The insurance industry in China will always have powerful competition with changes. Baidu, Alibaba and Tencent are now moving outwards from traditional online activities e.g. Alibaba with ANT Financial and Tencent with WeChat (WeBank, WeSure). Clearly, Alibaba and Tencent are expanding globally, and this supplies a great opportunity for strong global insurers to partner with the BAT. So co-operations can be built on expertise and IP, with lower investment, but more rapid income, through revenue sharing and minority stakes in the niche market collaborations.
Q.2 Which will have a bigger impact on the insurance industry, blockchain or AI?
If we consider China, I believe AI will have the bigger impact. Consider blockchain, it is distributed, offers no centralised control, and places emphasis on the market and consumers. This is counter China philosophy, which is based on central control and regulation; especially in insurance and other vital sectors of the economy. Meanwhile, AI will be implemented certainly by digital-based insurance entities as they build their mass of data and big-data integrations, to further individualise, target and rate their products and services, Offering huge advantages over traditional insurance entities and distribution. Outside of China, perhaps blockchain can establish an equal position to that of AI. If we look at the origins of insurance in the 17th Century, it was formed from the mutualisation of protection by merchants and shipping ventures in London. Blockchain, and we are already seeing movement, offers a secure platform for transaction and insurance of p2p mutualisation of cover. The issue for blockchain, just like for cryptocoins, is regulation, particularly cross-border. Just like telematics, we shall see the established insurance industry welcoming blockchain but on the other hand doggedly opposing it because it will erode their markets, potentially very rapidly, on the grounds of consumer protection – nor will the regulators want to see control dilute of insurance in their markets.
Q.3 What are the key trends in digital health insurance from your point of view?
The primary trends in China are:
- Insurers support the state health system, integrating and augmenting the current services.
- More affluent consumers are seeking more and better cover online, with improved digital services
- Digital distribution of health insurance increasing rapidly.
Really all three of these trends are linked. If we look at the huge success of PingAn Good Doctor, it supports the Chinese state medical system, integrates it with insurance (and co-pay) and augments it with prevention, health management and low cost healthcare services. In addition, it is so convenient to the healthcare consumer, providing interactive consultation online and pharmacy delivery services to the consumers’ doors. The integration into the existing healthcare system is particularly important, the healthcare infrastructure in China is vast, but is quite traditional and aged; the costs of modernising the system are vast. I foresee the further needed vertical integration of healthcare services in China catalysed by Insurtech, which is ideal for O2O exploitation for the benefit of all industry players and Chinese citizens. Finally, 2016’s digital health insurance premium was US$62bn, 67% growth year on year, I suspect 2017’s number will come in well over US$100m and will show strong growth in 2018 and forward inline with China Government policy implementation.
Q.4 The notion of an ecosystem seems especially relevant in China (Ping An Good Doctor or China Life retirement homes). Why do you think we don’t see the ‘ecosystem’ phenomenon in the West?
This is a good question indeed. I believe it is largely cultural but also a function of scale. We do see online ecosystems in the West, but not to anywhere the same extent or reach. The separation of China’s internet from the rest of the world, via language and the country’s ‘firewall’ has also affected the adoption of online ecosystems in the West. The separation has stifled understanding, learning and integration of the inside and outside internet. Naturally, some things will have developed differently in both sectors of the internet. Chinese society has been homogeneous for thousands of years and has a sense of family and community. This has translated into physical components of an industry congregating together, to co-operate and co-exist with mutual benefit. There are still areas in all the cities where you can find concentrated individual markets providing all the goods and services for children, home, car, holiday, sport, medical and so forth. It is only natural for this ‘community’ concept to translate to the China internet/online world. The consumers are are used to one-stop shopping, and this demand has translated online in the online communities or ‘ecosystems’.
In the West, generally we do not see these types of congregations except through ethnic congregation for cultural continuation and comfort. In addition, the culture of business and purchase is to research, compare, look at what others are doing, interact and test before and holistising many lateral factors before moving to implement. To many Westerners this long drawn-out period of consideration seems strange, as the Western culture is, in contrast, more dynamic and transactional and this is how the online world in the West tends to organise. However, in the West we can see consolidators like PCWs and market places, because of the technological convenience, have become very popular, but point service providers still exist in insurance (and other sectors) and succeed. This is far less true in China, even market dominators like Ping An adopt the ecosystem concept and, are consequently, even more successful than if they went alone. Scale also has a big part to play.
In the West, most countries and markets are small, 55-60m consumers in the UK, versus well over 1bn here in China. So investment in ecosystem, together with their consumer demand dynamic, means even with a tiny market-share they can quickly be commercially successful. With the right consumer concept, O2O in particular, they can be hugely successful as has been proven again and again in China. Now the Western online players are able to move in a similar direction to China online ecosystems, as the shift has been effected, and is gaining more and more acceptance. We see Facebook for example growing its consumer footprint and moving into many more value-added consumer activities. Now with the advent of IoT in the home, car and workplace, I expect the Chinese concept of the ‘online ecosystem’ to gain more and more momentum in the West.
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