce (as the case is for Alibaba), Tencent in social networking, and Baidu in search. What "compares" and "contrasts" can you share as they relate to Indonesia?
CLEO RANDING 21:58
Well, I think that the Indonesia economy actually follows what China and the US have done. And PasarPolis aims to continue to lead innovation to protect people's ways of life. So I think the way things have happened in China or in the US, will happen in Indonesia. So when you mentioned about what Alibaba has done with insurance, we're building similar things with Tokopedia, for example. What Tencent has done with insurance in China, we're building a similar platform with Gojek. So we see that there are numerous correlations to what has happened in China. With the US, for example, we are building innovative products in GoSure, just like what Lemonade has built in the US. So we see that there is a significant correlation to how Indonesia's economy, and also digital economy, will learn, building great innovation around insurance products that are very consumer-centric, that are lovable for the customer, because of the way that the product differs from traditional products, and the way that the claims differs from traditional products. So we think that what Lemonade has done in the US, we are doing similar things in Indonesia in our partnership with Gojek. You are right to say that, in in this part of the world, having a large partner is important because people's education around insurance is still not as prevalent as in the US. So I think that would be the contrast and the difference, whereby in China the insurance penetration is larger, or in the US even much larger. In Indonesia, you do need to make sure it's more frictionless. So, coming close to your customer becomes a PasarPolis strategy to really partner with large platforms. And we've partnered with most of the tier one partners, be it Tokopedia, Bukalapak, Traveloka Group or Gojek and others; because we do see that there is significant potential to give people a way to buy insurance in a very simple and meaningful way, and a frictionless way if we can deliver the right product at the right place through the right distribution channel.
Now Cleo, you've mentioned that big data has played a massive role in driving aspects such as the ease of access to, and the proper targeting customization and pricing of, insurance products online. Can you give us some more insights into this?
CLEO RANDING 24:28
Yes, absolutely, Alan. I think that number one, the way that we would think of insurance underwriting is very different. We want to use actual data to actually determine the insurance pricing, to actually determine how and when claims are being paid to make sure that we can do smart instant claims. That requires a tremendous amount of data. In order for us to understand "green" and "red" channelling, we need to understand and have automated risk assessment technology to be able to make sure that we have enough of a "data lake", and also enough consumer data and behavioural data. Even cross-channel data insights through our partnership with numerous partners will allow us to create, for example, scenario-based attributes. For example, if you go into a mall, maybe we will then offer you COVID insurance. At the same time, understanding your actual customer information will allow us to understand what products would be best for your needs, and your family's needs. And we do believe that innovating, using dynamic pricing for insurance, and using our joint "data lake" with our partner will enable us to improve our underwriting capabilities. For example, in the case of travel insurance, we can utilise travel frequency, real time positioning, flight info and weather data to then determine the right price for insurance. For auto insurance, for example, we can use driving behaviour, real time positioning and the type of vehicle people drive, to understand what would be the risk of accident for a particular driver. Same thing as well with health insurance through the steps that they take: sports frequency through heart rate data, etc., to be able to understand pricing for them. So more and more big data allows a more precise prediction of price, thereby reducing and eliminating inefficiency in pricing.
Continuing on this line of discussion, I spent a lot of time in my past life as an investment banking analyst looking at Zhong An Insurance in China. One of its strengths as an online player was indeed to collect extensive data on customer behaviour. By learning what customers do in particular situations the company can offer customised products. Zhong An would typically take less than a month to develop a new product, which is about five times faster than a traditional insurance company. So what aspects of the Zhong An experience relate most to PasarPolis?
CLEO RANDING 27:14
Well, I think that Zhong An proves to us that they are able to write hundreds of millions of policies in a month shows the size of insurance in the digital economy to be very large. Their ability, as you rightly mention, to create product very fast, shows to us that building insurance through iteration can be done. And I think that also shows to the regulator that when we use data and make incremental product changes, that are very consumer-friendly, that would be good for the consumer. So we see that there is a lot of things that we can also learn from Zhong An. What they have done to build the scale of B2B2C partnerships through insurance, and creating a large business for the partner clearly shows that there is a lot of opportunity for other players in the region to also do the same thing. We also learn from people like Lemonade, for example, how to create a very unique product. And creating this unique product, just like what you mentioned earlier, that are very different than the standard product that the incumbent insurance companies have, will enable us to target a different segment of consumer, the millennials, the younger generation, the digital consumers, to buy a different type of product through us. And I think we learn a lot from different players both in China and in the US as well.
Cleo, how does PasarPolis think about the merits of acting as a third party marketplace or an agent, versus taking a principal role, or underwriting, the insurance relationship?
CLEO RANDING 28:57
PasarPolis believes that technology can make a difference in buying, and in the experience of, insurance. So we do believe that our focus is actually building the right technology to help the underwriter. The underwriter now has much more well-capitalised financial assets, and balances, to allow them to underwrite better. So our focus now is to work with underwriters, and really build an innovative product together. And I think that even if, for example, PasarPolis would incubate new products, we would still be working with underwriters, because the way we see things in terms of our lens is collaboration, collaboration with market leaders. And in this case, of course, the underwriters are much larger. We work together very closely with Allianz, AIA, MSIG and many other insurance partners. Of course, we work very closely with Sinar Mas InsureTech. We also showcase that, by working closely with them, we would be able to really leverage what we are really good at, and leave the balance sheet and the investment part to people that know that part the best. And our focus is building technology to really make the insurance experience far superior. And that has been our key focus. Whether we incubate certain products where we may start to do a little bit of testing, or we take a little bit of the risk because we feel that by doing that we will have skin in the game; that we are contemplating. But having said that, we do believe that at the end of the day, the underwriters have larger balance sheets, and it makes sense for them to continue to do so.
Understood. That's very clear. Cleo, can online insurance be a 100% mobile device-based experience in the future? Or will customers prefer using desktop to do things like thorough research before for buying?
CLEO RANDING 31:01
Well, I firmly believe so. I think that it's very clear that insurance will be more bite-sized in the future, and it becomes a much more seamless way to buy insurance. So you will buy a different type of insurance as you go through your day. And that way, of course, a mobile-based experience of buying insurance in the future is very, very important. And I don't think that you would need a lot of research before you buy insurance. Just like what happened now. Maybe desktop is important for buying, for example, your large life insurance. But for most cases, we do believe in a 100% mobile device experience as a way to buy insurance in the future.
Well, this concludes our seventh instalment of Indo Tekno. Thanks so much for joining us today, Cleo. The podcast was translated from English to Bahasa Indonesia by Alpha JWC Ventures. Terima kasih untuk mendengarkan. Sampai jumpa lagi!