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China & India may define the future of Insurance and InsurTech


A major thesis at Daily Fintech is that digital financial inclusion is driving what we call “first the Rest then the West“. This reversal of the flow of innovation is a big 21st century megatrend. We have already described this happening in mobile payments thanks to real consumer needs and a leapfrogging over old technology. This may also be happening in Insurance, which is a key plank to a middle class life. Both China & India have a growing middle class. So the demand is strong and the lack of a big established insurance industry offers the opportunity to leapfrog the West in the use of new technology and business models.



Bernard Lunn
Bernard Lunn
China

Zennon Kapron of Kapronasia explains why we should be paying attention to Insurance in China: “As China’s middle class becomes wealthier, they have increasingly looked at insurance as both a way of protecting their family, but as an investment vehicle. This increased demand has driven fundamental changes in China’s insurance industry both in terms of overall maturity and technology adoption.”

In China the InsurTech company to watch is Zhong An (site in Chinese only).

Zhong An is a pure play InsurTech venture. Zhong An is also a full stack InsurTech venture; they are a regulated Insurance company that can offer a full suite of services. Think of it like a challenger Insurance – digital first. When we write “venture” in the West we tend to think “venture capital”. In China, think “joint venture”. Zhong An was created by three established Chinese companies:
- Alibaba (think Amazon, eBay & PayPal merged together)
- TenCent (think Facebook & Twitter)
- Ping An (Insurance company)

You can see a single round over $900m on Crunchbase; no step ladder funding here.

Zhong An first got traction from return-delivery insurance for buyers on Taobao.com (Alibaba online marketplace) and is a specialist in providing cover for various risks relating to the internet economy.
Zhong An sells direct, not via traditional insurance agents.
According to this WSJ report, Zhong An is headed towards IPO. Zhong An has underwritten more than 1.6 billion insurance policies and paid out 369 million in claims

Another InsurTech venture to watch in China is TongJuBao, which describes itself as a P2P risk sharing platform through communities of shared interests and social relations among Internet users.

Their funding process looks more familiar to the West with an English language site. We can even see a pitch on Angel List.

In the West we have Lemonade, Guevara, Friendsurance, and Inspeer with a P2P risk sharing model. The point about “first the Rest then the West” is that TongJuBao is clearly not a story about China copying Western models. It could be that P2P risk sharing Insurance gets traction first in China.

India

We are not seeing the same level of ambition and innovation in India despite a similar sized market opportunity.

Crop insurance is a big deal in India where by some estimates close to half of employed Indians work in agriculture. However, rather than technology innovation (perhaps opening futures and options market on farm commodities) we are seeing old fashioned Government subsidies.

One venture getting traction is Policy Bazaar. Their online insurance comparison site claims 5,000,000 customers seeking both life and non-life insurance. Policy Bazaar Has received $69.6m in VC funding and has a Pitch that is designed against traditional agents – “we don’t SELL, we TELL!”

Another InsurTech venture in India to watch is Coverfox. They raised $12m just under a year ago and have a similar comparison model to Policy Bazaar, with a slight edge in mobile UX as per some people.

The online insurance comparison model does not count as innovative these days and has low barriers to entry. The point is that in markets such as India with so much new demand for insurance from an emerging middle class, just making the selection process easier can create a big business.

It is not just China and India. This innovation is also coming from other Asian markets and from Africa and Latin America. It is likely that the future of Insurance will be defined in the Rest not the West.

Bernard Lunn
Founding Partner, Daily Fintech Advisers
www.dailyfintech.com

Bernard Lunn is a serial entrepreneur, senior executive, adviser and a strategic dealmaker. He worked in Fintech before it was called that with startups, growth stage and turnaround ventures (incl. Misys, Temenos, IMS, ITRS). He has lived and worked in America, India, UK & Switzerland and is adept at cross border deals.

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Mercredi 4 Mai 2016
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