How insurtech startup Papaya looks to digitalize Vietnam’s opaque insurance industry

CEO and co-founder Hung Phan has learned two important insights from building his insurtech startup Papaya. First, don’t follow the agent-based model which just digitalizes the process that offline insurance agents follow. It will be extremely costly to acquire and manage these agents in the long term.

Second, don’t rely on an existing platform to distribute your products. It will squeeze your margins, and the platform will eventually figure out how to sell directly to customers.

Ho Chi Minh City-based insurtech startup Papaya wants to become a healthcare and wellness platform for employees. / Photo credit: Papaya

When Phan founded Papaya in 2018, it took a while for his team to decide on the startup’s business model. The company previously tried selling motorbike insurance to drivers on popular Vietnamese on-demand platforms, but the demand was just not there.

So the startup decided to settle on solving a painful experience that many people in Vietnam go through: the claims process in health insurance. Very often, customers feel cheated by insurance companies due to the confusion surrounding their exclusion policies.

In Vietnam, Papaya is part of just a handful of insurtech startups operating in the country, partly because insurance is a traditional industry with large incumbent players.

Last month, the company won the Tech in Asia Startup Arena Pitch Battle 2020. It previously raised pre-seed money and is now looking to raise US$1 million to further invest in automation technology and hiring.

Digitalizing the insurance industry

The sector’s total addressable market has huge potential. The government estimates that total premiums collected by insurance companies in Vietnam last year reached about 160.2 trillion Vietnamese dong (US$5.4 billion), up 20.5% year on year. That said, the penetration rate is still relatively low, as only about 8.5% of the population has a life insurance policy, according to the Vietnam Insurance Association.

People crowd hospitals in Ho Chi Minh City, Vietnam. / Photo credit: 123rf

Phan, who previously worked for FWD Insurance, understands the painstaking process of claiming health insurance for both patients and insurance companies. It’s largely based on manual processes like filling out paperwork and sending back-and-forth emails, and the approval process might take several weeks.

For now, Papaya only operates in the business-to-business space. Its customers consist of insurance companies which also see the benefits of speeding up their own claiming process. So far, the startup has secured contracts with two major insurance companies in the country – FWD and Bao Minh – which delegate a number of their portfolio companies for Papaya to manage.

The company currently processes health insurance claims for 8,000 employees, who can use its mobile app to digitally check in at hospitals and clinics within the insurance companies’ network.

According to Phan, this allows the employees to get their claims approved within 30 minutes (for claims under 3 million dong or US$130). Generally, Papaya can approve claims under 5 million dong (US$217). Those that go beyond this threshold require additional approval from insurance companies.

A large enough market