News and Opinion about Millennials surrounded by fintech & insurtech + Opinion by S. Ernest Paul

Digital Insurance Ecosystems in China

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Within the insurance industry, the notion of an ‘ecosystem’ has come to symbolize a path for those seeking to marry direct distribution with core services ranging from transportation to mobile payments to healthcare. For this reason, few have chosen to pursue the ecosystem model, but those that have share three common traits; First, an online platform – serving as a customer acquisition portal, user interface, and data cache that logs traffic flows, user behaviour and customer profiles. Finally, insurance ecosystems often include an O2O capability, delivering a range of everyday services from healthcare to mobile payments and often using new technologies to compete with current providers.

Ant Financial is the fintech arm of Alibaba, China’s ubiquitous e-commerce platform. When considering Ant’s ecosystem, it’s important to recognize the foundation upon which it is built – data. Alibaba has petabytes of data, most of it provided for free by its users. While western tech giants such as Facebook and Google also have enormous data pools, none of them have the same reach into mobile payments and offline services as Alibaba. This not only gives Ant an all encompassing view into the lives of it’s users, it also provides end to end access, through which it offers a range of financial services; from mortgages to wealth management and increasingly, insurance.

To date, Ant Insurance has amassed 380 million policy holders across life, health, auto, travel, credit and shipping return lines. Although the scope and scale of scenarios through which Alibaba is offering coverage is staggering, Ant’s biggest strength (the Alibaba ecommerce platform) could also be its biggest weakness. Specifically, the Alibaba Group will soon need to navigate new waters including virtual reality, personalised medicine and blockchain. Alibaba’s ability to compete in these fields over the next decade will also determine the strength of Ant Financial’s ecosystem.

Notably, while Ant Financial built its ecosystem on a bedrock of data, Ping An has poured its financial strength into building ecosystems across four key sectors.

Much speculation has been made about the impact of self driving vehicles and telematics on the auto insurance industry. Still, 22 million cars continue to be sold in China annually and Ping An makes 70% of its property insurance revenue from the auto segment. Considering this, Ping An has made several moves into transportation and chief amongst them is its majority stake in Autohome, a platform which allows users to buy and sell cars, source local dealers and find mechanics across 330 Chinese cities.

Interestingly, Autohome is not Ping An’s first attempt to establish an ecosystem in transportation. In 2013, Ping An launched Ping An HaoChe, a similar service that also boasted a network of car manufacturers and dealer partnerships. However, a year after launch, HaoChe’s aggressive offline expansion coupled with a low online conversion rate stalled growth. With a mis-aligned entry strategy, and $200m in sunk costs, Ping An quietly scaled back the effort.

However, this experience with HaoChe did not dissuade Ping An. Instead, it took a majority stake in HaoChe rival Autohome for $1.6bn USD. In addition to the core marketplace, Ping An mines data from Autohome such as car servicing frequency, purchasing habits and location data. This, in addition to a recently launched augmented reality showroom has helped Autohome reach 76% market share of online car sales in China. Ultimately, with Autohome, Ping An is demonstrating not only its willingness to invest in future autonomous driving technologies, but it’s determination to compete in the short term too.

Essentially, what we are witnessing here is foreign insurer competing with Chinese internet platforms by partnering with a traditional industry that can provide the vital offline components necessary to foster an ecosystem.

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