Interview Qumata

Market Opportunity

How does Qumata envision the future landscape of the life insurance industry, especially considering the evolving dynamics of inflation, changing demographics, and the ongoing digitization of the insurance process?

Thank you for the question. It's important to note that Qumata primarily operates within emerging markets in Asia, so my perspective may be somewhat skewed towards that region. Regarding the future landscape of the life insurance industry, particularly in emerging markets, we see significant potential growth. The rising middle class is a key driver, leading to increased home ownership and subsequently, a higher demand for life insurance. As the middle class expands, there is a natural uptick in life insurance sales.

However, I should mention that our insights are more relevant to developing markets in Asia. In some of these regions , simple term products are gaining traction, contributing to the overall growth of the life insurance sector. Here technology can help, and digitization is a key priority for Life Insurers. Take underwriting as an example – in contrast to developed markets, non-medical limits (the limit at which a video or physical medical examination is required) are lower, requiring a significant amount of applicants to undergo medical examinations for specific product lines. As fraud – both non-disclosure and syndicate - is a core reason for the low NML limits, technology solutions like Qumata can help to identify these potential risks and allow for less intrusive medical exams. 

Conversely, in developed markets across Asia, simple life insurance products have shown slow growth given the market’s saturation – In 2021, Hong Kong for example had a Life Insurance penetration of 17.3% followed by Taiwan with 11.6%, Singapore at 7.5% and Japan at 6.1%. Developing countries such as India and Indonesia rank low with 3.2% and 1.1% respectively. Due to this, we have observed insurance giants in APAC to diversify into more health offerings across their mature, developed markets.

As Qumata operates within the niche of allowing technology to augment the current underwriting methods for Life & Health insurance, specifically in countries with relatively low non-medical limits - the current and medium-long term interest rate environment has not had a direct impact on our business. That said, higher interest rates have slowed Venture Capital Investments significantly across the board, potentially leading to less innovation in the short term as rates may not revert to levels seen prior to the hikes seen in early ’22.

In markets like Insurance, where sales cycles for technology businesses are long compared to other industries, large cash reserves and thus larger fundraising rounds can give up and coming technology businesses an edge. With limited availability of venture capital, digital innovation in some core areas of the value chain can slow as companies do not have the financial endurance.   

In summary, our observations are centered around developing markets in Asia, where the growth of the middle class is a key factor driving the expansion of the life insurance sector and opening up multiple opportunities for technology to play a leading role. Examples of this can be seen by firms like Qumata decreasing medical limits by identifying non-disclosure & other types of fraud through technology. In our niche, inflation is not a major concern, yet higher interest rates have led to lower venture capital investments thus increasing the risk for less innovation in the short and medium term.

Many companies have failed to implement and scale their underwriting modernization methods, and they're still maintaining their manual processes. Why do you consider this to be happening?

The persistence of manual underwriting processes in many companies can be attributed to the effectiveness of traditional underwriting methods, particularly in developed markets. Developed markets often boast reliable electronic health systems, such as those predominant in the United States. These systems facilitate robust checks and ensure that data is centrally and easily accessible. Additionally, higher-income countries generally experience lower instances of fraud.

In contrast, when we shift our focus to developing markets, we encounter a different scenario. These regions lack localized health systems and data infrastructure, making it challenging to access and verify information. Furthermore, developing markets exhibit higher instances of fraud. 

In most cases, the above described fraud risks – both in the form of non-disclosure on an applicant’s health declaration form by agents or the customer themselves, as well as plain syndicate fraud – leads to more inconvenient underwriting practices such as lower non-medical limits. Across some developing markets in Asia, non-medical limits are so low that a majority of applicants for certain product lines must undergo medical exams – often including blood samples and trips to diagnostics centers. This severely impacts the ease of doing business and with it leading to higher levels of dropout. This adversely impacts an insurer's sales prospect as well as places more hurdles to enable customers to buy protection.

In response, insurers are looking to innovative tech solutions to allow for alternative, more convenient ways of underwriting risk.

In conclusion, technology is key in its augmentation of underwriting. As a factor to add additional layers of information to current processes in developed markets and as a way to streamline more inefficient processes across developing markets with high levels of fraud.

Do you think Asian markets are in a competitive position in terms of continuous underwriting?

Continuous underwriting is a concept that, despite being often discussed in conferences and insurtech forums, I've rarely seen effectively implemented. While there have been presentations and discussions, the reality is quite different. 

