Khor Hock Seng, group CEO of Great Eastern Holdings, cuts a relaxed figure as he sits down in the insurer’s Prestige Suite @ Voltage, at Great Eastern Building on Pickering Street. The Prestige Suite is quiet, spacious and private, and designed for the high-end market — the same way private banks help their clients feel privileged versus those still queuing for their turn at the teller.
Most would think of the insurance industry as a boring one: Just sell the plans and collect premiums for the next 20 years or so for bread and butter products. Yet, in recent years, the industry is actively transforming to offer more competitive and relevant products and services.
In a wide-ranging interview with The Edge Singapore covering topics from general insurance to Great Eastern’s most profitable products, Khor, who took on this role in 2015, explains how the Prestige Suite can help Great Eastern capture a bigger share of the affluent market.
“About two years ago, we started Prestige Partners as a brand to position ourselves within the affluent market,” Khor reveals. “We started with 140 representatives we believe who have the qualifications and criteria to support high net worth individuals (HNWI),” he continues. Great Eastern now has 500 Prestige Partners reps.
The reps use the Prestige Client Office to meet their clients. “Those customers classified as Prestige or affluent customers can make use of this office to get their things done in a seamless manner because they require a different kind of service,” Khor explains.
“Our Prestige partners and Prestige Client Office is structured to assist clients in terms of tax, legal structures, trust structures and so on. If our rep comes and says this client wants help to structure something, we can assist to coordinate these services through the rep and our partners like our legal, tax and trust partners,” Khor elaborates. “The affluent market is big and more people are looking at insurance as part and parcel of their portfolio.”
Prestige Life offerings include monikers such as Prestige Life Gold, Prestige Life Harvest and Prestige PAcare, which includes coverage of up to $3.5 million for accidents. There is also the Prestige Portfolio, which can be tailor-made, as well as some single premium products.
“Over the past one year, we have created a Prestige Portfolio and we are shifting to that. One of our key products is Prestige Life Rewards,” Khor says. Prestige Life Rewards is a single-premium product that provides a monthly payout starting from the second anniversary of the policy. Prestige products are sold through both Great Eastern’s agency force and its bancassurance partners. In Singapore, that is done largely through Oversea-Chinese Banking Corp (OCBC) which owns almost 88% of listed Great Eastern.
Great Eastern’s Prestige Products are participating products. That means the policyholders participate or share in the profits of the insurance company’s par funds. This differentiates them from the other affluent product, Universal Life, which does not have a participating structure.
In addition to Great Eastern’s own reps, Prestige Products are marketed through OCBC’s premier banking offices to the bank’s private clients and also at Bank of Singapore.
In FY2020 ended December 2020, Great Eastern contributed $798 million out of OCBC’s total earnings of nearly $3.59 billion. In FY2019, the corresponding numbers were $832 million out of $4.87 billion respectively.
In 1QFY2021, Great Eastern’s net profit surged several times to $437.6 million from the same period a year ago because of the nature of how its assets and liabilities are matched. Other insurers such as Manulife Financial Corporation (see sidebar on InsurTech) experienced a 40% collapse in net profits which its CEO, Roy Gori, attributes to “noise”.
In addition to its Prestige Suite initiative, in 2018, Great Eastern also acquired a general insurer in Indonesia. The move expands Great Eastern’s product offerings and geography. Eventually, over the next three to five years, Indonesia’s life insurance business is expected to contribute 10% to Great Eastern’s new business embedded value (NBEV) while general insurance should contribute 10% to the group’s topline.
“As a group, we have identified general insurance as a core business line and over the last three to four years, we’ve been putting a lot of emphasis on growing general insurance because our life [insurance] is more dominant,” Khor says. The Indonesian general insurance company has been rebranded Great Eastern General Insurance.
The focus is to grow the retail general insurance business through synergies with partners and different channels. In addition, the products — like the life products — will continue to be distributed through Great Eastern’s bancassurance and agency channels.
The general insurance business includes both retail and commercial lines. Retail products are sold to individuals and include lifestyle protection such as travel, motor, home and maid insurance. For commercial general insurance, Great Eastern offers a wide variety of products to protect the business assets and employees of companies such as fire, project-related insurances (including contractors’ all risks and construction bonds), workmen compensation, business travel packages and many others.
