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How Ant Financial is disrupting insurance

The supercharged take-up of Xiang Hu Bao-an initial insurance product converted to an online mutual-aid platform- shows the power of digital finance.



Nineteen days after joining Xiang Hu Bao, Ant Financial’s online mutual-aid network, your correspondent had contributed to financing medical support for nine people fighting disease. The cost she bore was only Rmb 0.05 (US$0.007) for all nine policies, with no fee to sign up.

But adding up the contributions from her and lots of other people on the network enabled those nine people to claim a one-time payout of up to Rmb300,000 ($44,500), valid against about 100 diseases.

For traditional insurance companies selling critical-illness cover, Xiang Hu Bao is set the change the landscape, just as Ant’s YueBao rocked the world of money-market funds. Whoever joins Xiang Hu Bao is eligible for one-time cash payouts, with the entire membership – now at 55 million people – sharing the cost.

Payouts are calculated based on cases submitted, and that sum in turn determines the twice-monthly premiums that members must put in – rather than the traditional business model of paying expensive premiums up front for the promise (often qualified) for future protection.

Whereas a traditional insurer would use premiums to build an investment fund, to generate returns for future obligations as well as to earn a return for the company, Xiang Hu Bao operates on a pay-as-you-go basis.

And Ant Financial takes a 8% management fee out of the pot on all claims paid.


The business model of Xiang Hu Bao comes from an affiliated partner, Xinmei (Trust Mutual Life Insurance).

In 2015, together with seven other external partners and Tianhong – YueBao’s manager, Ant set up Xinmei. In May 2017, Xinmei got approval from China Insurance Regulatory Commission and was officially licensed as the country’s first mutual life insurance organization. 

When Xinmei and Ant jointly launched Xiang Hu bao in October 2018, it was not smooth. Xiang Hu Bao took off as an insurance platform built in the Alipay app, with Xinmei to guarantee the payouts.

Traditional insurance companies in China, shocked by the microscopic premiums, complained about what they said were dishonest practices. The China Banking and Insurance Regulatory Commission (CBIRC) then fined Xinmei and its founder, Yang Fan, Rmb900,000 for misleading sales: he had initially told the public that first-year premiums would be around Rmb200. But CBIRC concluded that the premiums were actually very uncertain. (Xiang Hu Bao got its first claim in March which meant the premiums for the first five months were zero.)

Ant moved quickly to quash any political problems and “updated” the product in November, removing Xinmei from operations and repurposing the platform as a mutual aid program.

“The platform is now only a mutual-aid program,” an insurance broker explained to DigFin. “It clearly states ‘We do not promise that you can obtain certain risk protection.’” 

The platform’s name was also changed, swapping characters for “mutual insurance” to “mutual treasure” (the pinyin version remains the same). Ant also set a ceiling on first-year fees of Rmb188, promising to cover any payouts in excess.

Taking off

The clarification hasn’t blunted the popularity of the platform, which is on track to gain its first 100 million users far more quickly than Ant Financial’s other financial services, such as investments (Yue’Bao) and credit scoring (Zhima Credit). A Xiang Hu Bao spokesperson says the company expects to have 300 million users, or more than 20% of China’s population, signed up within two years.

Like with these other services, Ant is creating a digital financial service that meets users’ needs for medical coverage. It operates in a country where many people can’t readily access or afford traditional insurance. By creating a method for people to pay micro-premiums – efficiently and at scale because it’s digital – Ant is expanding the insurance pie beyond what traditional carriers would ever go after.

Risk control

Xiang Hu Bao is built in the Alipay app.But not everyone in the Alipay universe is eligible to join Xiang Hu Bao, there are two hurdles.

First, membership requires a credit score of at least 650. The score ranges from 350 to 950. A credit above 600 is seen as excellent, suggesting that the person is an active consumer in Alibaba’s e-commerce centre Taobao and always pays his bill in time. This bar both reinforces the commercial drivers throughout the Alibaba universe and minimises the fraudulences. These members also can surely afford the monthly premium.

We use a consortium blockchain to link the notary office and the e-certification center

Ant Financial’s spokesperson

Secondly, Xiang Hu Bao only accepts members without pre-existing conditions, no record of continuous medication over a 30-day period, and they must be below the age of 50. People in their 40s can claim up to Rmb100,000, while younger members can claim up to Rmb300,000.

To mitigate fraud, members submit claims and supporting evidence via the Alipay app, with a blockchain keeping track of identities.

“We use a consortium blockchain to link the notary office and the e-certification center,” said the service’s spokesperson. “All the documents in the chain have legal effect and can’t be modified.” Ant has even built its own judicial system, with members eligible to service on juries that review the most controversial cases: today there are some 800,000 people in China serving on the jury. (Your correspondent applied but failed the exam.)

Wechat’s stance

Xiang Hu Bao is not the first online mutual-aid society in China. Three years earlier, Alibaba’s rival Tencent launched a similar platform, now with 75 million members. Its service, called Shuidi Huzhu, recently raised Rmb500 million ($74.4 million) in a Series B round, led by Tencent itself.

But Ant’s version has been growing much more quickly, possibly because of its very different approach. Shuidi Huzhu leveraged WeChat’s strong social network. But Shuidi’s means of fundraising from members involves lots of sob stories circulated throughout WeChat, making it more of a charity appeal.

Ant, on the other hand, has been clear that Xiang Hu Bao is a financial product. It initially stumbled over how it defined “insurance”, but the product’s design, which obviously has widespread appeal, has carried the business through its being fined.

For traditional insurers, even in China, Xiang Hu Bao is not yet a direct threat. Its micro-payments model means it is creating a new market from consumers that a traditional insurer doesn’t try to reach – because such a market is too expensive for a paper-based, product-centric insurer to contemplate.

But Ant Financial will be looking to role out Xiang Hu Bao throughout emerging markets worldwide. It will be growing scale and using the service to reinforce payments and other financial services. How long can traditional insurers expect to remain comfortably ensconced in their current markets with their current business models? Or is now the time to attempt new digital businesses of their own…before it’s too late?

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