The development of technology has seen more fintech innovations in various sectors. In the insurance sector, insurtech has been gaining traction in recent years, especially in markets such as China where online ecosystems are quickly adopted and widely used.
China has a relatively low insurance penetration. By the end of 2017, the country’s insurance penetration rate was 4.42% (2.59% in life insurance and 1.83% in non-life), according to Winston & Strawn, with Hong Kong and Taiwan at 15% and 16% respectively.
Yet the market is quickly expanding. In 2018, the primary premiums in China hit 3.8 trillion yuan (US$540 billion), which was the second largest globally, up 3.92% year-on-year. With a growing need for customized products and product innovations, the Chinese insurtech industry, which started relatively late, has great growth potential.
“In China, insurtech is a popular segment in the market. If you look at the market statistics, during the past decade, the online insurance market size increased almost 58 times, which is quite a significant increase,” says Billy Song, CEO of ZA Tech, during the Hong Kong Fintech Week this year.
Over the last five years, total online insurance premiums in China have increased by nearly twentyfold, from 11.07 billion yuan in 2013 to 183.53 billion yuan in 2017, according to KPMG.
This is largely due to the fast adoption and widespread use of online ecosystems by Chinese.
Meanwhile, the regulatory environment in the country is supportive of technology innovations. “If you want to start a business in China, you need to start with technology rather than people,” says Song, highlighting the importance of tech in China.
“We are also seeing an increase in both the number and the size of insurtech companies. For instance, ZhongAn (ZA) was only established in 2013. Four years later, we launched an IPO in Hong Kong successfully. That’s why we established ZA International,” says Song. “Now, insurtech and fintech are among the most important areas for ZA International. We got our virtual banking licenses in Hong Kong this year. And we also established ZA Technology.”
The disruptions triggered by insurtech are causing a revolution in the insurance industry. The reason why this industry can be reshaped by insurtech is the possibility of building a new ecosystem, according to Song.
In addition to China, Song’s company is also entering overseas markets such as Southeast Asia and Japan. In Indonesia, ZA is collaborating with ride-hailing platform Didi to offer innovative insurance policies which are affordable and flexible to drivers, especially those with low incomes. This type of innovation is also being applied to ZA Tech’s partnership with Grab, the largest ride-hailing platform in Southeast Asia.
“We greatly increase the target audience. I believe this type of insurtech innovation will have a great future. It brings insurers much closer to the customers and improves the relationship between traditional insurers and new types of customers such as millennials,” Song comments.
“The market has seen the need for traditional players to adopt more technology,” says Clement Cheung, CEO of Hong Kong regulator Insurance Authority, noting that insurtech offers a positive disruption and a better fintech eco-system.