“In Malaysia and Singapore, we have a huge agency base and we have a good breakthrough in getting this base to market our general insurance personal lines business,” Khor says.
For group insurance, Great Eastern’s products will continue to be offered to large companies and SMEs comprising group inpatient and outpatient medical, group specialist and GP schemes and group term life as employee benefits to the companies as a key strategic staff retention tool. These products can be customised to the individual needs of the corporates or they can be purchased on a pre-packaged basis. Great Eastern is one of the market leaders of group insurance schemes in Singapore and Malaysia, according to a Great Eastern spokeswoman.
Digitalisation through ‘Digital Affinity’
The second thrust to market both general insurance and life is with its “Digital Affinity” channel. In June 2020, Great Eastern invested US$70 million ($95 million) in Axiata Digital’s financial services business, via a newly-created holding company called Boost Holdings in which the insurer will own a 21.875% stake.
Axiata Digital is part of the digital ecosystem of Axiata Group, a major shareholder of Celcom in Malaysia that has nine million customers. The tie-up with Axiata has extended to Indonesia, where XL Axiata, a subsidiary of the Malaysian telco, has a subscriber base of around 40 million. “A lot is prepaid but it’s still a base,” Khor points out.
Great Eastern’s partnership with Axiata created Boost, an e-wallet and lifestyle app with over 7.5 million users and 170,000 merchant touchpoints in Malaysia and 544,000 merchant touchpoints in Indonesia. While the partnership is meant for both life and general, in the early part of the journey, it will be used for general insurance.
Here in Singapore, Great Eastern has several industry partnerships that are making use of new digital channels. One such joint development is with Singapore Telecommunications (Singtel) to offer general insurance products ranging from home, motor and travel. It also has a partnership with Active SG, a programme by the government to promote sports, to offer accident coverage. “Our Digital Affinity channel is on top of our usual distribution like brokers and our life agency which is a unique point for us,” Khor says.
As part of its general insurance and digitalisation initiatives, Great Eastern implemented a new core system in Singapore in May this year. In Malaysia, the new core system comes on stream at the end of October. “This will allow us to bring the latest type of products to the market. With Digital Affinity, we will be very innovative and contextualised. It would also be bite-sized and flexible,” Khor says.
Profitability of life versus general
There are different matrices through which insurers view general insurance versus life business. First, profit for general insurance is evaluated yearly and not on future profit, and renewal cycles are shorter. In terms of size, general insurance is smaller as a business compared to life insurance at Great Eastern.
“General insurance, with the right distribution and capabilities to manage products well, can be reasonably profitable,” Khor says.
On the other hand, life requires more capital, so from an internal rate of return (IRR) basis, general insurance may be better. For general insurance, profit is evaluated yearly and not on future profit as life insurance is.
Insurance companies are known to hold a lot more capital than regulatory requirements. While Great Eastern does not reveal its risk-based capital ratios, it is believed to be well above 200%. United Overseas Insurance (UOI), which is largely a provider of general insurance, announced a capital adequacy ratio of 449% as at Dec 31, 2020. The regulatory minimum is 125%.
In terms of absolute profit, though, life is higher than general insurance. And, typically for life insurers, protection solutions provide the largest margins. For other products such as savings products, there are many other financial institutions such as banks that offer similar products.
At Great Eastern, demand for life insurance is still mainly for participating protection plans (about 40%), with lower interest in investment-linked product (ILP) plans (20–30%) as customers seem to prefer policies with guaranteed returns. In Malaysia, ILP plans are a lot more popular.
Market watchers often wonder if Great Eastern’s parent, OCBC, has renewed plans to take the insurer private. OCBC last offered to buy out minority shareholders in 2006 before the Global Financial Crisis. Meantime, several insurance companies have restructured (see sidebar on InsurTech).
Prudential, which has a secondary listing on the Singapore Exchange, has had a presence in Singapore since 1931. The British insurer has restructured its business so that the locally-listed entity is focused on Asia and Africa, with Asia being its largest source of earnings.
In 2019, it demerged its British and European business into M&G. In January, the Prudential board announced its intention to separate Jackson National Life Insurance Co, its US business, through a demerger this year. According to Mike Wells, group chief executive of Prudential, Jackson’s separation will complete Prudential’s transformation from a diversified, global group into a focused business exclusively targeting the fast-growing health, protection and savings opportunities in Asia and Africa.
