From insurtech to incumbent: How Aviva Singlife came to life

Many start-ups aim for disruption, but what does it take to break through in the insurtech industry? The founder of Singlife shares his journey and insights.

In this episode of the McKinsey on Insurance podcast series, McKinsey’s Alex Kimura speaks with Singlife founder Walter de Oude, who shares insights on his journey to fund and grow an insurtech start-up in Singapore.

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From insurtech to incumbent: How Aviva Singlife came to life

An edited transcript of the conversation follows. For more conversations from McKinsey on Insurance, our podcast series about the trends, disruptions, and strategies that are reshaping the insurance industry today, subscribe to the series on Apple Podcasts, Google Podcasts, or Spotify.

McKinsey: My name is Alex Kimura, and I’m a partner in McKinsey’s Singapore office. Today, I’m excited to share a conversation with Walter de Oude, the founder and deputy CEO of Aviva Singlife. We will hear about Walter’s transition from corporate executive to start-up CEO, the innovation that Singlife brings to the market, key challenges and trends in the industry, and growth opportunities created by the pandemic. So there’s a lot to cover here. Welcome, Walter.

Let’s start with the backstory on your journey with Singlife, which you launched in 2014. Tell us about the beginning and how the idea was hatched.

Walter de Oude: Sure. So, by way of introduction, I’m Walter de Oude, the founder of Singlife. I’ve been living in Singapore for the past 20 years, and I spent a bit of time in Japan and India along the way. I’m an actuary by profession and have been involved in the insurance business this entire time. I started the Singlife journey in 2014, when it became apparent to me that there was an opportunity to build a new way of executing the business model. While we formally licensed the business in 2017, it did take us three years to raise the required amount of capital, get the regulatory licenses in place, build the tech, build the team, and get going.

So the first step was going to the regulator and getting their blessing. I went to the regulator and said, “This is what I’m going to do.” And they said, “Well, this is a bit unusual,” because from a regulatory perspective, even the application forms are not set up for insurance start-ups. The forms talk about track record, first, and capital. And they’re all written in a way that describes a large foreign company coming to establish a subsidiary, not a life insurance start-up. So we had to provide alternative evidence that we would be successful.

Then we had a discussion about how much capital we needed to put in. And it was off to the races to go and raise $50 million.

McKinsey: How did you raise that money? Did you have to tap into your personal savings? Did you have to go to friends and family?

Walter de Oude: Personal savings come first because you have to demonstrate even to friends and family that there is something worth investing in. Fortunately, having had a reasonably good career, I had some reserves, but they did dwindle pretty quickly. You have to get friends and family to keep you going. Raising money is tough. It took three years. The starting point was the most logical capital provider, an obliging insurance company. If I could successfully build a digital version of an inefficient organization, surely they would invest in [fixing] it, and there would be an exit for me folded back into a bigger company. Most large companies loved what we were doing, but when it came down to parting with money, the idea of a large corporation investing in a start-up and giving equity to people like me was just unpalatable.

The next phase was to find two things: a big pocket of money that was available to invest in venture business, and someone who was also willing to [invest in] financial services—which is actually a very small intersection of the Venn diagram. I think we made three formal applications to the regulator with capital support. During that process, those deals fell apart in one way or another—either I wasn’t willing to accept the terms or they changed their minds along the way. It was a painful, painful three years.

McKinsey: Was there a point where you felt like, “This is just too tough; I just need to give up here because there are too many hurdles”?

Walter de Oude: Often. But my wife says that my biggest skill and my biggest challenge is that I’m an eternal optimist. She looks now and says to me, “Walter, you would have taken us into the abyss if you hadn’t gotten it over the line.” Because my personality is like a dog with a bone, right? You just carry on. Of course, there’s days when you think, “Oh, my goodness, what have I done?” But for me, the motivation of doing things my way, being in control of my own destiny, with this absolute conviction that what I was doing was necessary, was the direction of travel. It was just a matter of time to find the right components to get it over the line.

McKinsey: Let’s transition to Singlife, now that we know the backstory. What’s different about Singlife?

Walter de Oude: From a technological perspective, the insurance industry seemed to lag behind other financial-services industries. The payments industry was the first to really adopt the streamlining of tech, and banks were much quicker to follow. The Singlife proposition was to take the best technology and turn that into real efficiency for our customers. In the early days, it was totally about digital execution. We banned words like “paper” and “batch runs”; these things were just not part of our psychology. And we were able to deliver a fully functional, end-to-end, seamless onboarding platform for insurance—compliance, governance, underwriting—that is efficient in the extreme.

