Wayne Xu, president of ZhongAn International, is reticent to discuss expected micro-insurance sales volumes by the company’s new partner, Grab.
“In emerging markets, our focus is more on education than selling products,” he told DigFin.
In Singapore, though, it’s a different story: the focus of the new joint venture between ZhongAn and Grab will be to sell financial products via Grab’s driver app.
The same is likely true of Hong Kong, where the company is part of one of the three groups to so far win a license to start a virtual bank. Inside sources have told DigFin the company is seeking a digital insurance license there too.
Xu would not comment on that, but noted that in Hong Kong and Singapore: “To be successful in digital insurance relies on scenario-based products, which means you need both good product ideas, and a technology platform” to deliver them efficiently.
ZhongAn Online P&C Insurance has already shaken up the world of online insurance in China. Now its subsidiary, ZhongAn International, is looking to do the same abroad, by using its tech to support partners such as Singapore-based GrabTaxi Holdings.
The Shanghai-based company, whose shareholders include the chairmen-founders of Alibaba, Tencent and Ping An, was founded in 2013 to bring mobile-only service. It was the first to industrialize ideas like flight-delay insurance, which requires a tech stack that can handle massive volumes and split-second onboarding and payouts.
The company is listed in Hong Kong and today has a market cap of HK$45.3 billion (US$4.8 billion) despite never having turned a profit.
Digital insurance relies on scenario-based productsWayne Xu, ZhongAn
Its niche market segments and the difficulties of copy-and-pasting mainland Chinese “techfin” models abroad mean ZhongAn has been a curiosity for traditional insurance companies.
ZhongAn International is also 51% owned by Softbank’s Vision Fund, which has also invested $1.5 billion in Grab. So there is a broader thrust to the partnership than just a desire to sell insurance. For ZhongAn, this represents the big chance to show its pioneering models in scenario-based insurance will work in Southeast Asia. Grab’s insurance providers are Saison Life and Chubb.
Versus incumbent insurers
And if this JV is a success, then what does that mean for the rest of the insurance industry?
ZhongAn isn’t taking on big incumbents head to head, says Xu. Its international business has two components. First is providing its technology to traditional insurers, such as Sompo in Japan, that are using it to completely digitalize.
The second is supporting partners such as Grab, which has recently announced a suite of financial services for its drivers, riders and third-party merchants. These include new services in micro-insurance and investments, along with Grab’s existing payments capabilities.
“Our business is different to that of traditional insurers,” Xu said. “We operate in the online economy, serving different customer types with unmet expectations.”
Providing low-ticket, high-volume products requires a cutting-edge tech design. “This lets us underwrite millions of policies in a single day, or let us tailor a new product in a week,” Xu said.
That kind of speed and scale is beyond any incumbent insurer, but it’s not necessarily what sells the sort of high-margin policies that traditional players sell, such as complex commercial insurance or investment-linked products.
Grabbing new markets
Xu says ZhongAn isn’t interested in competing with traditional players in their existing markets. “We notice many traditional insurance companies look at ZhongAn’s example in China. If they want to enter the China market, perhaps we can help them,” he said.
The immediate focus of the ZhongAn-Grab alliance is different. Grab has an e-wallet in six Southeast Asian markets linked to its ride-hailing app. It wants to sell financial products to small- and medium-sized businesses.
Payment trends run two years aheadWayne Xu, ZhongAn
Grab is integrating its own payments technology into point-of-sales machines for retailers and online into regional e-commerce websites, so people without a bank account or a credit card can transact. It’s extending its microloan service for drivers to SMEs, first in Singapore, where it has a license.
And it wants to sell SMEs micro-insurance too, via its driver app. Reuben Lai, head of Grab Financial Services, says Southeast Asia’s insurance market is now worth $100 billion but is far less penetrated than India or Japan, so there’s huge scope to grow.
The Southeast Asia play
The headline figures for Southeast Asia hide the region’s fragmentation. Market practices, regulations, cultures and habits vary widely. This contrasts with ZhongAn’s experience developing products for China, where there is more opportunity to scale.
Xu says conditions are similar enough: the region has lots of underinsured people, who are all users of smartphones. The sign that Southeast Asia is market ripe for digital insurance is payment trends for online commerce.
“Payment trends run about two years ahead [of insurance], and they’re telling us that Southeast Asia is now important,” Xu said.
We’re not focused on profitabilityWayne Xu, ZhongAn
He says acquiring user data – which is vital to feeding ZhongAn’s algorithms for pricing risk and personalizing offerings – should follow a similar path. ZhongAn will rely on data from Grab (which is why it wants to operate through partners, rather than sell insurance directly); along with third-party sources of public data, internet crawls and traditional financial authorities such as credit bureaus.
Will ZhongAn’s international business reach breakeven faster than the domestic parent? Xu declined to say exactly. Sompo is paying the company a license fee; it will share revenues with Grab through their joint venture.
“This is a lightweight way to run a business,” Xu said. “We’re not focused on profitability.”