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China: A Decade of Blowing a Digital Track



In this series of blogs, my colleagues and I will look at the insurance sector in emerging markets, with a particular focus on technology, digitization, platforms and ecosystems.

About ten years ago, Accenture sent me to China to advise insurance companies on how to develop new ideas. Much has changed since then. The Chinese economy. At that time, its GDP was 5.1 trillion US dollars; by the end of 2019, it had almost tripled to $ 14.3 trillion. [1]

If anything, the changes have been even deeper on the insurance front. When I visited China, insurers were actively looking to learn about practice elsewhere. Today, the tables have turned: insurance companies globally can learn large numbers of players such as Ping An and ZhongAn. (In fact, the online insurance company ZhongAn did not even exist in 2009 ̵

1; it was launched in 2013 by Ant Financial, Tencent and Ping An, [2] and now has 400 million customers. [3])

China has become the home of insurance innovation, with companies Ping An who invents the industry. Frankly, it's hard to see what China – based insurance companies can learn from peers elsewhere. It's easy enough to see what others can learn from them.

Huge progress

My clients often ask me how their comrades in China went so far in such a short time. The answer: they put data and technology at the center of their business. This means that they understand their customers in real time and can develop and release products and services in days rather than months.

This ability was born of necessity. Think about the size of the market: during that visit, one of my customers told me that they had 50 million customers; another had a call center with 50,000 employees; and a third had a network of more than a million agents.

With such figures – over ten times as large as large insurance companies operating in mature markets with low growth and zero sum in Europe and the United States – insurance companies in China had to follow a digital path, which made a technical steps that saw them avoid the digital birth pains that insurers elsewhere are struggling with.

This combination of factors – a large market, a growing middle class (the main driver of insurance in any country) and the technological leap – is unique to China and explains why insurers there were able to integrate the necessary technology into their stacks. If one of these elements is missing, progress has been slower. Even in Indonesia, the largest Southeast Asian market, there is not much of a middle class yet, which is why, even if you see interesting developments in ecosystems from the likes of Gojek, its insurance market is far behind.

Another important factor is easy regulation. In China, as in Southeast Asia in general, regulation has not bound the hands of innovative actors in the way it probably has in Europe, for example. China's regulatory authority allowed insurance companies to develop before weighing into rules in areas such as building reserves.

Lessons to learn

The core of insurance is a computer game – and it has never been truer than today. The most important lessons revolve around how China's insurance companies use data, artificial intelligence (AI) and analysis to streamline the entire range of insurance processes, from insurance to claims. To take one example, Xiang Hu Bao (a critical mutual health insurer of the Ant Group) has fully automated damage assessment using AI.

Again, the scale of the market helps because companies need a large series of data to create reliable systems that, for example, use AI to analyze the damage to cars and administer claims on that basis. It is in these areas that insurers elsewhere are looking for answers for China.

The second key is the use of platforms and ecosystems, areas where Chinese companies lead the world. One of the best examples is Ant Group (formerly Ant Financial), which built an economic ecosystem that includes almost everything that consumers may need – from payments to banks to loans to yes insurance. Ant ecosystem-based approaches provide a unique picture of each customer, which means that it can take a very customer-oriented approach.

Finally, it is worth briefly touching on the differences between real estate and accident and life insurance in China. P&C is of course a simpler game: it is short-lived and often mandatory (someone with a car and home must insure them). For these reasons, non-life insurance companies in China are ahead of most of their peers elsewhere. Life insurance is more complex and there are still addressable markets in China that are not covered. That being said, companies in China are creating exciting products in areas such as critical health insurance, while their thinking on mutual insurance is innovative and can be applied elsewhere. looks at how their counterparts in China use AI and data analytics to process claims. In fact, it goes much further. AI has completely changed the damage process in China, and today transport companies have reversed the damage process and pay by default .

In my next blog we will look at how leading insurance companies have changed all aspects of claims value chain and what others can learn from this.

[1] Measured in current USD. See: https://data.worldbank.org/indicator/NY.GDP.MKTP.CD?end=2019&locations=CN&start=2009

[2] SoftBank Vision Fund to invest $ 100 million in China's technical joint venture, Financial Times (August 27, 2018). See: https://www.ft.com/content/28dcbb9c-a9eb-11e8-94bd-cba20d67390c [195659004] [3] Announcement of interim results for six months ended June 30, 2020, ZhongAn press release (August 26, 2020). See: http://northeurope.blob.euroland.com/press-releases-attachments/1245239/HKEX-EPS_20200826_9412694_0.PDF


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