This month we speak to Peter Wang of Qian Hai Life, a Guangzhou-based life insurer.
Q.1 In the face of increasing competition in the Chinese insurance industry, how can western insurers compete with Baidu, Alibaba, and Tencent (BAT)?
First, Western insurers can collaborate with BAT by taking advantage of BAT’s mature technology and online platforms while utilizing the global resources of western insurers to provide more attractive and special services for Chinese consumer group with BAT, but not compete with them, through combining global resources, mature technology, and advanced insurance expertise.
But an even more interesting question for me is what can Chinese insurers learn from western insurers, and vice versa.
For example, Chinese tech companies have pioneered mobile payments and the notion of an ecosystem is clearly better developed in China, whilst Chinese insurers have recognized that consumers are mobile first and expect everything on demand, including insurance.
However, on the other side, we can see that western insurers have excelled in other areas.
First, western insurers have figured out how to serve specific market segments, and more importantly how to make these market segments profitable.
Examples of segments include:
– Chronic diseases. Diabetes. Obesity.
– Retirees, a particularly important segment for China.
Another issue that western insurance companies have dealt with is how to go global. South East Asia will be an especially relevant market and western insurers have already done well in Indonesia, the Philippines, and Malaysia.
Q.2 Which will have a bigger impact on the insurance industry, blockchain or AI?
Specifically I can give two use cases for blockchain in insurance.
First use case: Blockchain to automate electronic health records.
China’s health insurance market is great because there’s nearly universal public health insurance coverage. Yet as with other markets, there’s still a challenge around medical data as patients that are transferred between hospitals have no guarantee of data integrity between hospitals. The current solution is to manually reconcile this medical data across clinics, pharmacies and insurance companies. However, the notion that an open-source, community-wide trusted ledger can store health records – so that changes to a medical record is auditable across multiple organizations in the health system – is rapidly gaining support.
Second use case: Blockchain to authenticate micro-policy issuance from 3rd party platforms.
Another use case for blockchain is related to usage-based insurance policies (those that are only valid for a few days or hours). These UBI products have already established themselves as a winner on digital platforms. The success of UBI products is based on the accessibility of location data and also rely heavily on the time of policy initiation and expiry when assessing the validity of claims. As blockchain can immutably record the date and time of policy issuance, the ability to transform policies into ‘smart contracts’, or programs that run when certain conditions are met, can deliver increased security, automation and efficiencies.
And although usage-based insurance policies can also be delivered without the use of blockchain, a blockchain-based policy has a degree of transparency and certainty that is otherwise difficult for an insurer to deliver consistently. This is because as usage-based insurance is largely distributed on third-party digital platforms (such as flight aggregators) insurers don’t have access to the server logs of these 3rd party platforms to authenticate the exact time of policy issuance. Blockchain can independently verify the time and details of policy issuance to validate usage-based policies for both insurers and consumers alike.
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?
Also, the notion of an insurance ecosystem, and more importantly how to build it, is also better understood here.
I think there are two major reasons behind this phenomenon. From a commercial perspective side, Chinese companies believe “the bigger the better”. Giant corporations can gain more social resources (government support, policy preference, etc) and obtain more public attention which in turn promote their social recognition and brand image. At the same time, through establishing an ‘ecosystem’, companies can expand their businesses into various areas and ultimately form a monopoly or oligopoly market to ensure their stability.
From the customer side, Chinese customers believe “too big to fail”. On one hand, the government would back those giant ships up. Customers’ right would be highly protected by the state, which gives them a strong sense of safety. On the other, ‘ecosystem’ really brings customer more consolidated services and better customer experiences.
Q.4 The CIRC is imposing strict regulations on the development of digital insurance in China. Do you think there is a risk that CBIRC (China Banking Insurance Regulatory Commission) could stifle 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 so there may be instances where CIRC over regulates an emerging trend in order to protect consumers. One example of this is the current proliferation of ORC (Online Reciprocal Communities), startups selling low price low limit critical illness reimbursement through WeChat groups. In this instance, CBRIC has made sure that these startups do not market themselves as offering insurance, but instead must communicate that this form of insurance is not provided by an actual insurance company and therefore not guaranteed protection.