DSA webinar transcript: How financial inclusion can promote healthcare inclusion

Insurtech companies can keep the price of premiums as low as 50 cents in an attempt to woo the emerging middle-class market in Asia, a section that has traditionally been underbanked and lacked access to insurance and healthcare.

Speaking at an online panel discussion ‘From Financial Inclusion to Healthcare Inclusion’, Milvik Bima founder and CEO Gustaf Agartson said, “We can use data to propose relevant products to consumers and make insurance affordable. Thanks to mobile wallets, we can sell policies to people who haven’t had access to them before.” Even a 50 cent policy could result in a profitable customer. Agartson added, “That is enabled by our scale. By adjusting the level of coverage, we can get the premium down.”

Another disruptive strategy being deployed by companies serving the emerging middle-class according to Vertex Ventures partner Carmen Yuen was an asset-light business model. She said, “Data is important, but for incumbents, the bulk of premium goes towards distribution. Digital insurers like Bima and Sunday do their own underwriting. They have streamlined the need for big offices and lots of people, which helps lower expenses. The balance is passed on to consumers as cost savings.”

Besides insurance, telemedicine solutions, particularly for countries that did not traditionally have large reserves of doctors or medical facilities was the need of the hour. Asked if foreign medical professionals could also be brought in to address the shortfall in a market like Indonesia, MDI Ventures principal Aditya Hadiputra said, “We have been actively exploring that option, if regulations permit. But such consultations are in a bit of a grey area, at the moment. How do we know for sure if what the doctors are prescribing is something that we are supposed to consume? These are the areas where we have to tread carefully.”

Golden Gate Ventures partner Michael Lints recommended that the scope of healthcare shift past the current dominant trends of telemedicine and digital health. He said, “I would be extremely interested to see more developments within hospitals – elderly care, disease prevention, or data analytics. It is where we have a big gap, and a role to play in the region.”

The webinar was sponsored by Milvik Bima, and the session, moderated by DealStreetAsia’s Andi Haswidi.

Here is a video link to the session and a transcript edited for brevity and clarity.

How have the last 18 to 20 months shaped Milvik Bima?

Gustaf Agartson (GA): In just the markets where we operate, there are millions who don’t have access to healthcare. Over the past 18 months, people are more aware and concerned about health, compared to before. There’s been a mindset shift among consumers which resulted in very strong growth. Our direct-to-consumer offering saw around 180% growth over the last year.

Some of our existing customer base had access to telemedicine for a while, but through the pandemic, the utilisation rate has doubled. We have also seen increased support from governments. They now realise the importance of telemedicine and its criticality during the pandemic.

In terms of regulation, has it become easier to penetrate markets in Southeast Asia?

GA: It’s much easier to collaborate with governments: we’re doing that across several markets including Indonesia and Malaysia. Governments realise that it’s going to be important to regulate telemedicine. They are also aware that they can’t just create a plan that will play out over the next couple of years — we need something right away. That sense of urgency has accelerated things. Fundamentally governments are on the same page as us. We all want financial inclusion and access to high-quality healthcare.

From an investor perspective, how have the past 18 to 20 months changed your thesis?

Carmen Yuen (CY): For us, healthcare straddles the enterprise solution space, consumer internet and fintech. COVID-19 accelerated the process of disruption. In 2020 we invested in 3 companies, not because of the pandemic, but after taking time to evaluate the space. Speedoc is based in Singapore and the other two are from India. IVF Access, which is for in-vitro fertilisation for couples, and Ayu Health, a frontend customer experience company in India.

We were looking at areas like telemedicine, consultation, health and fitness apps and the front end of customer relationship management.

When reviewing potential investments in fintech, how does access to healthcare factor into your assessment?

CY: Healthcare and fintech overlap. Healthcare is global, because all of us are susceptible to similar illnesses, yet it is also local, given the regulations. Doctors from one country cannot practice in other countries unless they possess the necessary certification. As a result, much as we would like it to be global there are local contexts. For instance, when it comes to payments, in Singapore we are quite comfortable with credit cards. But in the region, where cards are less entrenched, digital wallets are very prevalent. Or you have a consult now, pay later model.

What are some of the innovations that are working in Indonesia, when it comes to opening more access to fintech and healthcare?

Aditya Hadiputra (AH): On the healthcare side, two of the big telemedicine companies continue to grow. But we are not investing in just those two, but in up-and-coming companies like Prixa, for example. As a region and a country, we suffer from problems including a low number of doctors and beds. And the lower quality of care when compared to the US or China. Telemedicine helps bridge that gap.

Insurance penetration is still very low – there are only 6 million policyholders. Even if they opt to take government insurance it has a lot of issues. It continues to pile up debts which are likely to lead to more problems in the future. Innovations that bridge this gap are essentially healthtech and include — but are not limited to — insurtech companies. We are building a ‘pay later’ model with companies in our portfolio like Kredivo who are working with our sister company AdMedika as a TPA. Even if people are covered by insurance, they still have to pay the excess claims. In a mature country like the US, you can eventually settle the bill later. But in Indonesia, you are not allowed to leave the hospital if you haven’t settled.

