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China In-Depth: Baidu, Alibaba, Tencent

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The Chinese InsurTech market is dominated by three key players – Baidu, Alibaba and Tencent, otherwise referred to as BAT. But what has been the development of each within the Chinese market?

Baidu, Alibaba and Tencent have all had some ups and downs within the insurance market, but Baidu would appear to have the least to show for their efforts to date. It has yet to obtain any insurance licences, while its competitors have three each.

Each also has a somewhat different focus and Baidu’s has been on the application of artificial intelligence (AI) within the field of automated cars with its Apollo programme and natural language processing (NLP) with its ERNIE platform.

Jack Ma of Alibaba and Pony Ma of Tencent

Clash of the titans

Since 2013, these internet giants – Ali and Tencent – have been actively involved in the insurance industry. They have each established major companies that are disrupting and innovating in equal measure.

Alibaba uses its technology to improve and optimise the user experience to sell a range of insurance products through Alipay, its third party mobile and online payment platform.

Its insurance arsenal is well provisioned, which includes: Trust Mutual Life Insurance, Cathay Property Insurance and Zhongan Online. Despite strength in depth, all of these brands are finding it hard to generate profit.

Early adopter

Zhongan Online was China’s first digital insurance company. It provides customisable corporate group insurance for small and medium sized enterprises. It also offers special insurance cover such as pet insurance and drone third party liability insurance.

Jointly established by Ali (now Ant Financial), Tencent and Ping An, it was launched in November 2013 and is headquartered in Shanghai. There are no branches, as all underwriting and claims are conducted through the internet.

Less than four years after launch, it became the fastest insurer to go from startup to IPO when it listed on the Hong Kong Stock Exchange. Since listing, its market cap has fallen by almost 60% to around 40 billion yuan. Though premium income in 2017 increased by 74.7% to 5.95 billion yuan, losses totalled almost 1 billion yuan.

The story did not improve in 2018, with losses through the first three quarters of 1.094 billion yuan. By early 2019, there were still no profits, but revenue was continuing to increase at a rate faster than any other pre-profit company, at around 75% year-on-year.

It has 300 million customers, with an average of 8.4 policies each, contributing around 17 yuan per person to premiums. Alibaba’s two other insurance institutions – Cathay Property Insurance and Trust Mutual – are also running at a loss.

Shanghai based Cathay Property Insurance was established in 2008. Between 2009 and 2017, Cathay Property Insurance made losses of more than 900 million yuan. However, shareholders remain patient, playing the long game with increased capitalisation from 1.63 billion yuan to 2.63 billion yuan.

Trust Life Insurance Mutual Insurance Agency (Trust Mutual) was China’s first mutual life insurer. Approved in May 2017, it is registered in Beijing. Mutuality is a new concept for China, and it is not yet closely regulated. Trust Mutual focuses on mass market strategies, using the internet to slash costs.

Plans to join with Ant Insurance to launch mutual aid health protection services for Ant members folded in around a month due to regulatory difficulties.

Different strokes

AliBaba also offers mutual insurance, property insurance, Internet insurance licenses, and insurance agency licenses through Ant Insurance and Wantong Asia. It also has a Hong Kong insurance license.

Ali has promoted its Quan Min Bao life pension plan and Xiang Hu Bao critical illness mutual plan.

And Xiang Hu Bao has resonated with consumers. Millions signed up within days of its launch and by the time it had been running for 12 months in October 2019, it had attracted 92 million subscribers.

While Ali has looked to the main commercial and retail markets, Tencent adopted a boutique approach.

The WeSure platform has worked with insurers to provide customisable insurance, and used the social media nature to sell selected products and from a commercial point of view, it seems to be working.

Data from WeSure showed that as of March 1, the platform had more than 90 million users. As of September 2018, the WeSure programme has 20 million active users and it ranked first in the insurance app for the previous six months.

Other insurance brands that Tencent has an interest in include He Tai Life Insurance, Beijing Yingke Bicheng Technology (15%), Hong Kong Aviva Life Insurance (20%) and Beijing Teng Nuo Insurance Broker.

Shifting sands

Baidu and Alibaba saw an opportunity to offer a range of insurance products across their users, by taking the important step of educating the market about the benefits of these new products.

They have both since changed their distribution models and moved away from mass market distribution towards tailored cross selling, as seen with WeSure and Xianghubao.

This is similar to Zhong An, which has offered short term policies to access higher margin lines.

However, Baidu’s shift has been considerably greater. In April 2017, it launched a program called Apollo, an open source, complete secure software platform to assist the fast tracking of autonomous driving solutions that might be integrated into the automotive industry’s own vehicle and hardware systems.

This was designed to be a collaborative ecosystem, to further Baidu’s technological advantages in the field of artificial intelligence while promoting the development and popularisation of autonomous driving technology.

Apollo is a complete set of hardware, software and service systems, including vehicle platform, hardware platform, software platform and cloud data service.

Baidu provides the source code for functions such as environment awareness, path planning, vehicle control, and vehicle operating systems, as well as provide complete development testing tools.

They will collaborate with partners for vehicles and sensors based on compatibility and synchronisation and recommend them to third-party partners in order to reduce the research and development threshold of unmanned vehicles.

Apollo Robotaxis from https://insideunmannedsystems.com/

A pilot scheme has already started with Baidu’s first fleet of 45 Apollo robotaxis operating on China’s urban roads.

The vehicles, L4 Hongqi EV vehicles jointly developed with Chinese carmaker FAW Group, can perform a variety of intelligent self-driving functions, including changing lanes based on road and traffic conditions, assessing nearby vehicle movement and employing automatic avoidance.

The public can hail these taxis in Changsha, Hunan province, though each robotaxi still has a human operator who can override the controls if necessary.

A new breed of disruptors?

It has been claimed that disruptive platforms like Xianghubao are not competitors to insurance companies, but are being used to popularise and educate an unsophisticated public.

Though Baidu, Alibaba and Tencent have dominated the first and second decades of China’s internet sector, they cannot hope to retain control in the future.

A number of companies, including Tik Tok, Meituan and Didi Chuaxin are looking to muscle in to become the next BAT.

Ali and Tencent are well placed within the insurance sphere, but here Baidu has been left behind. However, Baidu’s collaborative approach to develop an open source platform for driverless vehicles could place its AI technology within all cars not only in China, but across many parts of the world.

With the other internet giants struggling to turn a profit from their admittedly hugely popular platforms, it remains to be seen whether some, or all titans of the Chinese internet sector will be forced out by other businesses that manage to combine popularity with efficiency and sustainable margins.

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