In the broader Asian market, the adoption of continuous underwriting has been limited, and I haven't witnessed any notable instances, except perhaps for token efforts like offering a minor discount for a specific level of activity, which I wouldn't categorize as true continuous underwriting.

New Techs Wave

Insurers could consider a vast amount of data sources for a new underwriting process (health data, medical records, fitness protocols, pet ownership, behavioral indicators, etc.). In your opinion, which are the most confident data sources for accurate underwriting?

The selection of confident data sources depends on the specific goals and challenges one aims to address. Traditional underwriting still and will for a long time to come play a decisive role in underwriting. Technology, specifically big data analytics, can be used to augment areas where traditional questionnaires can lack, and other forms of underwriting are costly both monetarily and from a  time perspective – fraud is a good example here. Questionnaires are not a good indicator of fraud and medical exams are an inefficient way of validating disclosures made in an application form.

In terms of data sources used to run the various big data models, the effectiveness varies depending on the country. In developed markets like the United States, access to reliable electronic health systems and medical records provides accurate information for risk assessment.

Conversely, in developing markets such as Indonesia, and India, where localized health systems and data infrastructure are lacking (although building up, specifically in India), relying solely on medical records becomes challenging. In these regions, data sources like fitness data as well as location data become invaluable. Qumata places particular emphasis on location data as it provides insights into activity levels, offering a pragmatic alternative to wearable data, which may be limited in availability in developing markets as well as offering a vast amount of insight to detect fraud. It is important to state of course that the applicant needs to provide consent for this data to be analyzed.

Wearable data, though useful, has its limitations, as certain condition groups and other elements crucial to the underwriting process cannot be accurately predicted. However, for certain areas such as cardiovascular health, wearable data can provide valuable insights to augment current underwriting mechanisms.

We know that regulation is a key stakeholder when we consider using personal data such as health data to create underwriting decisions. Is this an important element to favor a more conservative and risk-averse approach in the life insurance industry? And what measures are there to ensure the secure handling of sensitive information?

Thank you for addressing this aspect of data privacy and regulation. Specifically in the area of data privacy, we haven't encountered significant issues related to regulation, primarily because our approach centers around empowering the customer. 

As the data belongs to the customer, they alone decide whether to share their data – a choice both we and our clients fully respect. This customer data ownership helps to empower applicants and allow for greater trust as customers using a technology solution are aware that they can choose to (or not) provide consent.

While data sharing is primarily addressed through customer choice, regulation does play a role in aspects like data movements. In many markets where we operate, data cannot leave the country due to regulatory restrictions. To address this, we ensure compliance by operating local AWS servers in each jurisdiction. This strategy has proven effective, and the use of local AWS servers hasn't restricted our operations or posed significant challenges.

In summary, our emphasis on customer choice and the local deployment of AWS servers has allowed us to navigate data privacy and regulatory considerations effectively, ensuring a secure and compliant approach to handling sensitive information. Regulatory compliance is key to the success of any tech business, specifically in the area of life & health insurance.

Next Level Underwriting

How does Qumata keep a balance between speeding up the process and ensuring accuracy in risk assessment and underwriting decisions?

Accuracy of underwriting is at the core of any pricing tool. We ensure the overall accuracy of our solutions by focusing our products on specific niches in the underwriting value chain to effectively augment areas traditional underwriting lacks and technology can help – non-disclosure fraud as an example.

Working on such principles of underwriting augmentation allows us to be confident in maintaining strong traditional underwriting principles which are supercharged through the use of technology.

How does Qumata differentiate itself to maintain a strong market position? How does this differentiation contribute to the company's profitability?

In the early years of our company, we made the mistake of getting caught up in the industry hype, primarily funding various insurance innovation projects. However, we soon realized that insurers often allocate innovation budgets without a clear focus, leading to limited success. Our pivot involved a shift towards a more discerning approach, emphasizing return on investment (ROI) and identifying tangible use cases. Instead of chasing broad, hyped trends like questionnaire reduction, we narrowed our focus to specific, high-value problems within the insurance sector. 

Our current niche revolves around addressing the challenge of reducing medicals, and we've homed in on specific markets and subsegments where this burden is particularly high. This targeted strategy allows us to provide specialized solutions and command higher fees, contributing to our sustained growth. Our success stories are rooted in the effective replacement of medical examinations with technology adept in spotting non-disclosure and other types of fraud within developing markets, a focus that continues to drive our growth.