But the real secret sauce of Singlife was our ability to present ourselves as a challenger brand. That gave us massive support from the community, the general public, and investors. So, Alex, it’s not just about the product; the product is just one of the ingredients. Positioning ourselves as new, fresh, exciting, consumer-driven—that was really what pushed us over the line.

The real secret sauce of Singlife was our ability to present ourselves as a challenger brand. That gave us massive support from the community, the general public, and investors.

Walter de Oude

McKinsey: Every venture capitalist will tell you, “If you want to be a major disrupter, you have to solve a major pain point.” What is that major pain point that you think you have solved or are attempting to solve?

Walter de Oude: Insurance for a million years has been positioned as a necessary evil. Companies have always sold the product based on the idea that you need to buy this product because if you die, bad things are going to happen. It’s a grudge purchase. And if you can change it from a grudge purchase to a relationship-enhancing one—something that you’re actually proud of having, rather than buying out of reluctance—you get momentum out of that. That was very evident in our story.

McKinsey: What’s so special about Grow?

Walter de Oude: Well, you can’t really talk about Grow until you talk about the earlier product evolution. We started our business looking purely at protection. But not everybody wakes up in the morning and says, “Hey, today’s the day I’m going to go and buy some life insurance.” But what we realized as our business proposition evolved was that in order to channel people toward that protection product, we had to get closer to customers in their day to day. We found through quite a lot of research and just gut instinct that if we could get closer to a customer’s cash, we could get closer to their overall wealth and, ultimately, maximize the protection, which is the cherry on top of the cake.

So we started their wealth journey with a Singlife account. We said we wanted to be better than a bank—why can’t we play in a bank space? And we built banklike capabilities using an insurance store of money and giving customers liquidity through cards. It worked so quickly, we put $1 billion of customers’ money—100,000 customers—on the books in about seven months. Once we had that proposition, Grow is then the next phase to say, “How do we then start to channel customers’ money into a high-engagement product that is value-creating for us?,” and then Grow is a longer-term savings plan.

McKinsey: Let’s talk a bit about your acquisitions. Singlife acquired Zurich in 2017 and recently merged with Aviva. How did those come about, and what was the impetus behind them?

Walter de Oude: The important thing for us, and we learned it as we moved into the Aviva transaction, was that scale is everything. Economies of scale are so vital in this business, and the Zurich portfolio probably accelerated our scale by about two years.

McKinsey: There aren’t many examples of a start-up buying an incumbent in the industry. What challenges did you face in this position?

Walter de Oude: The challenge is that nobody thinks a start-up is going to do it until they do. And the challenges then are, how do you demonstrate that you’re credible, that your quality of capital is right, that your regulation is OK, that you’re not going to screw up the data, that you’re not going to mess up our customers, that you’re not going to affect our brand? Those are things we had to challenge. But in our favor, we had a team of pros. We were known quantities as individuals, and the growth that we’d shown so far suggested that there was an avenue. But the challenge was on trust and pedigree.

McKinsey: And what are the challenges that you’ve faced integrating with Aviva or these sorts of companies?

Walter de Oude: Zurich was a portfolio transfer; there was not an acquisition of the physical entity. I remember going to the regulator to give them regular updates. I’d gone through the process of migrating portfolios before, and we were able to negotiate the deal in July and August of 2017. We got the regulatory approval in December 2017, we got the scheme of transfer through the courts in March 2018, and we were fully integrated—no systems changes—by April 2018. So we did that very straightforwardly.

McKinsey: So as a result of this, Walter, is Singlife an incumbent or insurtech? Where do you sit on the definition?

Walter de Oude: Every successful start-up becomes what they hate, which is an incumbent. Your growth leads you to a position of needing to defend or perpetuate that growth. You can’t just do everything you want when it comes to high-stakes risks. You now have to be protective of the business. I would say that we have transitioned from a start-up to a high-growth incumbent. I think we have high potential if we look at our capabilities. But being a much bigger animal now does make us go a little bit slower than I’d like.

McKinsey: And where do you see opportunities in Singapore for high growth?

Walter de Oude: Singapore remains one of the fastest-growing wealth hubs in the world. Wealth will continue to expand. I think that growth of advisory services will slow, but the pattern of advice will change. We expect that bancassurance will lose market share, and agencies will continue to lose market share. Whereas the Aviva proposition, which is built on third-party or independent advice, is much more prominent in an environment where advisory is growing in share. I think that the digitalization of financial services is still in its infancy here.

