China Insurance Market Ripe for Digital Disruption: Viewpoint

China’s tech giants — Baidu, Alibaba and Tencent — increasingly have a finger in every part of the economy. So why aren’t they bigger participants in what should be an easy sell online: insurance?

Some inroads are being made.

Last November, Baidu joined with Allianz and Hillhouse Capital Group to establish a nationwide digital insurance company. Alibaba affiliate Ant Financial, along with Tencent and Ping An, have stakes in one of the country’s first online insurers, Zhong An, which sells indemnity at a discount to drivers who accept monitoring devices in their cars. The most popular insurance sold by Ant is shipment-return cover, which for about 5 yuan ($0.75) allows shoppers on Tmall and Taobao to send goods back for free. But by and large, China’s property and casualty insurance market remains the bailiwick of traditional players.

It’s an odd absence, especially considering the sector is overdue for a shake-up. E-commerce spending in China already surpasses that in the U.S. and payment apps are fast catching up to cash. According to a survey conducted by Bain, China has the highest percentage of people who say they’d miss their cell phone more than their wallet.

Insurance can be a challenging business. According to Bloomberg Intelligence analyst Steven Lam, about 80 percent of China’s 59 auto-insurance companies posted underwriting losses in the first quarter.

Get it right, however, and there are gains to be made. PICC Property & Casualty, for instance, makes about 70 percent of its underwriting profit from selling car cover. And while PICC’s growth in auto premiums may cool as vehicle sales slow, non-auto lines like agriculture, liability, accident and health insurance, could fill the gap given China’s latest five-year plan aims to promote the use of liability insurance to improve safety and protect the agricultural sector in the event of natural disasters.

Insurers themselves are becoming increasingly tech savvy, which is helping to school customers in the ways of the internet. Ping An launched China’s first online financial management service back in 2009 and its Good Doctor product, an online-to-offline healthcare servicing platform, has some 77 million registered subscribers. In theory, it should be simple to encourage that user base to buy insurance online as well.

Without a traditional player as a partner, it may be more difficult for China’s tech giants to make a go of insurance online considering they don’t have in-house expertise when it comes to underwriting and managing claims.

Still, Alibaba, Baidu and Tencent do have the tech know-how and online payment nous. China’s insurance industry is ripe for disruption, if only its B.A.T. internet triumvirate would take the leap.

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.