This post describes the three most significant recent news items coming from Insurtech and Digital Insurance in China. As mentioned last week, we are planning for this to be a regular feature and are really excited to bring it to our readers!
This feature combines two things key to our mission at Daily Fintech a) it is global, and b) we limit it to only 3 news items as we know our busy readers need a high signal to noise ratio.
News Item 1: Wesure, Tencent’s proprietary insurance platform launched
Decrypted: Tencent, China’s social network giant released its proprietary insurance platform Wesure within its social app, Wechat on 2nd Nov. 2017. It is not the first move Tencent made in insurance, but it’s the most significant one so far.
It is clear that Tencent does not want to fall behind in the Fintech race against its domestic rival, Alibaba, who already launched an insurance platform and claims solution via its Fintech arm – Ant Financial.
Tencent and Alibaba are the two best known tech companies in China and they are trying to expand business in every corner of people’s lives. Both of them have been developing at a tremendous pace in 2017 and have come close to Facebook and Amazon in terms of market cap.
Our take: Insurance is a huge market in China. Annual premium income has grown from 1.4 trillion RMB (USD 21.12 billion) in 2011 to 3.1 trillion RMB (USD 46.77 billion) at a 16.8% CAGR. The market size of insurance in China has surpassed Japan and is second to only the US market.
The Digital Insurance part of the market has grown 10 times since 2012 yet still accounts for less than 10% of the overall domestic insurance market. So it is clear that with the increasing development in InsurTech, plus the continuous expansion of the whole insurance market, that Digital Insurance will thrive and prosper at high growth rates in the near future.
Therefore, it is no wonder that not only are the traditional insurers trying to keep relevant in this new digital world, but that the tech giants also want to stake their position as early as possible and make the most of their digital advantages.
Alibaba’s advantage lies in payment, while Tencent’s is in social, in other words, Wechat. According to data released from the Wechat team, the number of Wechat daily active users reached 902 million in September, 2017, which is a 17% YoY growth. The total population in US is only 319 million! So customer acquisition won’t be a problem for Wechat.
Right now, there is only one product in Wesure. It is a medical policy called WeCare and is co-launched with licensed digital insurer Taikang Online. Policyholders can get a 6 million RMB coverage with no deductibles and related hospital services with a few hundreds RMB premium. Compared with other medical and health coverage in China, WeCare is quite attractive no matter in coverage or in premium. But what’s even more important, it is clear and simple. With only a few illustrations, customers can easily understand what the policy offers.
It is clear that Tencent is in no rush to push forward their insurance strategy. Unlike insurance supermarkets and comparison sites, Tencent will be offering only refined products in small quantities. For example, they plan only 2-3 products for each insurance category. Personalized insurance will also be the future of Wesure.
Wesure also provide customers with policy management services and Wechat users can review and renew their policy easily inside the app.
Liu Jiaming, CEO of Wesure told reporters that they will launch auto insurance in the near future, but since most of the customers are satisfied with their current auto insurer, Wesure is planning to focus on after-sale service, such as quoting for renewal policies. And they might even build an eco-system around auto insurance, such as providing maintenance and car washing services for those who purchased auto insurance in Wesure.
Wechat has proved they can conquer the Chinese social market by providing customers with a top-notch user experience. Now they are expanding on the root of this social dominance. What’s more valuable is that they are proceeding carefully and they have not forgotten to put the customer in the center. Today we have got tech giants like Tencent and Alibaba, traditional insurers like Ping An and start-ups like Zhong An all playing in the Digital Insurance field. It will be very interesting to see who will win. (Something even more interesting is that Zhong An was co-founded by Tencent, Alibaba and Ping An, so their major stakeholders may end up becoming their toughest opponents)
News Item 2: Double Eleven Festival boosts InsurTech sales in China
Decrypted: Double Eleven Festival is a Chinese online shopping festival created by Alibaba in 2009, it starts with e-store owners on taobao.com (Alibaba’s online shopping platform) offering large-scale discounts to attract customers on 11th November every year. This day, 11th November was called Bachelors’ Day before, because this data is expressed as ’11.11’ in Chinese and each part of it looks like a single guy. Alibaba’s attempt to implement a sales promotion on this day worked out pretty well, so they made it an annual routine ever since.
This year, sales volume in Alibaba’s platform reached an amazing 168.2 billion RMB on a single day. The logistics issues are correspondingly big with so much sales and packages needing to be sent throughout China,; the number of returning packages will inevitably be huge as well, due to broken package, discrepant description and all other reasons. So digital insurers in China have already been prepared. They have partnered with e-commerce platforms and e-store owners to provide package return policies for consumers and will pay for the express fees if a package is returned. They actually started this in the very beginning of the Double Eleven Festival and now they are providing more coverage.
Our take: Double Eleven Festival is a direct way to display Alibaba’s marketing and technology capabilities as they invited so much Internet traffic in a short period of time on a single day and processed the huge amount of data with efficiency and fluency. It is also digital insurer’s opportunity to display their capabilities enabled by InsurTechs.
As a matter of fact, they have done that already and their performance is getting better. Zhong An Insurance, the leading InsurTech startup in China, sold 210 million policies on Double Eleven last year. They provided more than 13.3 billion RMB coverage for consumers from Tmall, Taobao, Mushroom Street and other e-commerce platforms.
Sales volume of policies went higher this year. According to data from Ant Financial, 12 insurers have sold 860 million policies on Double Eleven. That means 600 thousand policies per minute and 10 thousand policies every second. The policy volume reached 230 thousand per second at peak.
With volumes getting higher, both traditional and digital insurers are tapping into more fronts in e-commerce. They are providing employer liability insurance, quality insurance, after-sale insurance and other kinds of policies designed for e-commerce consumers.
All these require a higher level of technology capability. When consumers place an order, the big data system will build a model through its algorithm and analyze indices like consumer behaviour and commodity category. Then it will come up with a premium and add it to the total payment. All these processes happened within a second and was completely automated. Consumer’s shopping experience is not impacted.
Big data, artificial intelligence and automation are the key technologies applied on Double Eleven, and they are making insurance increasingly easier and more practical for Chinese consumers.
News Item 3: Foreign insurance development roadmap revealed. China will lift limits on foreign ownership stakes in finance sector in three years.
Decrypted: After the state visit from US President Donald Trump to China, China State Council held a briefing on 10th November. Vice Finance Minister Zhu Guangyao said that China will lift limits on foreign ownership stakes from 49% to 51% in finance sector in three years. It means international insurance corporations will be able to expand their market share in the China mainland in the future.
Our take: Foreign capital has been watching the Chinese market for a long time. Since China joined WTO in 2001, a number of international insurers have been trying to expand in the market. New York Life and Metlife are among the first ones to get approval to establish a joint life insurance company.
According to data from CIRC, there are 57 foreign insurance companies from 16 countries in business in China. The market share they hold increased from less than 1% in 2001 to 5.19% in the end of 2016.
Most foreign insurers choose to start joint venture with local companies, whether it is Chinese enterprises or domestic insurance companies. Due to regulatory restrictions, foreign insurers usually could not be the controlling shareholder in the past. And that often results in disagreement and is a constraint on the business.
With the new policy in place in three years, foreign insurers can have decisive voices, and it will be more convenient for them to implement their innovation strategies in China.
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