McKinsey: We’re seeing a lot of incumbents digitizing their agency, digitizing bancassurance, and really trying to boost productivity and grow. Do you see that as a competitive threat to your business?

Walter de Oude: If you’re the cyclist running at the head of the Tour de France, and you’re looking over your shoulder every five minutes to see how far ahead you are and how quickly the gap is closing, you ride slower. My view is, just drive it like you stole it and just go hell for leather. Believe in your guts in what you’re able to deliver and go faster. It goes without saying that the industry is going to catch up and the lead we have will narrow. But that doesn’t mean I’m worried about it—I’ve just got to run faster.

McKinsey: What do you think the key challenges and trends for the future are? What are the capabilities you need to really win in the next five to ten years?

Walter de Oude: I think that distribution is key and that advice is key to distribution—but you’re not going to get the maximum benefit of that advice unless the product capability or the experience of the relationship is first-rate. Gone are the days when people were happy to just be sold a product and then forget it. People want a better level of engagement with their financial providers and access to them in real time.

McKinsey: Do you look outside the insurance industry for inspiration?

Walter de Oude: The oldest story in the book is that nobody goes to a travel agent to buy plane tickets anymore, and that story is perpetuated across every part of our ecosystem. The technology integration into core systems, the use of microservices or meshlike interactions of componentry, is not just an insurance thing; it’s an every-industry thing. And our job is to take the best of these experiences or technologies and see how they can add value to our infrastructure.

McKinsey: Pivoting to a little bit of insurtech: We’re seeing this whole excitement over insurtech valuation, and so forth. What do you think about that?

Walter de Oude: I think there’s an evolution in the capital markets. If I’d had as frothy an investor or capital-market situation five years ago when we started looking for capital, I would have [avoided] a whole lot of the pain we spoke about earlier. There is an abundance of capital, and this is driving valuations beyond what is intrinsically there. I think on the insurtech side, like in everything, one in ten will survive. But the nine that fail will at least have a fighting chance because they’re getting more capital. I think valuations are high. I also believe that in the insurtech space, we were successful relative to the market because we immediately went full stack rather than looking at a specific use case or component. The problem with focusing on a specific use case or component is that you can’t control your whole destiny. Most insurtechs need an insurance company to partner with.

McKinsey: Do you think these incumbents need insurtechs going forward to build their capabilities and expertise?

Walter de Oude: I think they do. But the perverseness of it is that the insurtechs are doing the learning on behalf of the incumbents. What happens is an incumbent will come in and look at ten insurtech capabilities and say, “Oh, that’s great.” And nine times out of ten, they’ll walk away and go to their IT guy and say, “That guy’s building that union. You need to build it yourself.” I see this all the time.

McKinsey: What is the longer-term ambition for Singlife?

Walter de Oude: We’ve just got to go big and take on opportunities when we see them. We aspire to be a Singapore-grown, regional business, which gives us an opportunity for growth. Singapore will grow, but not at the pace that we see in the Philippines or other neighboring countries. Not only do we have to grow geographically, but we have to grow product-wise and through the financial-services landscape.

McKinsey: How would you or your shareholders rate Singlife’s success? How do you know whether you’ve “made it”?

Walter de Oude: I think the earliest Singlife shareholders invested in us to see how far we could push the boundaries and to use us as a learning experience for bigger businesses we’ve grown into as the Aviva Singlife Group. Now that Singlife has acquired Aviva, the ambition is slightly different. Our shareholders are still hungry for growth. We are not a dividend play. We will be reinvesting every penny that we make into growing the business, with a view to extract maximum equity value for ourselves and for future shareholders.

McKinsey: What advice would you give incumbents working with insurtechs?

Walter de Oude: Be honest and open, not arrogant, and appreciate that these insurtechs have given ideas more thought than the incumbents have. I’ve thought through this very deeply. Insurtechs are not for you to just learn from and steal ideas from and incorporate. Respect the fact that all of these guys [insurtech leaders] are eating baked beans out of tin cans with a view to improve the industry. So buy them, embrace them, invest in them, grow them, and support them to the best of your ability for the benefit of the industry.

Comments and opinions expressed by interviewees are their own and do not represent or reflect the opinions, policies, or positions of McKinsey & Company or have its endorsement.

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