Replaying the Story of ZhongAn, China's First Internet Insurance Company
ZhongAn has walked a unique path – and played a special role in insurtech industry development.
►Starting in the to-C market, ZhongAn drew a healthy number of customers through large traffic and gradually discovered its future direction by combining insurance and technology.
►The company is currently exploring the to-B market with both comprehensive insurance solutions and other technology-based services for financial industries.
►Since 2019, the company has been actively seeking overseas opportunities, and has already deployed in several countries in Asia.
In the previous article, we illustrated the current market position and financial performance of ZhongAn. Here we discuss how the company made it to the top.
Founded in 2013, ZhongAn started its business in online insurance, targeting individual clients, becoming the first massive insurtech company in China. In 2016, the company established ZhongAn Technology to further promote the transformation of insurtech industry and began its to-B business. Empowered by its scientific strength, it survived among the fierce competition and became the winner in online property market, and went public on Hong Kong Stock Exchange in 2019 under the ticker 06060:HKEX.
Overall, the company’s development path can be analyzed in three stages.
Phase one: ecosystem establishment
ZhongAn established itself with the intention of driving the insurance industry with new technologies. It is always hard to be a pure starter. Through these years, the company never stopped exploring the best ways to integrate the insurance and technologies to grow.
Automobile, life and health are three main classifications of insurance products. PingAn, China Life and People's Insurance Company of China (PICC) have taken more than 70% of the market in these domains, while tons of small companies occupy the rest. As a start-up, it is impossible for ZhongAn to seize a spot from the product side, instead, it broke into the market through the internet, which had not been fully exploited for the purpose.
What is behind almost every successful strategy is precise market identification.
Pricing is the pivot for insurance. Traditional companies use actuaries to analyze the population, risk, historical claims and competitors’ prices manually to quote a product for the public – an approach which is apparently inefficient and non-differential. ZhongAn, on the other hand, uses technologies like big data, AI and machine learning to price every single client through more comprehensive dimensions, immediately becoming faster and more cost-efficient. What’s more, prices will be automatically adjusted with the risk changes.
Equipped with the technology advantages, the next step for ZhongAn is to cut into the product side in multiple scenarios.
Partially held by Alibaba, ZhongAn has built robust foundations in the to-C market in both everyday consumption and auto sectors, which account for 33% of its business now. In the first year, ZhongAn focused most of its business – around 77% – on freight insurance, which helped it take market share rapidly. Though the businesses are diversifying and the proportion of the freight insurance went down over time, the strategy laid the foundation for ZhongAn in the to-C market.
The large population in China always provides large potentials for the to-C market. ZhongAn first utilized the O2O co-insurance model, offering car and health insurance products to drivers and passengers in ride-sharing through the cooperation with ride-hailing giant Didi’s financial arm. The team-up with Ant Technology’s payment platform Alipay and ByteDance’s Douyin (the Chinese TikTok) further helped the company to explore the to-C market and turned the traffic to clients.
Later, ZhongAn found opportunities in the healthcare market, which is now its largest business sector, worth CNY 4.8 billion insurance premium in 2019, according to the company’s annual report. It commenced the ‘Internet + healthcare’ innovation. The company earned its Internet hospital license in July 2019, and its online hospital officially launched five months later, which was designed to shunt the traffic from traditional hospitals. The application of precise triage and electronic profiles increased the efficiency diagnosis process and balance the asymmetry between doctors and patients – also, the linkage with more than 1,100 hospitals. Benefiting from the pandemic in the first quarter of 2020, the public’s increasing attention to health and time expenditure on the Internet provided more development room for online insurance companies.
Institutional clients form the other large community that is worth exploring. Also acting as an SaaS provider, ZhongAn has been deployed in the consumer finance field since 2013, which is currently the second-largest business sector. Beginning with the non-financing insurance guarantee through Alipay, it found a problems within the market – that the products didn’t meet the financing demands for small businesses. Over time, ZhongAn turned into a financing guarantee insurance provider, to better help small businesses through credit insurance. Now, it has cooperated with over 100 financial institutions, with the credit granted worth over CNY 100 billion.
Throughout, the to-B business has been growing fast.
Phase two: Stepping out of the comfortable zone to further explore to-B businesses
ZhongAn Technology, established in 2016, is designed to support and promote the entire insurance industry in transformation. The company serves as the window for ZhongAn in exploring the to-B business and as the cradle for developing new technologies.
ZhongAn Tech provides well-rounded solutions that cover the entire chain in insurance services, through the product design, marketing, underwriting, claiming and following services.
A digital insurance platform – ‘Graphene’ – helps insurance companies in designing and launching new products as soon as possible. Along with the marketing function, companies can easily promote in different scenarios. Then comes the strong pyramid-shaped operating supportive system, using Alibaba Cloud’s technology – ‘MaxCompute’ – as the foundation. Laid by the data processing platform DataStudio’s visualization platform ‘X-BI,’ which is backed by AI, topped by the smart operation platform ‘X-magnet’ with advertising functions. Within the pyramid, some other automatic-based products also helped insurance companies with more efficient client management and risk management.
ZhongAn Tech also offers customized digital solutions to companies in digitalization in every single knot in the insurance business rope. Not like other fintech companies, ZhongAn overruns them in professional development in insurance risk management, which is very different from the traditional actors in other industries. Not only does this differentiate ZhongAn, but also its speed in deployment outside insurance.
Always apt to seize on hot issues in market, ZhongAn finally stepped out of insurance, putting its focus on blockchain and AI. The Blockchain as a Service (BaaS) platform helps small businesses with security risks and contracts management. ‘Annchain,’ the independently developed open product, is one of the first nation-approved projects. Based on a combination of blockchain, AI and cryptography, the product offers a ‘open but unshared’ operating environment in digital assets and smart contracts for financial institutions.
Phase three: Sailing overseas
As a representative of the insurtech company, ZhongAn has been outputting internet-based insurance business models overseas, to lead the trend of ‘copy from China.’ End of 2017, ZA International was established in Hong Kong, which serves as the main platform for ZhongAn’s international development.
First, ZhongAn targeted the South Asia market, where insurance penetration is historically low. In 2019, ZhongAn and Grab, an O2O platform, co-established a new firm – ‘Grablnsure’ – to provide Internet commercial car insurance in south-east Asia. ZhongAn helps in building digital insurance platform and back-ups, while Grablnsure focuses on local promotion. The number of insurance policies had reached 5 million at the end of 2019.
Then, ZhongAn helped a Japanese insurance company called ‘Sompo’ launch the first earthquake insurance policy in Japan and upgraded the internal systems for it.
The same year, ZhongAn teamed up with one of the largest Singapore insurance companies, NTUC Income, debuted the first microinsurance plan in south-east Asia, called ‘Pay per Trip.’
What is more, ZA Bank, a subsidiary of ZhongAn Tech, participated as the only HK virtual bank in the cooperation project – ‘LionRock-Inthanon’ – that was in charged by Hong Kong Monetary Authority and Bank of Thailand. The project researches the cross-border payments on digital currency, and ZA Bank was responsible for the tests based on its blockchain technology.
The bottom line
From being the first mover to becoming the benchmarked entity in the Internet insurance market; from the establishment in the to-C market to developments in institutional client portfolio; from a solely insurance-based business to comprehensive technology-based solutions; from domestic market deployment to overseas exploration, ZhongAn never stops redefining itself.