Insights

Online-only Insuretech ZhongAn Insurance

Pony Ma from Tencent, Mingzhe Ma from Ping An Insurance and Jack Ma from Alibaba Group (Source:China Daily)

ZhongAn Insurance (HK:6060) is the first online-only Insurance technology company in China, which was established by Jack Ma from
Alibaba Group (NYSE: BABA), Pony Ma from Tencent (HK:0700) and Mingzhe Ma from Ping An Insurance (SHA:601318). Total income in 2017 was 5,583 million RMB (roughly 810 million USD) and increased by about 65%.

In March 2014, CIRC (China Insurance Regulatory Commission) approved the expansion of the insurance industry’s permitted business scope, including the addition of “short term health and accident insurance” to ZhongAn Insurance. One month later, the company released “Wujieshan”, their online insurance platform.

ZhongAn Insurance started their business from property and casualty insurance and has now spanned to auto-insurance, medical insurance and other areas. The total income in 2017 reached to 5,583 million RMB, and for this half of year in 2018, the total income surged to 4,067 million RMB. However, net profit still underperformed compared with the increase in income. The company has experienced a downturn in profitability and reported an operating loss since last year.

ZhongAn grabbed the attention of the market on Singles Day 2016, a Chinese shopping holiday, by selling over 200 million insurance-related products during the week.

The company decided to IPO in September 2017 (ticker: HK: 6060), and became a constituent of Hang Seng Composite LargeCap & MidCap Index just one month after IPO. In August 2018, Softbank Vision Fund, one of the largest private equity funds in the world, invested in ZhongAn. As a leading internet Insuretech company, ZhongAn Insurance is now attracting global attention.

“Combined ratio” is a quick and simple way to measure the profitability and financial health of an insurance company. The combined ratio is calculated by summing the loss ratio and expense ratio. ZhongAn Insurance’s combined ratio has been over 100% (approximately 124.0% by the end of June 2018), which means the company is paying out more money in claims that it is receiving from premiums. The breakdown shows that Expense ratio has rapidly increased. ZhongAn is taking substantial cost to acquire customers.

Unique product lines

ZhongAn expanded its e-commerce platform with accident insurance, medical insurance and auto insurance as well as a series of unique products such as pet insurance and drone insurance.

There is a function in their mobile app to calculate customers’ walking steps in order to generate data for calculating insurance fee. The main income of the company relied on return shipping insurance in the past and as the company scaled to offer various products, the income structure is getting more balanced.

Partnerships at 5 segments

ZhongAn holds partnerships with many large well-known companies aimed at 5 segments:
Lifestyle Consumption, Travel, Consumer Finance, Health and Automotive to build their customer base.

Lifestyle Consumption:

ZhongAn is cooperating with Alibaba’s Tmall for its lifestyle consumption segment. Tmall users can purchase delivery insurance for 0.3 RMB, which is provided by ZhongAn. Besides selling insurances to Tmall users, ZhongAn also provides shipping return insurance and offers funding for the shops in Tmall. By gathering data from both users and shops at Tmall, ZhongAn integrate and analyse the data and offer them for micro shops at Tencent too.

Travel:

There are four areas in ZhongAn ecosystem of travel that they are focusing on. Besides its original Online Travel Agency (OTA) channels, the travel ecosystem business further expanded their marketing channels into airlines, offline plane tickets agencies and service platforms of travel agencies, and continued to enrich their product portfolio to provide travel customers with travel accident insurance, flight cancellation insurance, hotel cancellation insurance and other products.

Consumer finance:

ZhongAn offers credit guarantee insurance products and solutions for micro finance companies such as Wecash, which is backed by Tencent.

Health:

Customers can purchase health insurance products through the platforms of partners (such as the insurance service platform of Ant Financial and Wechat channel) and the proprietary platforms. ZhongAn acquired many customers through two payments services by providing reasonable healthcare insurance.

Automotive:

The key issue for auto insurance is driving data. ZhongAn is cooperating with Didi, Xiaomi to gather more driving data for calculating auto insurance fee.

Growing Insurance Market in China and Overseas’ Growing businesses

It is said the insurance market size in China will increase to 4.9 trillion RMB (approximately 710 billion USD) based on gross written premiums. Based on life insurance, P&C (property and casualty) insurance will reach to market size of 1.5 trillion RMB (217 billion USD), and A&H (accident and health) insurance will reach to market size of 1.0 trillion RMB (145 billion USD). ZhongAn Insurance is well positioned to penetrate this enormous market and is improving its market presence rapidly.

Outside of China, ZhongAn is also accelerating its business in Asia, especially after the company got capital investment from Softbank Vision Fund. ZhongAn Insurance COO, Mr. Wayne Xu released that the company had already tied up with Paytm, an e-commerce platform based in India and the company started to sell insurance products through this new channel including 350 million customers and 8 million shops on the platform. ZhongAn also tied up with Sompo Japan Nipponkoa, and the two companies are looking to release new products together.

As a leading online insurance company which is trying to “distrupt” the whole insurance industry both in and outside of China, it is worth watching continuously.


The original article was published by Stockclip, Inc. on 18/12/2018.

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