Within the insurance industry, the notion of an ‘ecosystem’ has come to symbolize a path for those seeking to marry direct distribution with core services ranging from transportation to mobile payments to healthcare.
Although this may sound like an updated form of cross selling, establishing an ecosystem requires extensive resources and deep engineering talents. For this reason, few have chosen to pursue the ecosystem model, but those that have share three common traits;
- First, an online platform – serving as a customer acquisition portal, user interface, and data cache that logs traffic flows, user behaviour and customer profiles.
- Second, a data mining capability. This is sometimes paired with a dedicated data center used to create scenario based financial services that are seamlessly integrated into the online platform.
- Finally, insurance ecosystems often include an online to offline (O2O) capability, delivering a range of everyday services from healthcare to mobile payments and often using new technologies to compete with current providers.
Although achieving all three of the above is an undertaking for any company, developments in China have shown what is possible for those prepared to embrace new platforms and make investments that will out-last the tenure of current management.
Ant Financial
Ant Financial is the fintech arm of Alibaba, China’s ubiquitous e-commerce platform. When considering Ant’s ecosystem, it’s important to recognize the foundation on which it is built – data. Alibaba has petabytes of data, most of it provided for free by its users. While western tech giants such as Facebook and Google also have enormous data pools, none of them have the same reach into mobile payments and offline services as Alibaba. This not only gives Ant an all encompassing view into the lives of its users, it also provides end to end access through which it offers a range of financial services; from mortgages to wealth management and increasingly, insurance.
However, Ant Financial isn’t just mining data for distribution purposes. Pioneering work on pricing and loss adjusting is also underway. The recent unveiling of an AI enabled loss adjusting assessment for car insurance (based on claim data and image recognition) is the first of many deeper disruptions. Other initiatives include Ant’s new policy holder authentication process, which has evolved from passwords to biometric confirmation based on facial, retina and fingerprint scanning.
To date, Ant Insurance has amassed 380 million policy holders across life, health, auto, travel, credit and shipping return lines. Although the scope and scale of scenarios through which Alibaba is offering coverage is staggering, Ant’s biggest strength (the Alibaba ecommerce platform) could also be its biggest weakness. The Alibaba Group will soon need to navigate new waters including virtual reality, personalised medicine and blockchain, Alibaba’s ability to compete in these fields over the next decade will also impact the fate of Ant Financial’s ecosystem.
Ping An
The importance of ecosystems to Ping An was recently articulated by group vice president Jessica Tan:
“We think four sectors are most relevant for us and our customers: financial services, real estate, auto, and health. Therefore, five or six years ago, we created everything around these ecosystems.”
One key difference between the Ant Financial and Ping An transition up stream is in their approach. Specifically, while Ant Financial built its ecosystem on a bedrock of user data, Ping An has poured its financial strength to build ecosystems across four key sectors.
1. Auto
Much speculation has been made about the impact of self-driving vehicles and telematics on the auto insurance industry. Still, 22 million cars continue to be sold in China annually and Ping An makes 70% of its property insurance revenue from the auto segment. Considering this, Ping An has made several moves into transportation and chief among them is its majority stake in Autohome, a platform which allows users to buy and sell cars, source local dealers and find mechanics across 330 Chinese cities.
Interestingly, Autohome is not Ping An’s first attempt to establish an ecosystem in transportation. In 2013, Ping An launched Ping An HaoChe, a similar service that boasted a network of car manufacturers and dealer partnerships. However, an overly aggressive offline expansion, coupled with a low online conversion rate stalled HaoChe’s growth. A year after launch, and $200m in sunk costs later, Ping An quietly scaled back the effort.
However, this experience with HaoChe did not dissuade Ping An. Instead, it took a majority stake in HaoChe rival Autohome for $1.6bn USD. In addition to the core car marketplace, Ping An now mines data from Autohome such as car servicing frequency, purchasing habits and location data. This, in addition to a recently launched augmented reality showroom has helped Autohome to a 76% market share in online car sales. Ultimately, in the auto vertical, Ping An has demonstrated not only its willingness to invest in future autonomous driving technologies, but also it’s determination to compete in the short term too.
