This article first appeared in The Edge Malaysia Weekly on July 13, 2020 - July 19, 2020

WITH travelling plans largely halted since the Covid-19 outbreak became a pandemic in March, Tune Protect Group Bhd has been working hard to mitigate the impact on its business.

The plans are essential for the group, as the travel insurance premium segment makes up about 60% of the insurer’s net profits and 30% of its gross written premiums (GWP).

“We will see a dip in earnings this year — it is what it is.  However, as we are rela­tively strong in our capital and liquidity position, we are channelling our efforts into our recovery and digital transformation plan during this MCO period,” says Tune Protect CEO Khoo Ai Lin in a recent interview with The Edge.

While the travel insurer leader is unable to escape a dip in earnings this year, Khoo observes that things could have been much worse had the company not accelerated its transformation plan and launched the new initiatives last year.

In recent times, the group has expanded its product range to include comprehensive coverage for small and medium enterprises, marine cargo insurance and other innovative protection plans for motor personal accident. Khoo stresses that most of it is done digitally.

“It is a blessing that we had commenced our plans early on and this has led to a marginal decline of about 3.8% y-o-y in  the group’s gross written premium in the first quarter ended March 31, 2020 (1QFY2020).

“The initial plan was that these efforts were supposed to be the ‘real incremental’ for the business this year, but given the current situation, it has also worked out well in helping to mitigate a further dip in earnings,” Khoo says.

She adds that the new initiatives have gained traction.

For 1QFY2020, Tune Protect saw a decline of 3.4% in its revenue while net profit contracted 86.2% from the previous year. Many believe that the full brunt of the impact is likely to be seen in 2Q.

Khoo says the group had to take some provision for impairment of some of its receivables, but liquidity and cash flow remain strong. The group’s capital adequacy ratio is well above the regulatory requirement of 130% and even higher than its own internal trigger of 200%.

As the Covid-19 pandemic has weighed on the company’s performance, especially its travel protection business, Khoo says management sees a need to accelerate its transformation plan and digitisation.

Tune Protect is now in its second year of a three-year transformation plan guided by the four pillars of Go Asean and Beyond, AirAsia Ecosystem, Insurtech Capabilities and National Business.

Looking ahead, the travel protection business will continue to be the group’s bread and butter. “If you ask me about the travel business, this period will pass. People are all cooped up and can’t wait to travel. This is evident in the unlimited domestic travel deals launched by AirAsia recently. I believe it’s just a matter of time before travel picks up when borders start to open up.

“One thing we have to be real about, however, is that there will be more digitisation in terms of business as time goes by,” she says, adding that data analytics is critical for Tune Protect.

The group has been able to learn from the dynamic optimisation done for the travel protection segment and rolled out more on-demand, or lifestyle, insurance products.

“Dynamic optimisation with data analytics will enable us to further understand our customers’ demographic and psychographic profile to drive stronger engagements and target products and solutions based on their needs,” says Khoo.

Being in the AirAsia ecosystem has been beneficial for the insurer. The potential number of customers has increased to include not only those from the travel business but also those in other facets of the lifestyle business, such as the Tune Hotels business.

Tune Protect is currently working with Tune Hotels to offer protection plans to suit the needs of hotel guests.

Khoo says the group is looking at a health and wellness strategy as it seeks to build more engagement with its customers.

“It is important to see the value of our customers over time. Thus, it is important for us to transform our mindset to see them as customers versus seeing them as our policyholders. We feel it is timely that we are driving a health and wellness strategy now. Mindfulness on personal health and well-being has been elevated and it gives us a better engagement with customers to look into their health needs and lifestyle protection.

“We are looking at a few combinations of areas in our health strategy that will be focused on digital healthcare services,” explains Khoo.

As Tune Protect aspires to be the leading digital insurance provider, it is only too aware that growth cannot be organic.

Khoo says the way forward for Tune Protect is B2B2C (business to business to consumer), a business model in which a company accesses its customer via other businesses.

“For any retail business to succeed, you need critical mass acquisition. Our key strategy to acquire this critical mass is to leverage B2B2C. This will be done through strategic partnership with corporate clients that have a sizeable retail customer base.

“That means we will need to develop products and services to affinitise with our strategic partners’ product and services. We will continue to focus on product technology solutions such as our API’s data analytics capability in order to accelerate the transformation plan,” she says.

On the technology front, Tune Protect is also looking out for strategic partnerships, joint ventures or even acquisitions.

That said, Tune Protect has its work cut out for it as the pandemic lingers on. Currently, all six analysts covering the stock have a “sell” call. Its share price has more than halved over the period of one year, falling from 72.5 sen on July 8, 2019, to 32.5 sen as at last Wednesday (July 8), valuing the company at RM244.3 million.

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