Can foreign medical professionals also help make up for the shortfall by coming onboard via telemedicine?

AH: We have been actively exploring that option if regulations permit. AdMedika is looking to possibly onboard overseas doctors to bridge this gap — maybe starting as a second opinion option to telemedicine services. But such consultations are in a bit of a grey area, at the moment. How do we know for sure if what the doctors are prescribing is something that we are supposed to consume? These are the areas where we have to tread carefully.

Last year, $283 million of fresh capital was raised by homegrown startups in healthtech. In the first 6 months alone this year, roughly about $400 million was invested in healthtech. As an investor can you give us some context to better understand this growth in funding?

Michael Lints (ML): We did a similar analysis on fintech. We have never seen an increase in funding like we did in the first half of this year. The bigger companies have received the bulk of capital. Over the past few months, startups in the wellness space have picked up more, coming from Southeast Asia. We’ve seen this big boom in the US, and partially in Europe as well when it comes to nutrition, sports tech and overall wellness. We had an internal discussion on whether the pricing makes sense for emerging markets like Indonesia — a monthly subscription on a nutrition plan could cost between $20 and $50 a month. But for me, there’s also a disparity between the upper end which is wellness for people who are affluent, versus another demographic with less disposable income.

Earned wage access is not new, but its digitalisation is. I see that helping to push healthcare to this demographic. In Vietnam, employees opt for getting their salary earlier and this helps their living environment and has a social impact. It will continue due to digitalisation in Indonesia as well.

The second aspect is that we tend to look at healthcare as telemedicine and digital health. I would be extremely interested to see more developments within hospitals: elderly care, disease prevention, or data analytics. It is where we have a big gap, and a role to play in the region.

What are some of the lessons learned from other markets like Ghana — where Milvik Bima started — that you were able to apply here?

GA: We have historically integrated with telcos and now it is more with mobile wallet providers. The mobile wallet trend began in Kenya with Safaricom. We have seen this spread across all markets. Last year the number of active wallets was near 70% in Indonesia.

As people trust wallets to a greater degree, they keep their salary in them. That is a key enabler for Bima. By integrating with wallets, we create a frictionless way for people to pay. Our products are subscription-based. We have a platform that started with life insurance and moved into health insurance, telemedicine and other services. You need technology to integrate with wallets, but also to structure payments — break it down into installments, so that you can collect successfully.

Thanks to our start in Africa, we can leverage those learnings as we expand to South and Southeast Asia.

Can you elaborate on the role of agents in the process?

GA: The whole idea behind Bima was to leverage mobile technology — remove all paperwork. But a majority of our consumers are buying insurance and accessing healthcare for the first time. They value speaking to someone and having their questions answered. In order to scale, we digitalise processes, on one hand, allowing consumers to subscribe by themselves; but also offer them the option to speak to one of our sales associates. We want to serve both categories.

Are we overestimating, the role of e-payments in Southeast Asia considering the fact that most people still receive their earnings in cash?

CY: Our region is pretty cash-heavy. But with COVID, things have changed. They don’t have a choice. Previously, we invested in a company called Payfazz: mobile agents who convert cash into digital points for the wallets. Going forward e-commerce and microcredits will dominate.

In China, digital payment is second nature. I see this happening in Southeast Asia. Neobanks will come up and some of them will be wallet players that specialise their offering for dedicated groups of users. This will become a parallel universe to the days when you had separate credit cards for women, platinum cards, etc. Wallets will become dedicated virtual cards. And users will be able to move funds between them, to take advantage of promotions. Even when it comes to teleconsultation or paying a real doctor, or for insurance, it will all happen primarily over digital wallets.

Michael, how do you see Southeast Asia’s trajectory for payments? Will it follow India or China?

ML: It might be weird saying this as a VC, but we shouldn’t underestimate the power of cash. For anyone who has been to Europe, in Germany for instance, unbelievably a lot of payments are still in cash. It’s similar in the US. We are backing a large number of payments or digital wallet companies. The other element needed is support from large institutions: whether governments, real estate owners that accept rent via digital wallet; hospitals, or utility companies. It takes more than just amazing founders to support digital payments. If I’m unable to integrate these payments into my daily life, it will never take off.

In Indonesia, the central bank is considering digital currencies. Knowing that cash is still prevalent and people are comfortable using it, what sort of a timeframe are we looking at for the digital rupiah?

AH: I see it happening in a 5-10 year timeframe. But what we have seen since the beginning of the pandemic is quite unique. There has been a massive surge of crypto adoption. Indonesia’s wealth management space is taking off during the pandemic. People stay home and realise ‘I can get extra assets with the disposable income that I previously spent’. And so, they invest and cause new trends like tech stocks.

