The preeminent position held by Chinese insurtech pioneers is undeniable. Unhindered by legacy systems and processes and unburdened by the regulatory structures of more developed markets, companies like Zhong An and Ping An have been the poster boys of insurtech.
Being first to market was not the secret of their success. It was founded on sound technology, nimble business practices, and one key component that has revolutionized the insurance business in China - micropayments.
Devising a customer-centric model involves making it easy - even enjoyable - for customers to do business. Taking payment for digital services has, to date, been the most painful part of the exercise and can put people off completing a transaction.
Biometric security has made micropayments simple for millions of consumers across the world via their mobile phones or wearable tech and now insurance must fall into step. After all, simple, painless payments can make for repeat business.
The quicker and easier a transaction becomes, the happier - and more loyal - a customer becomes. It is simple human nature to be satisfied with those who do not make life difficult.
Developing sound micropayment systems will help to unlock sections of the developing markets that have low current levels of insurance penetration. Zhong An has shown that efficient management of millions of tiny payments can develop new markets when the old manual systems simply could not operate profitably.
Systems using mobile telephony have had some success in parts of Africa, but there is a lack of standardization and the technology is relatively expensive. Millicom's Tigo is one platform that has had success in Africa (and is now focused on Latin America) in developing a sales platform whose payments are managed by the telco1.
Though the expansion of USSD (unstructured supplementary service data) - a GSM technology that provides an interface between a mobile phone and an application - offers some hope, the ecosystems developed by the Chinese disruptors are far more advanced.
While quick and easy payment is an important factor, the ecosystem that builds up around a platform will likely be what keeps customers there. Just as retail focuses on the experience rather than simply selling units, so insurance must follow.
These ecosystems can offer customers a one-stop shop to conduct business and simplicity of payment is just one crucial component to building effective ecosystems.
They will be one-stop online platforms, where customers not only buy insurance, but interact with social media.
China has developed a model of payments + social + mobile + data. An example is Tencent with its combination of payment, social media and contextual messaging in a single app (Wechat). This platform generates 38 billion messages every day, producing a rich source of data to feedback into insurers' analytics engines2.
However, many jurisdictions may see greater engagement from their regulators. These agencies need to understand how the transformed businesses will be different and what this means for governance and consumer protection.
Brexit may have very specific consequences for regulations in the UK market, but there are other forces at work that need to be considered. The General Data Protection Regulations (GDPR) were implemented across the EU in 2018 and have made some considerable changes to responsibility around data. The debate has already begun in Washington about the possible introduction of similar consumer protection regulation into the US market in 20193.
Regulatory oversight always comes at a cost and requires careful management. It is another reminder to insurers that it is time to get serious about transforming into a digital business.
China is the market to watch for digital insurers, demonstrating action in technology at a massive scale. They have built highly automated insurance platforms and have taken a non-traditional approach to fundamental insurance processes such as such as underwriting, pricing and claims handling.
Mature insurance markets may see this as a threat and prepare to compete with these innovators/disruptors, the smart money - and the successful incumbents - will be the ones who learn from their experience and partner when it is apparent they cannot out-develop their technology.
Ant Financial - a affiliate of Alibaba, it is China's highest value fintech company, operating Alipay, the world's largest mobile and online payments platform; Yu'e Bao, the world's largest money-market fund; and Sesame Credit a third-party credit rating system. It has developed facial recognition payment technology through its Alipay service.
Ping An - the world's largest and most valuable insurer worth US$217 billion as of January 2018.
Tencent - Chinese conglomerate, the world's largest gaming and social media company.
Zhong An - founded in 2013, it is China's online-only insurance company. Since inception, it has acquired 460 million users and written more than 5.8 billion policies.