Insurtech will be "a risk stabilizer" for inclusive finance, industry insiders say

Tracy Li
China's online consumer credit will see fast growth in the near future and insurance technology will be as a "risk stabilizer" for the market.
Tracy Li

China’s online consumer credit market will see rapid growth in the near future and insurance technology will play an increasingly important role as a "risk stabilizer" for inclusive finance, industry insiders said.

With the consumption upgrading and the evolving consumption patterns of the younger generation, the world’s second largest economy is seeing a rising scale and penetration rate of Internet consumer credit, a big driver for financial inclusion.

The penetration rate of the market will reach around 20 percent in 2019, data from the People’s Bank of China and financial data services provider Wind Information estimates. And the number is projected to hit 25 percent by 2021, said Liang Yuping, assistant to the general manager and senior vice president for risk control business at Zhong An Online P&C Insurance, at a recent industry event.

Despite its rapid development, Liang noted that consumer finance, as an important component of inclusive finance, still faces many challenges in serving the long-tail customers.

The long-tail is a retailing business strategy which allows organizations to realize significant profits by selling low volumes of hard-to-find items to many customers, instead of the traditional marketing model of only selling large volumes of popular items to the mass market.

For example, financial institutions usually find it difficult to evaluate the potential credit risks of people who lack credit records and collateral for seeking loans, due to their limited technological capabilities and support from third-party players.

In this regard, credit guarantee insurance, plus technology, can help banks and other consumer finance service providers transfer and disperse risks.

“Credit insurance is a type of insurance policy with credit risk as its coverage,” explained Liang. “By integrating this protection with insurtech, underwriters will be able to build a risk management system supported by multi-dimensional data, thus helping inclusive finance institutions have a better control of operational risks while expanding their businesses.”

China Banking and Insurance Regulatory Commission called for more efforts to fend off financial risks while developing inclusive finance in a white paper issued last September.

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