2. Real Estate
Ping An’s real estate ecosystem is called Haofang. A one-stop shop for homes, real estate investing and property developments. Opened in 2014, the key to HaoFang’s success was its ability to secure early partnerships with dozens of real estate developers across China. This guaranteed a steady supply of new home listings which brought over 12 million Chinese consumers flocking to Haofang, and spending more than 150 billion rmb on new home transactions last year.
Again, Ping An’s ecosystems are about much more than distribution. The launch of a customer to customer (C2C) house leasing platform in a separate app and Haofangbao (an investment fund that offers investors discounts on house deposits) has broadened Ping An’s revenue streams.
Essentially, with Haofang, Ping An’s is diversifing itself away from its core insurance products, while also equipping it with direct distribution for its mortgages, wealth management products and range of insurance lines.
3. Health
Ping An Good Doctor is an O2O health platform and already covered by The Digital Insurer here. If Ping An HaoChe demonstrated the dangers of building an ecosystem, then Good Doctor is demonstrating the rewards. This time, Ping An has managed to amass a staggering 77 million users on Good Doctor while simultaneously assembling the largest team of online doctors in China. What separates Good Doctor from hundreds of other similar health apps is Ping An’s unique ability to combine online services such as consultations and medicine ordering with a vast network of offline hospitals that competing startups struggle to provide.
In fact, Ping An has built a three-tier network of doctors including 900 dedicated doctors to provide free online consultations 24 hours a day. Furthermore, Good Doctor’s B2C medicine supply network has already covered the whole country and its O2O medicine supply network serves tier-1 cities where it can deliver medicines within two hours. Having raised over $500m USD and reportedly readying itself for an IPO, Good Doctor is the brightest star in Ping An’s ecosystem and now a key pillar of the broader group.
Ultimately, although Ping An and Alibaba are China’s best known ecosystem players, it’s important to remember that ecosystems are not just a gift for the tech giants that rode the internet tidal wave in China. In fact, smaller insurers operating in China have begun cultivating ecosystems of their own – in new and increasingly clever ways.
Generali China
Generali has recently been ramping up its property insurance efforts in China, firstly by recruiting a new tech team and more recently by laying the foundation for Generali’s own ecosystem here, this time in utilities.
In this case, Generali is leveraging its JV partner, China National Petroleum Corporation (CNPC), to establish an ecosystem for home and health insurance based on CNPC’s positioning as China’s largest supplier of natural gas. As every CNPC gas installation requires an annual maintenance by law, Generali is capitalising on this offline interaction to cross sell home and health insurance through a dedicated mobile app carried by maintenance technicians. More importantly, this offline reach can also pave the way for the installation of connected home devices (including smart water meters and energy optimization devices) giving Generali the vital offline element necessary to establish an ecosystem.
Essentially, what we are witnessing here is a foreign insurer competing with Chinese internet platforms by partnering with a traditional industry, thus gaining the vital offline component necessary to foster an ecosystem.
Union Life
China has 200 million people over the age of 60, half of whom live alone. In light of this, and given a shortage of retirement communities, several Chinese life insurers have stepped up to provide retirement homes outside major urban centers. One of these is Union Life who recently invested $30 million to acquire seven facilities in the Shanghai-Nanjing region.
Although involvement in retirement communities is not unique to Chinese life insurers, the multi-disciplinary skill set required to deliver hospitality, f&b and palliative care is a level of commitment typical of those pursuing ecosystems. This example also demonstrates the delicate balancing act required to achieve government supported initiatives with regulatory concerns about insurers operating outside their core competency. By doing so, Union Life and others will continue to consolidate their ecosystems, bolster their offerings, and diversify their operations.
Conclusion
The ubiquity of mobile devices has lifted barriers that previously prevented insurers from moving up stream. At first glance, the ecosystem model offers direct distribution, customer ownership and additional revenue streams. However, creating a consumer internet platform coupled with advanced analytics and O2O engagement is a daunting task, one that requires extensive resources, but Generali and others have shown that even niche players can make the economics work with the right approach.
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