[The Future of Insurance Seen from China] Bansong Insurance and Healthcare Services... 'Insurtech' Rising in China

Customized Central Insurance as the Leading Option
Only 166 Won Premium...Free Delivery Refund and Exchange Costs
Send Blood Sugar Levels for Consultation...Market Growth Due to Less Medical Information Regulation

Exterior view of Zhong'an Insurance headquarters located in the Waitan area of Shanghai, China

[Shanghai (China) = Asia Economy Reporter Park Jihwan] The domestic insurance industry is at a crossroads due to market saturation, ultra-low interest rates, and rising loss ratios. Securing new growth engines such as overseas expansion or InsurTech (insurance + technology) has become an inevitable topic. In nearby China, for example, with a population of 1.3 billion and enormous capital strength, the development of InsurTech-related products has been accelerating for the past five years. If you don't have it, you must learn. Asia Economy explores the InsurTech-related movements of Chinese insurance companies and visits the sites of domestic insurers that have entered China to seek new ways to revitalize the insurance market facing growth stagnation.

Night view of the Oriental Pearl Tower in Shanghai, lined with high-rise buildings.

Mr. Zhang Siyen, whom we met last December in Shanghai, China, always purchases return shipping insurance when ordering from online shopping malls. He has often experienced that the actual product was very different from the photo. Recently, he decided to return a winter sweater bought online because the actual color was closer to khaki rather than the dark brown tone he expected. In Korea, in similar situations, customers have to bear the round-trip shipping costs. Mr. Zhang does not have to worry about this. The return shipping insurance he purchased in advance covers all costs incurred during refunds or exchanges due to quality dissatisfaction or change of mind. The insurance premium is only 1 yuan (about 166 KRW). Moreover, more sellers on shopping malls are offering this insurance for free.

Mr. Li Qiang, a man in his 50s, recently subscribed to an insurance product that offers premium discounts based on blood sugar level results. He shares his self-measured blood sugar levels on WeChat, China's national social network (SNS), and regularly consults with doctors via telemedicine. He can easily receive medical expert consultations on diagnosis and treatment without visiting a hospital.

While domestic insurers face difficulties securing new growth engines, Chinese insurers are expanding their domains by developing lifestyle-oriented insurance through digital technology adoption. Combining insurance with technology, 'InsurTech' has transformed the daily lives of Chinese people. A representative insurer is ZhongAn Insurance. Established in 2013 by Chinese big tech companies Alibaba, Tencent, and Ping An Insurance, ZhongAn is China's largest online property insurance company. Over the past six years, it has successfully established itself in the insurance market with lifestyle-oriented products rarely seen in the traditional insurance industry. All of the company's products are sold 100% online.

◇Strategy Penetrating Daily Life Worked= ZhongAn Insurance is rapidly attracting new customers with products that combine IT and real life. ZhongAn's cumulative earned premiums reached 12.85 billion yuan (2.131 trillion KRW) as of November last year, a more than 16-fold increase from 790 million yuan (131.2 billion KRW) in 2014.

The flagship products focus on lifestyle-oriented insurance. 'Return Shipping Insurance' is a prime example. It was launched in cooperation with Alibaba on November 11, 2014 (Singles' Day: China's version of Black Friday). Recognizing the rapid shift of Chinese consumers' purchasing patterns to online, it effectively covered various risks such as returns between sellers and buyers.

Lin Hai, Chief Actuary of ZhongAn Insurance, explained, "Chinese people have a strong consumption consciousness relative to their income level. Recently, as online shopping orders have surged, the subscription to return shipping insurance has followed the same trend." He added, "Sales of insurance products related to real-life consumption increased by 82% in the first half of last year compared to the previous year, with over 90% of the increase accounted for by return shipping insurance."

The loss ratio of return shipping insurance is around 72%, managed within the appropriate loss ratio range (70-80%). Flight delay insurance, which pays compensation when flights are canceled or delayed, is also popular. Premiums are cheaper when the weather is good and more expensive otherwise. A strength is that compensation is paid via WeChat even before the plane arrives at its destination.

Screenshot of subscription condition inquiry for Zonhyang Ilsaeng (尊享一生), a critical illness insurance health insurance product (based on a 47-year-old Chinese male).

Although the insurance period is short at one year, there are insurance products promising thousands of times coverage for a small premium. For example, ZhongAn's health insurance product, Zunxiang Yisheng (尊享一生), allows a 47-year-old Chinese man to pay only 81 yuan (about 13,400 KRW) annually and receive coverage up to 6 million yuan (995 million KRW) for cancer treatment and diagnosis combined.

◇InsurTech Made the Difference= ZhongAn Insurance's competitiveness in offering customized products to consumers lies in its capital strength, data accumulation, and technological capabilities. The composition of ZhongAn's workforce differs from traditional insurers for this reason. It can be called a fintech company. In 2015, ZhongAn was ranked first among the global top 100 fintech financial companies selected by global consulting firm KPMG.

Actuary Lin Hai said, "We increase investment in technology by more than 5% annually. Among the total 2,800 employees, over 1,476 (more than 50%) are IT-related personnel."

An official from a domestic insurer operating locally said, "ZhongAn immediately commercializes imagined ideas by integrating customer lifestyle data into existing insurance products, and also uses IT technology in underwriting and claims to achieve cost reduction."

In China, unlike Korea, the healthcare sector is also growing rapidly. In Korea, even if insurers want to provide healthcare services, the complex interests of various industries, such as consent for medical information provision, limit the expansion of healthcare services. Actuary Lin Hai explained, "If customers only consent to provide medical information when subscribing to insurance, they can receive one-stop medical services including telemedicine and prescriptions from 1,068 medical institutions."