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Interview: Hui Zhang

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This month we speak to Hui Zhang, General Manager of Answern Online in Beijing, one of only five holders of internet insurer licenses in China. Unlike Zhong An and Ant Financial, Answern doesn’t have ready made access to online distribution channels, however it has established itself though partnerships with seven Beijing based real estate companies. Through this differentiated approach, Hui Zhang’s has a unique insight into the future of digital insurance in China.

Q.1 In the face of increasing competition in the Chinese insurance industry, how can western insurers compete with Baidu, Alibaba, and Tencent (BAT)?

In the short to medium term, l think there will be frenzied competition whereby BAT will compete with everyone. However, although Tencent and Alibaba have both aggressively entered the insurance industry, western insurers have decades of underwriting experience which will increasingly matter as China’s insurance industry matures. For example, western insurers will be able to target segments of the Chinese market such as chronic diseases and the retiree segment.

Q2. Several InsurTechs are leveraging WeChat to market low premium re-imbursement based health insurance products, what do you think of this model?

It is certainly an interesting approach to customer acquisition. Many people in tier two and tier three cities are unable to purchase standard life/health insurance. The old tradition of saving money in case of serious illness or injury still exists. However, 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 policy holders. As the market matures, retention will also be an issue as western companies with unrestricted licenses will begin to compete with local players.

Q.3 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 addition of AI enabled 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.4 The notion of an ecosystem seems especially relevant in China (Ping An Good Doctor or China Life retirement homes for example). Why do you think we don’t see the ‘ecosystem’ phenomenon in the west?

I think we see clearer cases of ecosystems in China because China has developed so fast in the past 30 years that companies could quickly jump into adjacent industries that were at an early stage of development and so competition had not been entrenched.

For example, credit cards in China were bypassed in preference for mobile payments and then using transaction data to cross sell insurance and other financial services. In the west, it took longer for these industries to develop and so competitors became more entrenched and it was therefore more difficult for companies to move into adjacent industries.

Q.5 The China 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 stiffle innovation through too many rules and restrictions?

Possibly yes, but it’s important to remember that the regulator is trying to manage a lot of development currently. There may be cases of over-regulation, but the macro trend will be positive and the regulator has shown patience with internet startups despite an increased scrutiny on broker licenses. Another interesting development is the recent merger of the CIRC and the CBRC (China Banking Regulatory Commission) which is designed to address the increasing entrance of P2P lenders into insurance.

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