Raymond Lo, Chief Financial Officer at FWD, tells Nicky Burridge how innovation within the insurance sector is improving the lives of more customers, and how his CPA background continues to help him adapt to rapid changes
Photography by Calvin Sit
Despite his accounting background, Raymond Lo, Chief Financial Officer at FWD Hong Kong and Macau, sometimes finds himself having to put the numbers behind other considerations.
FWD, currently one of the fastest growing insurers in Asia, is trying to change the way people feel about insurance by overhauling its products to ensure they are both relevant to consumers’ lives and easy for them to understand, even if this approach does not always appear to make good business sense.
For example, the company’s innovative Savie Insurance Plan pays a set return of 2 percent a year for the first three years and allows penalty-free withdrawals. It also includes death benefit and accidental death benefit. “From a CFO’s point of view, it was a crazy idea because we would not make any money on it, we are competing directly with deposit accounts. But this simple account shows customers we are a trustworthy brand and helps us to develop a long-term relationship with them,” says Lo, a Hong Kong Institute of CPAs member.
In another move designed to help build trust, FWD has joined forces with mobile wallet “Tap & Go” from HKT to enable customers to access the cash they hold in Savie whenever they want.
“Insurance companies give the impression that it is easy to give them money but really hard to get money back. We wanted to change that feeling,” says Lo. “It is the first time a life insurer in Hong Kong has been linked to a mobile wallet.”
Lo explains that one of FWD’s key values is openness. “We want our policyholders to understand our products more easily.” He adds that in the company’s brochures and on its website, it now uses layman’s terms, rather than technical insurance language, to describe its products, illustrating their benefits with simple tables.
He says that Savie has been a great success, and it had to be closed to new savers after reaching the HK$1.2 billion limit in deposits FWD had set. Lo was not surprised by the success, pointing out that FWD’s savings products are still its most popular with Hong Kong consumers. “This could be attributed to the Chinese culture. Chinese people tend to save for the future,” he says.
But he adds that people are becoming increasingly aware of the benefits protection products offer as well, particularly medical coverage. “In recent years, awareness has expanded to health-related insurance. The public health care system is way beyond the maximum capacity. If people can afford it, they will turn to the private sector.
“However, medical expenses in the private sector are quite high and they keep increasing. Insurance can reduce part of the burden to the patients who want prompt and top-tier service.”
With this trend in mind, FWD has launched four health insurance plans as part of the new Voluntary Health Insurance Scheme, which aims to encourage more people in Hong Kong to take up medical coverage through the launch of lower-cost plans that offer a set level of benefits and tax deductible premiums.
It has also been looking to innovate in this area, and launched Mind+ last year, the first critical illness policy in Hong Kong to cover mental health issues. “Our product team did a lot of consumer research to understand what the market was missing and how we could bridge that gap,” Lo says.
As CFO, Lo oversees FWD’s financial, actuarial and office administration and procurement functions, and he has also been instrumental in managing the group’s credit rating and handling bond issuances in Hong Kong.
At the same time his role involves developing and executing strategy for the chief executive officer. “As CFO, my role involves not only focusing on the numbers, but also the direction of the company. I work with the whole senior management team, as well as the distribution channels, back office functions, IT and risk team.”
One of the biggest challenges of his job is meeting the aggressive targets FWD has set, while balancing the interests of shareholders, customers and employees. These targets include expanding FWD’s reach to make it a leading pan-Asian insurer. The FWD Group already operates in nine markets, including Hong Kong, Macau, Thailand, Indonesia, the Philippines, Singapore, Vietnam, Japan and Malaysia, and it is currently in talks to acquire the insurance arm of Siam Commercial Bank to increase its presence in Thailand.
Lo says: “FWD Group constantly looks for opportunities to grow. In fact, FWD expanded into Malaysia, our ninth market in Asia, this March.”
FWD is also keen to tap into the vast opportunities in Mainland China, where the announcement was made by Beijing to allow wholly-owned foreign insurers to operate there without the need for a local partner. “We have had a representative office in Shanghai for four years and we have already applied for a licence to operate in China,” Lo says. “China is a massive market and, with an expanding middle class, there is massive demand for insurance and health care-related services. Everyone knows the opportunities are there. The question is how to dip into that.”
Raymond Lo became Chief Financial Officer of FWD in 2013. He oversees the company’s financial, actuarial and office administration and procurement functions.
“Insurance companies give the impression that it is easy to give them money but really hard to get money back. We wanted to change that feeling.”
In the meantime, FWD, along with the rest of the industry is gearing up for the implementation of IFRS 17 Insurance Contracts. Considered to be one of the most significant changes to insurance accounting for decades, the standard will introduce a consistent way for insurance contracts to be treated on balance sheets.
But the industry faces a number of implementation challenges, ranging from ambiguity over the interpretation of the standard, to the high level of data infrastructure companies need to have in place to comply with it, to a shortage of qualified professionals to assist companies. In light of these issues, the implementation date will likely be pushed back by 12 months to reporting periods beginning on or after 1 January 2022.
To gear up for the change, Lo says FWD has set up a separate IFRS 17 project team that reports directly to him. The team’s leader is a member of the Institute’s Hong Kong Insurance Implementation Support Group and is actively involved in implementation discussions within the industry.
Lo thinks the insurance industry faces a challenge to be ready on time, particularly for smaller players. “We see a lot of challenges in the implementation. My understanding is some non-life and smaller scale insurers are not quite as near where they should be in the implementation work yet.”
