With extensive customer and transactional data in each ecosystem, InsurTech players design mutually beneficial insurance products through cooperation with the ecosystem platforms. We see 5 major ecosystems connecting InsurTech to ecosystem partners and customers, including consumer finance, lifestyle and consumption, health and medical, auto, and travel.
Ecosystem 1: Consumer finance
Online consumer finance refers to personal loans for consumption purposes, excluding mortgages and auto loans. It includes credit card loans, e-commerce credit offerings and online consumption loan products.
Both traditional players such as commercial banks and emerging Internet players such as Internet lending companies compete in the consumer finance market. InsurTech players have competitive advantages in individual credit risk management and fraud detection capabilities through automated processes as they have adopted technologies such as facial recognition, micro-expression analysis and machine learning. Key insurance players in this ecosystem include ZhongAn, Ping An P&C, Taikang Online, and Sunshine
Insurance.
ECOMMERCE PLATFORM ONLINE CONSUMER
INSURTECH COMPANY
Goods and services
Money and transaction record Customer traffic and
transactional data
Customer profile and protection needs InsurTech enables:
• Optimized online services • Increased transactions and
volume
• Less dispute and better overall experience
InsurTech provides: • Tailored protection services • Customised pricing • Simple purchase experience • Compensation for loss/theft and
bad experience
Ecosystem-based FinTech utilisation adds value to the FinTech (InsurTech) companies, ecosystem partners, and online customers
We see 5 major
ecosystems connecting InsurTech to ecosystem partners and customers
Ecosystem 1: Consumer finance
Where InsurTech is creating value
Technology-enabled upgrade segment. Insurers participate in the consumer finance ecosystem primarily through underwriting credit insurance and providing credit facilitation services, such as consumer credit data-related and lending technology- related services. Insurance companies can use their multi-dimensional consumer data to analyse the ability, willingness and sustainability of repayment during the loan approval process.
Ecosystem-oriented innovation. They can also help platform partners integrate lending and risk management capabilities into the ecosystem and provide additional credit enhancement services to increase the credit enhancement of securitised products to investors.
Which technologies are utilised: Big Data, cloud, Blockchain, AI and biometrics.
Big Data. Insurers collect and analyse proprietary data, in addition to the official credit records and other third-party credit information of customers by using Big Data analytics in order to avoid potential credit risks.
Cloud. Insurance companies develop cloud-based consumer finance service platforms to provide credit-related insurance such as credit guarantee insurance.
Blockchain. When offering credit guarantee insurance, Blockchain technology is utilised in the loan disbursement and repayment processes to ensure data security.
AI. Credit insurance providers use real-time AI-enabled risk management systems to obtain a comprehensive understanding of borrowers and address default risks throughout the product lifecycle.
Biometrics. Credit insurance providers use a variety of biometric parameters to determine borrower creditworthiness, including their online photos and changes in facial micro-expressions. If a borrower shows negative facial expressions during the loan approval process and this is captured by the credit insurance provider, he or she may receive a lower credit score.
Ecosystem 2: Lifestyle and consumption
Online consumption of lifestyle products in China has been boosted by the quick adoption and penetration of the Internet and mobile Internet, which has allowed the China e- commerce market to rapidly grow and mature. Within e-commerce, we think growth is likely to be stronger in the business-to-consumer (B2C) and consumer-to-consumer (C2C) segments. This is due mainly to the increasing well-established comprehensive services provided by major e-commerce platforms, and the rapidly developing express delivery network in China, which lowers the cost and increases the efficiency of logistics services. Ecosystem 2: Lifestyle
China: e-commerce market structure (2016)
Source: iResearch, Daiwa
China: quarterly online B2C GMV and growth China: B2C and C2C market GMV growth
Source: China Internet Watch, Daiwa Source: iResearch, Daiwa
Alibaba and JD.com are the leading players in the lifestyle consumption ecosystem, given they are the operators of the first- and second-largest e-commerce platforms in China in terms of gross merchandise volume (GMV) for 2016.
Insurers need a large volume of data and diverse customer profiles to realise dynamic pricing and tailored insurance solutions. Compared with traditional players, we believe the InsurTech companies are better positioned to capture the opportunities in the lifestyle consumption ecosystem. Currently, ZhongAn, PICC P&C, Cathay and Huatai Insurance are the key market participants in this area.
Where InsurTech is creating value:
Online distribution. In an online retail transaction, the customer, merchant as well as the platform may be exposed to various inherent risks. For example, purchased goods may be damaged, lost or stolen during the logistics process. Customers or merchants may need to pay shipping costs to return products. There may also be payment security issues or private information leakage risks.
Ecosystem-oriented innovation. With insurance products specifically designed to protect against the abovementioned risks, customers and merchants can enjoy a safer and more convenient purchase experience.
Which technologies are utilised: Big Data, cloud and AI.
Big Data. Insurance companies collect and analyse personal and transactional data of online consumers to address their insurance needs. They offer insurance products with customised pricing based on the customers’ consumption patterns.
B2B of SMEs, 44.7%
B2B of companies above the designated size, 27.4% Online shopping, 23.3%
Online travel, 3.0%Local life O2O, 1.6%
20% 40% 60% 80% 0 200 400 600 800 1,000 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 Gross Merchandise Volume (GMV) YoY (RHS) (CNYbn) 0% 20% 40% 60% 80% 100% 0 1 2 3 4 5
2013 2014 2015 2016E 2017E 2018E 2019E
B2C GMV C2C GMV
YoY - B2C (RHS) YoY - C2C (RHS) (CNYtn)
Cloud. Cloud-based systems allow insurers to process a large amount of policies at a rapid speed during the peak hours, ie, the Double 11 Shopping Festival.
