Cameron Green, CEO, Willis Re Australia
The rapid change in legacy free insurance markets, like China, exemplify the fact that innovation does not follow a step function, and that truly disruptive technologies are rarely created through the evolution of existing products and services. In fact, on the contrary, regulation, existing infrastructure, powerful incumbents and long-established customer habits all tend to act as inhibitors to progress and innovation.
Companies in developing countries are also able to attract intellectual and financial capital from partnerships unseen in developed, heavily regulated countries with high penetration of insurance products. For this reason, the explosive growth of insurance and InsurTech advancements in China should not be a shock.
E-commerce penetration in China doubles that of the U.S.A, and Chinese e-commerce leaders are aggressively pursuing their insurance strategies. In 2013, Alibaba and Tencent partnered with Ping An to establish Zhong An, China’s first online insurer. This enterprise completed an IPO on the Hong Kong Stock Exchange in 2017 raising US$1.5 billion. More recently, Tencent and Hillhouse Capital partnered with Aviva to form a Hong Kong-based joint venture focused on digital insurance.
Technology giants seem more forcefully willing to expand into insurance in China. Their experience highlights the benefits of digital distribution versus the challenges of building traditional distribution in a large and relatively under-developed country. An example of this is one stop shop digital distribution platforms like Taobao Insurance, selling insurance products from 40 insurers to over half a billion active users of Taobao.
It is unlikely that heavy involvement of tech giants in the insurance market will remain a Chinese phenomenon. Google failed in its first attempt to penetrate the insurance industry due to the market power of long-established incumbents and heavy regulation. But, as shown by Amazon’s recent acquisition of supermarket chain Whole Foods in the U.S., tech giants are no longer confining themselves to a start-up mindset and greenfield expansion. They are willing to invest in established platforms to disrupt value chains in new industries.
Finally, advancements to business models that utilise new or improved technology are almost universally exportable and capable of being ‘democratised’. When American-based insurance company,Travelers, acquired UK’s Simply Business,Travelers was seeking technology to enhance its U.S. small business distribution. Other examples include established tech innovators from the UK, such as QMetric and First Central, whose state-of-the-art technology is seeking to revolutionise the traditional approach – from product design and distribution, to underwriting and claims handling by utilising big data and artificial intelligence. In all these examples, the technology is transportable and therefore implementable in the U.S., Asia or anywhere else outside of the UK.
The constant advancement in technology, fuelled by the innovative and creative human spirit will continue to improve the customer experience for insurance buyers. Will it happen quickly enough? Time will tell.
One thing is certain, for established insurance companies, it is no longer enough to observe competitors in the local market, as game changing technologies developed anywhere in the world can be imported and implemented in markets across the globe. The benchmark has changed.
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