To enhance financial flexibility and de-lever the balance sheet, Prudential is considering raising new equity of around US$2.5–3 billion following the completion of the Jackson demerger, said Wells in Prudential’s 2020 annual report.
“Our preferred route is a fully marketed global offering to institutional investors concurrent with a public offering in Hong Kong to retail investors. As an Asia-focused company, the group believes there are clear benefits from increasing both its Asian shareholder base and the liquidity of its shares in Hong Kong. The allocation of any offering will take into account several criteria including the interests of existing shareholders,” Wells added.
Nic Nicandrou, chief executive, Prudential Corporation Asia, notes that Prudential is transitioning to focus exclusively on Asia and Africa. “We see a huge opportunity to make healthcare and financial security more accessible to more people in these continents, especially in growth markets such as China and India,” he says.
While Prudential — like Great Eastern — had started its digitalisation journey a few years ago, the pace was accelerated by the Covid-19 pandemic. During Singapore’s “circuit breaker” lockdown last year, Prudential rolled out PRURemote Advice, a video-conferencing and e-signature tool to enable advisery and policy sales to be done online, without its financial consultants (FCs) and customers having to meet physically. In December 2020, seven out of 10 customer cases were closed via PRURemote, and the trend has continued into this year.
As of December 2020, Prudential customers enjoy instant underwriting for 28 products. This means customers know if their application is successful at the point of sale.
On the servicing front, customers can access their policy details via PRUaccess, an online portal for policyholders. According to a Prudential spokeswoman, average logins have increased by nearly 80% in 2020, compared to 2019 and online transactions have increased by 35% in 2020 compared to 2019.
In Singapore, Pulse — a digital health and wellness platform that could change the way Prudential interacts with its customers — was launched at the start of the circuit breaker in April 2020. Pulse enables people to have convenient and safe access to healthcare services during a time of heightened social distancing. “Today, the app comes with health features such as health risk assessment, symptom checker and telemedicine consultation. It has been downloaded more than 260,000 times,” Nicandrou says.
Thus far, Pulse is available in 17 markets in Asia and Africa and has been downloaded 26 million times across these different markets. “Pulse by Prudential will be key to our future growth. With Pulse, we want to make it easier for our customers to access our offerings and help them achieve better health and financial outcomes so they can live well for longer and get the most out of life,” Nicandrou indicates.
Khor is unfazed by global insurers muscling in on Great Eastern’s territory. He believes that Great Eastern’s strategy in Malaysia gives it a foothold among its young and growing population. “In Malaysia, we have the largest customer base, plus we have been the dominant No 1 for many years,” Khor says.
In the last 10–12 years, though, Great Eastern has found a new growth engine in Malaysia, by tapping takaful or Islamic insurance. “Though it’s a lower income group, we are the sole insurer for the B40. We cover all the 5.5 million people under this category,” Khor says, referring to the “Bottom 40%” income classification used in Malaysia.
According to him, with greater digitalisation, costs can be lowered. This means Great Eastern can provide low, affordable premiums for this group while maintaining a certain level of profitability. “That has elevated our brand recognition among the takaful industry tremendously, making insurance accessible,” Khor says.
Different programmes to reach other Malaysians also are underway, including insurance for student loans. Under this demographic, Great Eastern could reap customers who are likely to move up the social ladder as they are likely to be white-collar employees given their tertiary education.
Digitalisation and reach
Khor stresses that digitalisation and the Digital Affinity strategy has to include customer experience and engagement. “Our key differentiation is we have the largest customer base in both Singapore and Malaysia compared to our competitors,” he says. “We can give a better journey for our customers and engage our customers better which is good for the medium and long term.”
In fact, Khor is getting the whole organisation to be customer-centric, transforming the company from the inside out as he puts it. “We just need to keep adapting. While innovation is important, we can’t predict the next trend. We must get our organisation to change and adapt in a very fast manner.”
Will it be a tall order for the 113-year-old company? Perhaps, but it did embrace digitalisation as Covid-19 hit its markets. As Khor leaves the comfort of the Prestige Suite, the Prestige Suite itself is a sign of adapting to the new normal of bespoke services required of nouveau riche millennials and Gen Z-ers.
This article was first published in The Edge Singapore on 22 July 2021.
Reproduced with permission of The Edge Publishing Pte Ltd
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