Tencent

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Tencent, the world’s fifth most valuable company, has succeeded by mastering notoriously difficult fields including social networking, gaming and healthcare. Although relatively unknown to the western world, Tencent emerged in 1999 with a PC messaging service called OICQ that allowed users to communicate within China’s internet cafes. Since then, it has enjoyed dizzying success by embracing a culture that has differentiated it amongst China’s internet giants:

1. First, Tencent has shunned advertising as a revenue model. Instead, up-selling ‘virtual goods’ within games such as adding ‘energy’ to make a game last longer. This has been key to Tencent’s revenue.
2. Second, Tencent has encouraged intrapreneurship by establishing teams to develop services that canabalise its existing offerings such as Qzone, QQBrowser and Pitu.
3. Finally, Tencent is notable amongst China’s internet giants for its pursuit of technologies that could benefit China’s less developed regions. Agri-tech, autonomous driving research, synthetic meat cultivation, and cloud services for rural China are all underway as engineers work on issues that will affect China and beyond.

Watch now: Video insight into the wider issues raised in this article with Swiss Re’s Yannick Even and the TDI team

Turning to financial services, although quick to establish a digital bank and a mobile payments feature, Tencent’s approach to the insurance industry has been more cautious. An early partnership with Taikang Life followed by joint ventures with Hetai Life and more recently Aviva were preludes to the establishment of its own broker in 2017 – tasked with designing and distributing personalised insurance policies across the Tencent ecosystem.

However, all these efforts rely on the same Tencent innovation that has swept China’s masses – WeChat, known in Chinese as Weixin (微信). WeChat is a messaging app that holds sway over a billion active users with the average user sending a message once every 15 minutes. In fact, Tencent’s contribution to digital insurance may rest solely on WeChat. As insurers continue to seek ways to move upstream, the rise of China’s most popular app is worth considering in more detail.

WeChat

A team of seven created the first version of WeChat in 2012. However, it wasn’t the only mobile messenger on launch. Xiaomi’s MiTalk was the leader at the time with 5m users. To succeed, WeChat rolled out several features to guide it through its early days;

1. Contacts on-boarding

WeChat, like every social network, realised early that they needed to solve the problem of having zero friends on day one. By enabling users to import their existing contacts from QQ (a PC based messaging service) to WeChat, Tencent fostered a familiar environment for new users.

2. Voice messaging

Voice messages were particularly important in China’s mobile messaging race, as smartphone keyboards struggled to produce Chinese characters easily. Drawing inspiration from competing messenger apps such as Kaokao talk and Line, WeChat rolled out a range of features such as voice messaging, enhanced emojis, and location-based communication.

3. Personalised user experience:

Finally, Tencent has borrowed heavily from Chinese traditions. The notion that small circles of friends are stronger at the core and weaker as the circle of connections widen, heavily influenced WeChat’s user experience. For example, comments and likes on a particular WeChat post can only be seen by ‘mutual friends’ and not ‘friends of friends’. Another Chinese tradition imbued into WeChat is the practice of gifting cash during national holidays. Expanding on this, Tencent allowed users to tie their bank account to WeChat, launching WeChat’s mobile payments feature which three years after launch, has become the biggest mobile payments provider in China, significantly surpassing Alipay in market share, although not in average transaction volume.

These efforts and others drove WeChat users to 50m by November 2011, ultimately allowing it to overtake MiTalk and setting the stage for a broader feature set that now includes official accounts for bloggers, and most recently; mini-programs. WeChat mini-programs are particularly interesting because they look and behave like native apps – except they don’t need to be downloaded. Instead, they live in the cloud and can be called upon by WeChat users at a moments notice. These programs now number a million, half the size of Apple’s app store and make them perfect for low-frequency use cases such as insurance.

WeSure

WeSure is founded on the premise that user data from WeChat profiles, location data, and transaction data from WeChat Pay can be used to tailor policies to WeChat’s user base. By designing scenario based offerings to chosen user segments on WeChat and easy-to-understand product illustrations, WeChat is attracting younger users across China’s tier one cities and Tencent itself has developed as a WeChat mini-app.

Another tenet of WeSure is the design of new products such as combining term insurance with an annuity component to relieve pressure on young families. WeSure is also leveraging its ties to WeChat to enable the sending of child medical insurance policies as a gift through WeChat. Despite only operating for less than a year, WeSure has already amassed 10 million policyholders, 70% who are first-time insurance buyers on WeChat, and 48% returned to buy more than one product.

