The aftermath of Covid-19
COVID-19's immediate impact is clear: We are all bracing for a wave of widespread economic and social pain. Many of us are either living in, or are separated from loved ones living in countries where healthcare systems are currently overwhelmed and inadequately provisioned. Economies will be hit by spiking unemployment, business and personal bankruptcies and deteriorating bank balance sheets.
Yuval Noah Harari pointed out in The Financial Times that we are also living through a time of historic change. The unintended and second-order consequences of Covid-19 will be with us for a long time to come. Marketers have long known that when a life event shakes you out of your day-to-day routine, old habits die and new ones are formed - this is why brands make so much effort targeting college graduates and new mothers.
When these shocks happen to societies as a whole, entire cultures change - measures taken during emergencies tend to stick around and become a new way of life. During World War II, women entered the workforce when men went off to war, and they never left; 9/11 changed the way we think about airport security and plane travel forever.
Here, we at Dymon Asia Ventures would like to spend a few minutes looking beyond the current crisis to its aftermath, and how it may alter the way of life in the sectors we invest in: financial services, insurance and healthcare. As always, when speculating about the future, some predictions will be right, and many will be off the mark. In 12 or 18 months, as the crisis unwinds, we will revisit this article and see how these have played out.
Financial services
1. Real-time digital payments will become the norm
This should come as no surprise, as South-east Asia has been headed this way for quite some time. But as social distancing forces transactions to move online, this may be the catalyst that finally drives widespread, ubiquitous adoption of real-time digital payments. Oliver Wyman reports that China's financial-services sector experienced a 100 to 900 per cent traffic spike in key digital channels during the outbreak. Central banks around the region are doing what they can to facilitate the transition: the Philippine central bank has asked all local banks to waive interbank fees on Instapay, removing a key factor of resistance to merchant and customer adoption. This will be a boon for financial-inclusion initiatives.
As the health crisis subsides and life returns to "normal", lingering social-distancing habits will nudge consumers towards contactless digital payments in point-of-sale (POS) transactions over contact-based ones. This will accelerate adoption of near-field communication payment methods - such as contactless cards and phone tapping - and QR code-based POS payments over card-swiping, signature and PIN code-based payment methods.
2. The parts of the banking industry that have resisted digitisation will move online
Some parts of the banking industry, like retail payments and retail banking, have made significant progress on digitisation. Others remain bastions of white-glove, analogue service - like private banking, which continues to rely on face-to-face meetings with relationship managers (RMs) and monthly, difficult-to-interpret PDF statements to engage with customers. But with markets in turmoil, and both clients and RMs homebound, this may be the impetus for high-net-worth individuals to start demanding and adopting better online services. This is especially so as Singapore and Hong Kong have typically served as the twin wealth-management capitals to all of South-east Asia's moneyed classes, but international travel remains closed.
3. Enabling technologies
Following on closely from large-scale digitisation of financial transactions will be the enabling technologies: eKYC (know your customer), ways to link digital identities to real identities, ways to electronically sign contracts and offer consent, embedded in chat and video-conferencing services. Linking all of the above will be open API (application programming interface) architecture, fraud protection and cyber security protection. We have already seen indications of how important this is. As countries around the region remain in lockdown, banks that have flexible online architecture remain open for business, whereas others that are digitally unprepared are completely freezing account openings and product applications.
An additional note here about cyber security: our friends and founders in the cyber security world have started seeing cyber attacks escalate as malicious actors take advantage of distributed workforces and the general chaos and confusion that follow. Now is the time to exercise extra caution. Our portfolio company ReaQta, for instance, is offering four months of cyber security coverage for free to healthcare organisations and companies affected by lockdown measures.
Insurance
1. Gig economy insurance takes off
Gig-economy and informal workers are seeing their incomes crater. Few of them have access to health insurance in this time of crisis. Insurtechs have been offering products like income-protection insurance, personal-loan insurance and health insurance tailored to gig-economy workers for some time, but they may have come second to more immediate needs in normal times. Covid-19 is bringing home their importance now.
2. Demand for commercial specialty insurance will spike
Supply chains are breaking because factories are closed for business; ransomware attacks are increasing because hackers know that workers are now logging on beyond company firewalls. These are risks that businesses can no longer ignore. The demand for supply chain and cyber insurance coverage will increase dramatically as companies seek to protect themselves. This crisis will catalyse the budding epidemic insurance sector, which will continue to grow well into the recovery with fresh memories of the Covid-19 pandemic.
As of early March 2020, Marsh had a six months of demand backlog for epidemic insurance coverage. Expect to see more analytics firms tackling pricing of pandemic insurance and reinsurance risks as this space matures (for example, Metabiota). Similarly, business-interruption insurance and key-man insurance will receive increased attention from business post-crisis.
As a sidenote - this does not fall within the bucket of commercial insurance - demand for life insurance and death-planning services will also increase, as society as a whole engages in a collective confrontation with mortality.
