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Commercial ORC – a B2B distribution model

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Online reciprocal communities (ORCs) first emerged in 2015 and were designed as a way to generate leads that did not rely on search engine traffic.

Since then, ORCs have become a highly successful marketing tool for insurance brokers and insurtechs seeking to introduce the concept of insurance to the mass market, including those who were previously unaccustomed – or unwilling – to buy insurance.

Different strokes

The structure is different from both traditional insurance model is a profit-making business owned by its shareholders, and a mutual, which is owned by its members.

Though traditional insurers have well-defined procedures, are efficient at making decisions and financially robust, they have suffered from a poor image, due to real and perceived conflicts of interest between serving their shareholders and customers.

Mutuals tend not to suffer these same reputational difficulties and have higher levels of member satisfaction, but are less well capitalised and a lack of scale make governance expensive.

ORCs are risk-sharing networks – peer to peer or P2P –  that allow a group of individuals to pool their premiums to insure against common risk.

Claims are paid from the premium pool and at the end of the claim period – usually, a year – any premiums left may be distributed to policyholders as cashback or discounts the following year.

The ORC way

The ORC model runs a single operation with multiple mutual exchanges offering the benefits of a traditional insurer with an improved member experience.

It distributes via an “attorney-in-fact” model – more commonly referred to as an agent – to operate the business instead of the monolithic structures employed by traditional insurers.

Between 2015 and 2018, community insurance platforms experienced a 500% growth, with users almost doubling to 230 million in the year to the end of 2018.

The reasons for this are apparent. Though health insurance is mandatory through the social security system, which has 95% coverage, it covers only the most basic needs. Surgeries and prescription drugs are excluded.

ORC membership requires only a small deposit, with a deduction made against charges. Membership is retained through topping up that deposit.

Commercial insurance is a growing market, but is targeted at higher earners, as more expensive, but can be tailored for individual requirements.

Artificial intelligence (AI) has been used to fill the gaps between user knowledge and access to an agent.

AI customer service is supported by staff, agents and volunteers.

The growth of Bihu

Bihu Technology was the first to launch a reciprocal insurance company in China. Launched in 2015 with capital of nearly 400 million yuan, it was supported by four venture capital funds in China.

It is a trust-based ORC model and has used education to make potential users aware of the benefit of protecting against certain risks and has become the fastest growing platform in the critical illness sector.

Up to 2019, it had developed its ORC and data collection, developed user acquisition channels, launched an agent management tool and a user acquisition tool through WeChat.

The past year has seen it look to cement its position by striking a  partnership deal with a multinational reinsurer.

It is also looking for regulatory clearance and licences to establish reciprocal property insurance and reciprocal life insurance.

In 2020, it will seek round B funding, expand its offline distribution (agent) channel and also expand its partnerships with eCommerce platforms based upon the Bihu reciprocal licence.

The future’s bright – and growing brighter

Bihu has successfully introduced a suite of protection products into a mass-market that didn’t know these risks could be mitigated.

Its educational application of AI has greatly increased understanding within the Chinese market for insurance and healthcare products, virtually creating demand through raising awareness and keen pricing.

Expansion into other insurance markets is a logical step and having established trust in the brand, puts the company is an enviable position for the next few years.

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