Digitalizing insurance
Traditional insurance companies often are large and inflexible behemoths. The idea behind insurtech is the disruption of the traditional insurance business with digital technology. Insurtech companies come in many shapes and forms. However, one way to challenge the modus operandi is: While traditional insurers used actuaries to determine insurance rates, online insurers rely on AI, big data, and machine learning to undercut the prices of competitors. Other new approaches include improved product design, cross-industry integration of products, and the integration of cutting-edge technology along the value chain to increase performance and reduce costs.An emerging industry always creates a nebulous environment, which is why Chinese regulators want to reign in the insurtech industry before it was too late. Therefore, the insurance industry watchdog CBIRC introduced regulations in 2021 which included a provision for insurance companies to set up internal compliance units. While this might be a bitter pill to swallow for investors and startups hoping for fast growth, a stricter regulatory framework will likely be beneficial for the insurtech industry in the long run.
Challenging the incumbents
In an industry that is dominated by large and powerful companies, the insurtech startup ZhongAn was able to go face to face against the establishment. The company’s road to success consisted of three steps. First, ZhongAn carved out a market position for itself by using technology as a competitive advantage. Second, the insurtech startup ventured out of its B2C model and began offering services to companies as well. Lastly, ZhongAn moved its services abroad by partnering with local insurance companies and exporting the Chinese insurtech model.However, the first-mover advantage is temporary. New startups and established competitors move into ZhongAn's domain and offer insurtech services. By now, almost all major insurance companies, such as Ping An, offer online insurance themselves. Additionally, smaller, and more specialized startups try to compete with ZhongAn on its home turf. For instance, Waterdrop Inc. is an insurtech company and crowdfunding platform that already had its IPO on the Hong Kong Exchange. Xiaoyusan (小雨伞) is an online insurance aggregator and darling of domestic and overseas big-name investors. With Tencent and Sequoia Capital, both startups have powerful backers with deep pockets behind them.
