This month we speak to Haifei Li of Sino Conflux Life, a regional life insurer in China’s North Eastern province of Liaoning.
Q.1 In the face of increasing competition in the Chinese insurance industry, how can western insurers compete with Baidu, Alibaba, and Tencent (BAT)?
The size of the market means the insurance industry in China will always have stiff competition. Baidu, Alibaba and Tencent are now moving away from traditional online activities and towards financial services 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-operation 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?
These technologies can be considered separately and also together. First, AI has already begun to change the simplest most repetitive tasks previously done by call centers. Customer service and claims are a significant cost for insurers and the emergence of decision tree based chatbots and claims processing will impact retention rates and profitability. Blockchain is earlier in its development and still unproven. For blockchain, there are still questions around security and the exact use cases for insurers. However, there are several parametric insurance products that can be independently authenticated with the use of blockchain.
Q.3 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?
The insurance industry in China is at an early stage. The public health system is also immature. This makes it possible for larger insurers to enter multiple fields adjacent to their core business. The concept of end to end ownership is appreciated in China, as the big tech companies have all been built around the idea of a platform. Many insurers now see the chance to jump into healthcare delivery instead of waiting for private hospitals and clinics to establish themselves. Ping An is the best known example, but there are others including Taikang, China Life and An Xin that are all moving into healthcare delivery and directly employing doctors.
Q4. Several InsurTechs are leveraging WeChat to market low premium reimbursement based health insurance products, what do you think of this model?
Many people in tier two and tier three cities are unable to purchase standard life/health insurance. Although the old tradition of saving money in case of serious illness or injury still exists, this model presents a lower price point for people not living in wealthy east coast cities. I think the challenge for this model will be whether it can convert enough customers to real policyholders. As the market matures, retention will also be an issue as western companies with unrestricted licenses will begin to compete with local players.
Q.5 The China Banking Insurance Regulatory Commission (CIRC) is imposing strict regulations on the development of digital insurance in China. Do you think there is a risk that CIRC could stifle innovation through too many rules and restrictions?
I don’t think so. Digital insurance is still a relatively new thing with many uncertainties. A cautious attitude is actually beneficial to the long-term development of digital insurance. Even though CIRC have enacted rules and restrictions, it doesn’t mean they want to limit its development. Both insurers and the regulatory committee need time to discuss and explore its most suitable development path and the appropriate business models. I believe the CIRC will open up the industry when the time is right.