He adds that FWD started the whole project more than 18 months ago, making it one of the earliest insurers in the market to begin implementation work. Even so, the company still faces challenges. “The standard is not yet 100 percent confirmed as some amendments are still under debate. There is also no readily available IT solution in the market. The team also plans for contingencies because our IT solution has been delayed. It is a challenge for the whole market,” he says.
Alongside the day-to-day business challenges that FWD faces, it also has to be mindful of disruption from fintech and insurtech companies. But Lo is not too worried, believing traditional insurers and new technology companies can complement each other rather than being in competition.
“I think they supplement each other to create a win-win situation. Fintech and insurtech companies can cover the mass market with simple products and some of the non-life products like motor, travel or simple medical outpatient,” he says. “However, for more complex whole life, critical illness or wealth inheritance products, professional service is required. We don’t see people spending HK$20,000 to HK$30,000 annually and not expecting professional service.”
FWD is also investing heavily in innovation, and plans to spend HK$500 million on insurtech in these five years. It will focus on three core areas, namely mobile services, the Internet of Things, and big data analytics. It plans
to use these technologies to help it gain a better insight into its customers and what they need. It also wants to make it easier for customers to interact with the company.
Lo explains: “When we started the FWD journey, we invested a lot in client-facing technology, such as online purchase and sales proposal systems. Around two years ago, we believed we needed to strengthen our back office systems, such as underwriting and claims. We also needed to strengthen our data analytics capabilities.
“These investments on back end operations and know-your-customer capabilities are really important for us to keep up and continuously strengthen our efficiency and service quality as our business volumes grow. We believe innovation needs to be relevant and not just innovation for innovation’s sake.”
FWD has won a number of awards for its innovation, including a Fintech Initiatives Award at the Shenzhen-Hong Kong Fintech Award 2018, jointly organized by the Hong Kong Monetary Authority and the Office of Financial Development Service of Shenzhen, for its collaboration with “Tap & Go” for its Savie product, while it also won 11 awards at the Bloomberg Businessweek Financial Institution Awards 2019 for everything from its medical insurance policies to its claims management and customer service.
Lo attributes some of this success to the innovative culture FWD promotes in which it encourages employees to make even small changes to improve the company’s systems or processes. “Innovation may not always mean building an electric car or writing an artificial intelligence programme. It could be smaller scale, such as automating reconciliations between systems, creating a system interface for financial reporting, developing a group-wide investment trading platform, or enhancing the workflow of our underwriting,” he says. “I will be very happy if our teams can incorporate this innovative culture into their daily work. Small steps count. We are not an IT company. We are an insurance expert.”
FWD has a strong focus on engaging with the community, looking for different ways in which to support local people in each of the countries in which it operates.
In Hong Kong, it works with the Hong Chi Association, which supports people with intellectual disabilities, to deliver the “Live Up Adulthood” Transitional Support Programme, offering training opportunities, internships and therapy to school leavers with autism and other disabilities.
Lo explains that FWD chose the charity because it wanted to help people reach their full potential. “In addition to donating money, we employ people who are helped by the charity as trainees. We want to empower people with different strengths and give them a chance to work.”
It has also signed a three-year partnership with the Special Olympics to sponsor its Unified Schools and Athlete Leadership programmes for young people with intellectual disabilities.
In addition, FWD has acquired the lease for House 1881, the historic former Marine Police Headquarters, in Tsim Sha Tsui, which it plans to use as a hub for community activities. “Through this project we have a unique opportunity to preserve and revitalize an important landmark in Hong Kong and engage with the community. We want to give back to society in meaningful and inspiring ways,” Lo says.
A solid grounding
Lo has spent more than 20 years working in the insurance sector. He credits his accounting background for not only giving him a good foundation in understanding business finance, but also helping him to adapt to the changes the industry has seen during this time.
He graduated from City University of Hong Kong with a Bachelor of Arts in Accounting, and spent the first few years of his career working as an auditor at Deloitte. He joined East Asia Aetna Insurance in 1997 as an assistant manager, moving on to Aetna Insurance and Pensions in 1999, which was acquired by ING two years later, working his way up through the ranks from a manager to become CFO in 2013. “I have led various functions including compliance, finance and operations. This detailed operation knowledge, as well as communication skills and leadership experience are critical for my leadership role now,” he says.
He jokes that when he qualified as an Institute member back in the 1990s, everything was still done on paper, and a working paper was just that: a paper. “Technology has progressed a lot in the last 20 years. The key to success is to embrace challenges and changes in the competitive environment in Hong Kong. The ability to get through CPA training means you need to possess the basic skills of learning. Having the right attitude towards learning is essential in our environment.
“It’s too difficult for us to imagine what business will look like 10 years down the road. We can only survive with continuous learning and with the right attitude.”
Unsurprisingly, his busy schedule does not leave him much time for leisure. When he is not working, Lo, who is married, jokes that he is a typical Hong Kong person and enjoys good food, watching movies and hiking. He also likes travelling, particularly to European destinations, such as France, Italy and Spain, which he rates for their food and culture. But he adds: “Work is extremely busy, especially because of the ease of mobile communication. People can reach me anytime, anywhere.”
Hong Kong, Thailand and Japan are FWD’s top three markets in terms of customers. FWD Life HK accounts for almost half of the group’s assets and is the ninth-largest life insurer by premium in Hong Kong, according to a report released last month by credit rating agency Moody’s.