On the crypto side, I read a couple of days ago that Indonesia has more crypto investors than retail investors! This massive improvement took just two years. And so, if the government intends to push something like digital currency, it might actually happen faster than five years. If awareness keeps growing, it is really disruptive to the whole financial ecosystem. A lot of transactions that happen on digital currencies, have little to no fees. The whole idea of digital currency is to make things more efficient, with transactions happening 24/7.

Digitalisation has allowed for greater access to data. Insurance companies can manage risk better and perhaps adopt dynamically adjusted premiums. Has technology made premiums more affordable? How disruptive has insurtech been compared to traditional players?

GA: Collecting data from consumers to make our product offering more relevant is a massive opportunity, but we must be careful about how we use it. We can use data to propose relevant products to consumers and make insurance affordable. And thanks to mobile wallets, we can sell policies to people who haven’t had access to them before, charging a monthly fee of maybe $5 or $20 and above. For some people, that’s not affordable, but we’re not excluding them. We have policies that cost around 50 cents per month. Even these customers can be profitable. That is enabled by our scale. By adjusting the level of coverage, we can get the premium down.

CY: Data is important, but for the incumbents, the bulk of the premium goes towards distribution. It has to serve agents, the claims departments and the actuaries. Digital insurers like Bima and Sunday do their own underwriting. They have streamlined the need for big offices and lots of people. It actually helps them lower expenses. They are thus in a better position to reprice and tweak product offerings in a much shorter time even as they maintain margins.

In that whole process, they can cover a certain portion of expenses, and the balance is passed on to consumers as cost savings. That translates to a lower premium.

ML: One interesting debate around data is how do you prevent discrimination based on age, gender or health conditions? There’s a lot of good coming from data, but the inherent challenge is how do you ensure that it remains fair?

In Southeast Asia, we have major data ecosystems created by super platforms. They invest in companies that can be a part of their own ecosystem. How does such a landscape influence the strategies of smaller independent companies?

AH: We are uniquely a region with multiple super apps that coexist. The giants like GoTo and Grab continue to open up their ecosystem to smaller players to fill in gaps. It’s more efficient to partner with smaller guys who focus on very specific problems and solutions. It continues to be an opportunity for VCs to finance these companies, so they can emerge and capture larger value, while trying to solve a specific problem.

ML: It’s called an ecosystem for a reason. There are different components that actually make it work. Over the past years, I’ve seen many spinouts emerge from these big super apps: whether it’s a specific niche or early employees who decide to venture out on their own. It actually helps continue the ecosystem. It’s put Southeast Asia on the map. Without these large companies showcasing what is possible, it would be very difficult to build the next wave.

How do you choose between ecosystems and the value of staying independent?

GA: We definitely see big tech as an opportunity. If you want arrangements such as co-branded products or data sharing, you probably will have to pick one. But we see a massive opportunity in staying independent, but benefiting from the ecosystem. We want to establish Bima as an independent brand that owns its customer data and then leverages all payment platforms that are available.

CY: Even the super apps came out in the face of competing giants during their time, and yet were able to find a niche for themselves, and build an ecosystem. While they seem formidable, they cannot be laser-focused on any one thing. They are typically very good in a couple of areas and merely okay with the rest.

I use Grab for travel and food delivery. I won’t use it for shopping or insurance. There can be companies that come up behind them, for sure. Alibaba was dominant and yet Pinduoduo emerged, bringing a whole new wave of social commerce. Similarly, startups do not necessarily fear incumbents. We just have to look hard at them and be better. For all you know, startups could be the ones starting a new trend.

Now for a couple of audience questions: Why is the Philippines being ignored when it comes to healthtech investments?

ML: There’s a lot of potential for the Philippines, but for investors, deal flow is crucial. The number of deals determine how active the ecosystem is. We feel the Philippines is re-emerging as a startup ecosystem. We are seeing signs: more companies starting, many of them coming to Singapore to fundraise or looking for collaborations. It’s a matter of timing. We will see a wave of healthcare companies from the Philippines. Believe me, all of us are looking at the market very closely.

AH: We actually have one company from the Philippines in our portfolio and it happens to be in healthcare — mClinica. It is from the first batch of MDI’s investments in 2016. But we have seen it grown in Indonesia, much faster than in the Philippines. There are multiple factors, but if we go purely by numbers, Indonesia is growing because of its population. But we see some unique companies emerging out of the Philippines.

GA: The Philippines is one of our smaller markets, but we have established the right, local partnerships that we need. We are quite bullish and think that there will be a lot of opportunities going forward. Even if we haven’t seen maybe the same momentum that we have from Indonesia over the past couple of years.

What is the next area of healthcare that VCs are betting on?

CY: It is about who owns your data. Medical reports are currently owned by institutions that you consult with: clinics or hospitals. How can we shift that in a way in which you own the data? When do we start? Is it at birth? Or do we start midway and build backwards? We haven’t seen any companies doing this, but at the end of the day, we believe that we ought to own our data. When we see a doctor, we can show them a diagnosis without seeking consent from hospitals. Even insurance companies only see whatever they bought from them, but they still do not have a 360 view of me. Only I will have that insight and view of myself.