AI. Insurance companies offer AI-powered smart chatbox services for customer education and services. They also use AI to uncover protection needs in their daily consumption scenarios.
Ecosystem 3: Health and medical
China’s healthcare market is one of the world’s largest in terms of healthcare spending. Driven by strong government support, rising awareness of health insurance and increasing affordability, China’s health insurance market continues to grow strongly.
Key players in this ecosystem include Taikang Online, PICC Health, ZhongAn and Answern. ZhongAn is making strong progress in this ecosystem. It has partnered with Xiaomi to integrate data collected from wearable fitness devices into its health insurance pricing. It also offers health insurance products based on DNA test results.
Where InsurTech is creating value:
Online distribution. The online distribution segment is becoming increasingly important for this ecosystem given the low customer acquisition cost.
Technology-enabled upgrade segment. Innovations are also emerging in the technology-enabled upgrade segment to develop more targeted and customised health insurance products. In addition, both traditional and online insurers including PICC Health, Taikang Online and ZhongAn, have started to process submitted claims digitally, significantly improving the claim processing efficiency.
Ecosystem-oriented innovation. This is a new and promising segment for health insurance as certain doctors and high-end hospital resources are not easily
accessible to patients. For example, InsurTech players, such as Yi An, offer insurance products that allow patients to gain priority registration to see a doctor and make a claim if the registration is unsuccessful.
Which technologies are utilised: Big Data, AI and biometrics.
Big Data. Health insurers are cooperating with Internet companies to analyse online customers’ health-related protection demand in order to offer tailored health insurance products to them.
AI. Insurance companies have applied AI in the claims settlement of health insurance, which allows the whole process to be automated with higher efficiency.
Biometrics. Insurance companies have begun to offer innovative health insurance products designed based on customers’ biometric data such as DNA testing results and heart rate. They also use biometric-powered identity verification to help reduce fraud risks.
Ecosystem 4: Autos
China has the largest auto market in the world with the highest number of outstanding vehicles but a relatively low penetration (number of cars owned per 1,000 people) of less than 250 cars compared with over 800 cars for the US, according to Oliver Wyman.
Auto insurance is the largest subsector of P&C insurance in China, with gross premiums accounting for 78% of total gross premiums of the overall P&C market in 2016, according to the CIRC. Auto insurance, particularly its pricing, is highly regulated in China, but has Ecosystem 3: Health and
medical
seen gradual deregulation in the past 3 years which has allowed for more market opportunities for nimble online insurance players.
Key players in this ecosystem include PICC P&C, Ping An P&C, ZhongAn and Answern.
Where InsurTech is creating value:
Currently, auto-related InsurTech products mainly fall into the online distribution and technology-enabled upgrade segments.
Online distribution. Online distribution helps insurers reduce cost and improve the customer experience. Many traditional insurers have set up their own websites or utilised third-party platforms to provide direct quotes and sell policies.
Technology-enabled upgrade segment. With the help of telematics devices that capture drivers’ behavioural data, InsurTech companies can use advanced algorithms and Big Data techniques to tailor product pricing of new products. An increasing number of traditional insurance companies are also trying to pilot automated claims processing.
Which technologies are utilised: Big Data and AI.
Big Data. Auto insurance providers have utilised driver behaviour data captured from telematics devices to enhance their existing auto insurance offerings. They are also collecting multi-dimensional data of the drivers for customised pricing.
AI. Auto insurance companies are using AI-enabled graph mining in the loss
assessment process to improve accuracy. This aids efficiency when assessing losses and helps improve the claim experience.
Ecosystem 5: Travel
Online travel agencies play an important role in China’s travel market. Major travel agencies include Alitrip, Ctrip, Qunar, Tuniu and Tongcheng. In order to differentiate themselves, the agencies offer different kinds of value-added services with their travel- related products.
In China, both traditional insurers and online insurers are actively competing in this ecosystem. Key players include ZhongAn, Huatai Insurance, CPIC P&C, PICC P&C and Ping An P&C.
Where InsurTech is creating value:
The online travel agencies have been partnering with InsurTech companies in recent years to offer travel-related insurance products which protect travellers against risks associated with flight delays, accidents and cancellations, amongst others.
Online distribution. Traditional travel-related products are integrated into the online travel agencies’ websites or mobile apps. Customers can purchase the product in a simple manner.
Technology-enabled upgrade segment. InsurTech players develop customised travel-related insurance products based on data collected from the online travel agencies.
Ecosystem-oriented innovation. More travel-related risks are addressed by innovative products designed by InsurTech companies such as flight-delay insurance and weather insurance.
Which technologies are utilised: Big Data, cloud and AI
Big Data. Insurers collect and analyse data from online travel agencies and other travel-related data providers to offer customised travel-related insurance products. They can also discover, using Big Data, other travel-derived protection needs for customers.
Cloud. The cloud-based system allows insurance companies to process large amounts of policies simultaneously.
AI. Insurance companies have also applied AI in the claims settlement of travel- related insurance, which allows the whole process to be automated with higher efficiency.