So far, WeSure has partnered with over 20 insurers including MetLife, Fubon P&C and Taikang Life. Finally it offers premium discounts for users that agree to the tracking of basic wellness data such as step counters and location coordinates. Ultimately, the establishment of WeSure may define Tencent’s contribution to digital insurance, and although WeSure has excelled at cross-selling travel insurance and low limit critical illness insurance, it still lacks the agency and bancassurance network required to distribute more complicated lines. To get there, Tencent is integrating online services with public hospitals and investing in preventative healthcare initiatives.

Watch now: Video insight into the wider issues raised in this article with Swiss Re’s Yannick Even and the TDI team

WeDoctor

WeDoctor (previously Guahou) was an early entrant into China’s mobile health space by making public hospital and doctor appointments available through an app. Although Alibaba’s AliHealth and Ping An’s Good Doctor offer similar services, neither can match WeDoctor’s breath of hospital integrations. WeDoctor also has the distinction of being the only digital health app authorised by China’s Ministry of Health. Tencent’s efforts to bridge online diagnostics have increased with its establishment of Doctor Work, an online/offline private healthcare service with 33 offline hospitals in eight cities.

Offline clinics are a key part of Tencent’s healthcare strategy, delivering screening and diagnostic services to Tencent users.

WeDoctor and DoctorWork also facilitate prescription drug deliveries and help users monitor sleep patterns, exercise, and diet in addition to the management of chronic diseases such as diabetes and hepatitis. Additionally, WeDoctor and WeChat Pay have been integrated with thousands of public hospitals to facilitate co-pay arrangements for state-funded health insurance plans that cover 95% of China’s population.

Open innovation

Finally, although both Alibaba and Baidu are pursuing a range of emerging technologies to alleviate societal challenges, Tencent is particularly active in causes that afflict China’s underdeveloped regions. First, the rollout of 4G infrastructure, followed by mobile internet services for rural regions such as early warning of natural catastrophes is undoubtedly the most cost-effective investment for improving living standards across rural China. Secondly, Tencent is actively investing in R&D efforts that also relate to insurers seeking to move upstream. Such as;

Transportation

The fact that transportation is becoming more shared, electric and autonomous is clear. Although not a pioneer, Tencent is active in autonomous driving research with a R&D unit both in Shenzhen and Silicon Valley. An investment in autonomous driving startup Lilium is also providing Tencent with access to autonomous driving technologies.

Preventative healthcare

China suffers disproportionately from chronic diseases such as diabetes, hepatitis B and respiratory diseases. To complement its work with WeDoctor and DoctorWork, Tencent has invested in Beijing based Karius to provides blood diagnostics that identify epidemics such as Zika or Ebola in seconds.

Food Production

Finally, Tencent is also active in sectors that affect society at large. An investment into Israeli Agritech Phytech which manufactures in-field sensors and satellite data to optimize water and pesticide usage is being brought to China while Tencent has also invested in Zenisis, a data analytics startup that helps African governments allocate national resources most efficiently.

See the slide deck below for more details on Tencent

Conclusion

The fact that Tencent is improving the lives of millions in China is beyond doubt. Yet despite Tencent’s success in markets that insurers will need to grapple with in coming years, challenges remain. For example, a high rate of myopia amongst Chinese children has prompted government restrictions on the approval of Tencent’s new games, its biggest revenue source, while Tencent’s new headquarters in Shenzhen and 40,000 employees dwarfs the nimble teams that produced World of Honor, QQ, and WeChat.

Finally, although Tencent has pioneered financial services from mobile payments to online banking, its contribution to digital insurance will largely depend on its ability to evolve WeChat on three fronts;

First, consolidate the use of WeChat pay, location features, and online merchants through which tailored insurance products can be cross-sold.

Second, expand WeChat overseas. Although WeChat already has 100 million users outside China, most of these are the Chinese diaspora and establishing a western audience would unlock a host of new markets and consumer segments for Tencent.

Finally, amid all the digital disruption along China’s eastern seaboard, it’s easy to forget its agrarian hinterland, and the opportunity to develop WeChat based financial services and digital insurance for this segment is considerable.

Watch now: Video insight into the wider issues raised in this article with Swiss Re’s Yannick Even and the TDI team