3. Insurance companies change the way they price risk with new sources of data
Covid-19 and its second-order effects are causing all sorts of previously-unrelated risks to become correlated. You can find analysis on what insurance policies are immediately impacted by the virus here and here. But the effects spiral outward: As the virus uses up more and more medical resources and non-Covid-19 patients lose access to healthcare, this could have much longer-term impact on patient health and insurance loss ratios. This may be the catalyst that pushes insurance companies over the edge to greater reliance on real-time data and to adopt new pricing models. This is especially so, given that the virus will encourage wider adoption of telemedicine, electronic health records, digital therapeutics and real-time health tracking.
Healthcare
1. Telemedicine becomes the norm
This one is fairly obvious, as the fear of the virus encourages people to stay away from potential infection hotspots. At the time of writing, one of the few publicly-traded telemedicine players, Teladoc, is trading up more than 70 per cent compared to the start of the year. Many of the patients who try telemedicine for the first time during this crisis may find that they like its convenience and ease of access. Insurers anxious about Covid-19's impact on loss ratios and eager to control costs may nudge more customers towards tele-doctors as the first port of call when they fall ill.
Secondary effects from the rise of telemedicine will include accelerated adoption of electronic health records and infrastructure around e-pharmacy - from solutions for providing optimal transport conditions like temperature and humidity to new regulations around the prescription and distribution of controlled drugs.
2. Subscriptions to private concierge healthcare programmes for the wealthy will spike, while governments may be galvanised to build up healthcare infrastructure
This is the healthcare version of supermarket hoarding. In the US, where tests kits are in short supply, the wealthy are leaning on memberships in concierge healthcare programmes to get priority Covid-19 testing. As public healthcare systems strain to meet the need, and trust in governments' abilities to provide adequate care during the crisis erodes around the globe, those who can afford it will ensure that they have other options when the next crisis hits. This will grow more acute as people with non-Covid-19 related conditions find themselves crowded out of the healthcare system in the coming months.
In South-east Asia, the upper-middle class and the wealthy are used to regionwide access to healthcare - from wealthy Indonesians flying into Singapore to visit primary-care doctors and specialists to middle-class Singaporeans flying into Bangkok and Vietnam for elective procedures. With borders shut, this is no longer possible. At the same time, the experience of Italy and now, the US, is a tragic demonstration of the disparity in Covid-19's fatality rate because of variances in the capabilities of local governments and healthcare systems to respond early and nimbly. This experience has highlighted the consequences of unequal access to healthcare and underlines the urgent need to shore up domestic healthcare systems.
3. Digital therapeutics take off
Anecdotally, digital therapeutic apps designed to help patients manage chronic health conditions are seeing an uptick in engagement. In part, patients are avoiding clinics for fear of infections, but Covid-19 is also making people realise the importance of managing conditions like diabetes and hypertension, given that those with such conditions are more at risk of developing severe infections. It remains to be seen whether this lasts once the immediate crisis passes, but this could be a silver lining for public health if patients' habits improve.
4. Verifiable 'clean bill of health' in real time
If Covid-19 is the 9/11 of healthcare, we will all transition to a new level of vigilance. The infectiousness of the virus and the fact that asymptomatic carriers can infect others have formed a common understanding that health management is not an individual but a societal issue, lest one gets infected and in turn infects others.
The countries that have been most successful so far in keeping Covid-19 under control are the ones that have managed to modify the behaviour of citizens at the community level and have leveraged technology to track the health of its citizens multiple times a day. So far that has mostly been done at checkpoints in the form of temperature scanners at airports and at building entrances. Now Singapore has launched TraceTogether, an app installed on your phone which uses Bluetooth to track whether you have been in close contact with a Covid-19 patient. The logical extension of this is to create a "bill of health" using health-tracking technologies built directly into the phone: temperature, heart rate, blood pressure. Only a clean bill of health allows you to enter crowded public spaces or to travel.
5. 'Age in place' technologies and services
Covid-19 will make us question the wisdom of housing vulnerable populations close together in enclosed spaces. The Kirkland nursing home was the centre of the outbreak in Washington state, the first state in the US to be badly hit, with all residents quarantined inside and family members barred from visiting. The Spanish army, dispatched to disinfect nursing homes, found residents abandoned as staff fled after cases of Covid-19 were detected.
In Singapore, some nursing homes have sadly been identified as Covid-19 clusters. Incidents like these will stick in the cultural memory and renew interest in technologies that help the elderly age in place in their own homes - health-tracking wearables, on-demand home-nursing care and digital therapeutics being some of the examples.
That is it for now. As William Gibson said: "The future has arrived - it's just not evenly distributed yet." We will know better in six months what Covid-19 related measures will go away and what will be with us for a long time. Please stay safe and take care of yourselves and those around you.
The writer is principal at Dymon Asia Ventures, an early-stage venture capital fund investing in companies transforming and driving access to financial services, insurance and healthcare in South-east Asia.
