In this article we discuss the potential of existing online tools and how these tools can be implemented in a highly regulated insurance industry.

When innovation becomes a passion

Can you guess how many times a day an average person looks at their mobile phone? Your phone is both your best friend and your 33rd organ. Businesses recognize how attached people are to their mobile phones and have turned this into an opportunity. Those in the insurance industry are also taking note, recognizing that online communication is the future of marketing and the most promising of all distribution channels.

Thai people's behaviors

Some say that Thai people actually prefer face-to-face interactions. That might have been the case before, but as time passes, people's behavior has shifted. Many people have turned to online platforms, since they are easily accessible. Insurers who ignore this trend will likely miss out on opportunities and fall behind. The OIC has responded by introducing specific regulations to govern online sales. Now, insurers will be able to apply them as guidelines to ensure compliance with local laws and regulations.

Getting to know blockchain

Blockchain, a type of distributed ledger, is managed within a peer-to-peer network by users with a strict set of protocols. These design features make it secure and potentially suitable for recording events and medical history. It may also be useful for administrative activities, such as identity management; transaction processing; documenting provenance; food traceability and voting. Blockchain builds upon a continuously growing list of records, called blocks, which are linked and secured with cryptography. Each block has a pointer to the previous block, along with a timestamp and a record of the transaction data. Blockchain was created anonymously in 2008 and shortly afterwards implemented as the public ledger for bitcoin transactions.

"Blockchain, a type of distributed ledger, is managed within a peer-to-peer network by users with a strict set of protocols."

Blockchain and the changes it brings

The introduction of blockchain was an inspiring opportunity for many business operators. Although some insurers still have no clue as to what it is, some are already reaping big gains from it. Perhaps it would be easier to give a simple example. Imagine the current payment process where we need to rely on banks as intermediaries to verify the transaction. With blockchain system, the transactions would be verified and validated by participants in the blockchain systems. This results in a faster, cheaper, and more secure process.

Peer-to-peer online network, a threat to intermediaries

Transactions in a peer-to-peer network do not require an intermediary. For example, bitcoins can be exchanged for currencies, products, and services among users. In the last three years, the number of people using bitcoins increased from 100,000 to an estimate of over five million.

This is just a sample of how fast things are moving forward. In the realm of insurtech, things are slightly more complicated, for instance, the e-signature requirement and paperless insurance policies. However, this is not to say that a peer-to-peer insurance network is not possible. Globally, peer-to-peer insurance sites have emerged. Policyholders, who are also insurers, report higher satisfaction from increased transparency and reduced overhead costs.

What basics should insurers know in order to explore these online channels?

In Thailand, insurance is a highly regulated industry. In order to survive, insurers need to stay abreast of the latest regulations. The OIC announced the Notification of the Office of the Insurance Commission re: Criteria and Procedures for Issuing Insurance Policies, Offering Insurance Policies for Sale, and Payment of Indemnity or Compensation under Insurance Contracts via Electronic Means, B.E. 2560 (2017) (the "OIC Notification"), which became effective on 25 August 2017.

The Notification regulates the following four insurance activities undertaken via electronic channels:

  • use of electronic means for offering an insurance policy for sale;
  • sale of insurance products via electronic channels;
  • payment of insurance compensation via electronic channels; and
  • issuance of insurance policies via electronic channels.

The Notification specifies that these activities must be in accordance with the law governing electronic transactions, and must not be contrary to or inconsistent with the laws on the prevention and suppression of money laundering, or other laws of a similar nature.

Insurance policies sold online must also be approved by the Registrar prior to being offered online. The conditions for payment of insurance benefits; premiums; or other information for the prospect's consideration and decision to purchase the policy, as prescribed by the OIC, must be disclosed.

Knowing more about these technologies can help you be on the look out for potential opportunities.