Carmen YUEN posted on 10 Jun 2020
Vertex Ventures Southeast Asia and India started our journey with Sunday Insurance (“Sunday”) in the second half of 2018. Over the last eight quarters, we have witnessed the tenacity of the team, their drive and agility to adapt to an ever-changing and intense environment.
Despite the inconveniences and constraints brought about by COVID-19, Sunday continues to grow her business traction but not at all cost. We are so proud of Cindy Kua, Co-founder and CEO of Sunday, and her leadership team in achieving more than three-fold topline growth since our investment, and improving the key ratios involved in the insurance business.
Sunday — a gem that is unique to itself
As a team, we have been following insurtech opportunities in the US and China, and were seeking for similar propositions in Southeast Asia. The insurance business (digital or otherwise) comprises at least three components: (i) underwriting, (ii) distribution and (iii) claims processing.
Many startups we spoke to did not have access to insurance licenses, which meant they cannot underwrite insurance policies. When I met Cindy, I knew in a heartbeat that this insurtech company is different — Sunday owns the entire insurance value chain. It is in an enviable position as it can underwrite, create and price insurance products. It is also responsible for optimising and managing the cost associated with underwriting, distributing and administering claims.
Through working with Sunday, I have learnt to appreciate a new set of insurance financial ratios, which may at first glance seem foreign and intimidating, but in reality, are much easier to understand than we think.
Unlike other businesses, insurance has its unique sets of ratios that help us understand if the business is on a strong growth trajectory.
The following is my Ratios 101 cheat sheet, which draws a parallel between the Profit and Loss (“P&L”) statement of an insurance company (at a simplistic level) to that of a generic business (e.g. online learning).
Hopefully, this helps to bridge the unfamiliarity one may have when he/she first reads financial reports of insurance companies. From the P&L statement, we will then delve into the insurance ratios.
The next segment is somewhat similar to “Cost of Goods Sold”.
Insurance companies have to bear operational or management expenses. Similar expenses are borne by many existing businesses.
Now we come to the insurance financial ratios, what they mean and more importantly, how Sunday manages them.
To achieve a desirable Loss Ratio as a new entrant to the insurance landscape, Sunday has to be more aggressive in parking Unearned Premium to the Claim Reserve, since its revenue growth is higher than market average.
Leveraging on the analysis, Sunday continues to optimize for risk while instilling desirable behavior in their policyholders to limit frequency/severity of claims. Sunday knows that the Claim Reserve has good potential to be translated to Profit at the end of the policy period, if there are less claims.
To manage its Expense Ratio, Sunday provides a mostly digitized experience for policyholders, from seeking new products, completing renewals to claims processing. In the months ahead, it will work towards optimizing the other aspects of the insurance journey.
I have observed that the Expense Ratio for Sunday has been trending downwards — meaning, it is heading towards the correct direction of gaining efficiency.
Sunday has been able to comply with the CAR regulations while growing topline. This is possible as a result of the continued recognition of Earned Premium even after paying out claims. In due time, Sunday will raise additional capital as it enlarges its portfolio.
Sunday — gaining traction against the backdrop of COVID-19
Despite the lock down and the inability to meet clients due to the COVID-19 pandemic, Sunday continues to grow its business — in fact, it beat its projected targets for the period ended April 2020, and business traction remains strong.
There are good reasons why Sunday is doing well. It sought to offer a fully digitized platform from the get-go and its management was laser focused on providing an intuitive product experience to its customers. This includes ensuring its claim process was paper-free and well thought through — even in the current situation where there is no one in the office (given COVID-19), a policyholder can still anticipate prompt payout when needed.
Coupled with the front-end experience, Sunday’s team continues to optimize their products for risk, to ensure the pricing of their products is fair but yet does not jeopardize Sunday with high severity nor frequency of claims.
I am thankful that even though Sunday is a relatively new general insurance player in Thailand, it has gained trust from many SMEs who have retained Sunday to provide Employee Benefit programs and enterprise-related insurance coverage. I am confident that as Sunday continues to strengthen its Combined Ratio, it will be ready to serve more enterprises, and create new products that resonate with these enterprises.
Source: Carmen Yuen’s Medium
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