Insurers shed gimmicks, adapt technology

If you can’t see the Mid-Autumn Festival moon because of cloudiness or your health deteriorates because of too many late nights, there have been insurance policies written to compensate for such setbacks.

But gimmicky among insurers is now abating as the industry moves into the more serious and more lucrative field of insurance technology. The face of the new vanguard is ZhongAn Online P&C Insurance Co.

ZhongAn is the first mainland insurance company to be granted a license to operate without physical outlets. It listed in Hong Kong in September in a public offering nearly 400 times oversubscribed, chalking up more than US$10 billion in market value.

So why were international investors so eager to embrace a company that has yet to show a profit? It certainly wasn’t insurance prospects that drew global attention. Rather, the company’s stature rests heavily on its technology arm, which is adapting artificial intelligence, blockchain, cloud computing, and big data to systems benefiting the financial services and healthcare industries.

Among the achievements of the technology was the application of blockchain technology to chicken farms in remote, poor areas to track the origin and activities of the fowl in order to provide reliable information to the food chain.

Blockchain uses an encrypted database that cannot be overwritten, ensuring food safety for consumers and help for farmers seeking to acquire financing and insurance coverage.

ZhongAn is also active in promoting the adaption of blockchain to record financial transactions and to share confidential medical records among hospitals, healthcare management companies and financial institutions.

It has helped reduce the time needed for claims on commercial medical insurance policies to one day from 10 in one small city in Zhejiang Province.

The company’s shares in Hong Kong have been trading at about HK$70 (US$xxx). Credit Suisse set ZhongAn’s target price at HK$75.50, about 41 percent of that attributed to the technology unit, where revenue is expected to rise 65 percent a year in the next five years.

The insurer reported premium income of 1.6 billion yuan (US$xxx) in the third quarter this year and a cumulative loss of 890 million yuan for the first three quarters.

Jeffrey Chen, chief executive of ZhongAn Online, said he envisions that technology will empower financial institutions to address all aspects of daily life.

The company listed in Hong Kong, he said, to increase its profile among international investors ahead of expansion into overseas markets.

Willis Towers Watson, an advisory and insurance broking company, said in a report that insurers in emerging markets are introducing innovative solutions faster than their peers in more developed markets. Advances in insurance technology make it easier, quicker and cheaper for them to assess customer behavior, needs and risks, and Chinese companies aren’t burdened by the legacies of past insurance practices.

“We believe that technology has not only the potential to disrupt national insurance markets, but also alter the balance of power between insurers in developed markets and those in emerging economies,” said Rafal Walkiewicz, CEO of Willis Towers Watson Securities. “Companies in emerging markets are often able to create new innovative solutions faster, and their business models are exportable.”

Yunfeng Financial Group, established by e-commerce giant Alibaba and partners such as Giant Group and Sina, acquired Hong Kong-based MassMutual Asia in August for US$1.7 billion.

The transaction will give MassMutual Asia, an arm of Massachusetts Mutual Life Insurance Co, access to shareholder financial services platforms and channels for the distribution of asset management and insurance products.

Various parties involved in the acquisition will also explore and cooperate on digitalization of insurance systems and use of data analytics in risk pricing.

Commenting on the deal, Eddie Ahmed, chairman, president and chief executive of MassMutual International, said the deal creates potential opportunities for MassMutual Asia to collaborate with an innovative network of entrepreneurial Hong Kong and mainland-based businesses. He cited “an exciting range” of initiatives from big data to asset management.

On another front, Toi See Jong, president of the Life Insurance Association of Malaysia and chief executive of Tokio Marine Life Insurance Malaysia, led a dozen Malaysian life insurers on a recent visit to Innospace+, a Shanghai innovation community, to learn about new developments in financial technology, including payment systems, risk analysis, online distribution and robotic processing.

China has led innovation in e-commerce and e-payments,” said Toi. “The insurance industry needs this innovation and can learn from China.”

Large insurers see technology as a defense mechanism in maintaining market position. Ping An Insurance Group, which has overtaken China Life Insurance Group to become the nation’s largest insurance company in terms of market value, has adopted a strategy of turning from capital-driven business to one driven by technology.

The group, which set up a technology unit in 2008 to provide in-house services for its core insurance business, now predicts that unit will generate half of its revenue from external clients in the next few years.

Pig An has invested more than 50 billion yuan in technology development in the past 10 years, mainly focusing on financial technology, medical technology and artificial intelligence.

Last month, its technology arm signed a deal with South Africa’s Discovery Ltd, that country’s largest health insurance group, to use Ping An facial recognition in banking services.

Ping An said the Chinese government is encouraging the export of such advanced technology as part of the “Belt and Road Initiative.”

“The explosive growth of the insurance industry in China is not constrained,” said Walkiewicz of Willis Towers Watsons Securities.