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Jan 2022

Online health insurance now and tomorrow

Source: Asia Insurance Review | May 2020

The COVID-19 pandemic has changed the insurance industry. Insurers that rely on traditional channels now are planning to move further towards contactless online insurance. We talked to several online players to understand their views on the current and future development of the online health insurance sector.
By Vincent Liu Liang
At the beginning of 2020, CBIRC vice chairman Huang Hong set himself a new goal: To grow the health insurance market to over CNY2tn ($284bn) by 2025. For the next five years, China’s health insurance sector will have to maintain a rapid growth rate. Although online insurance has seen significant growth in the past three years, it still has a long way to go. How much can online players get from China’s health insurance blue ocean?
Impressive performance amid the pandemic
  • Data shows that Waterdrop Insurance Mall’s (Waterdrop) newly signed annualised premium in February exceeded CNY1.2bn. At the end of February, total users exceeded 70m, including 30m new users in Jan-Feb 2020, equivalent to the increase of users in the whole of 2019
  • WeSure (Tencent) added 25m active users during the pandemic period so far. Demand for health insurance is strong. User numbers increased five times while sales volume increased four times year-on-year;
  • In the past three months, ZhongAn’s health insurance demand has grown significantly, with premium income of CNY2.565bn in the first two months, a year-on-year increase of 55%.
Waterdrop general manager Yang Guang told AIR that by the end of February, one month after China became the epicentre of the pandemic, the company’s online consultations and sales volume had increased by 36% and 39% respectively compared with the previous month.
WeSure COO, general manager Bruce Xie told AIR that during the pandemic, the company worked closely through virtual meetings and was able to launch new health products within 24 hours from conception to launch. 
“It normally takes traditional insurers years to launch a new product,” he said.
ZhongAn Online (ZhongAn) said that its operations were not affected at all during the COVID-19 pandemic. The company conducted 51 video conferences and 99 voice calls on the first day of its remote office.
The spokesman said that the impact of the pandemic on the insurance industry is complex. For the P&C sector, some products suffered in the short term and the growth in premium income was suppressed. On the other hand, the public’s health and risk protection awareness have improved, and provided growth momentum for the short-term breakthrough and long-term development of health products. 
This will further promote the industry’s return to its protection origin. She said that the online and technological development of the industry will accelerate after this ‘big test’. 
Trend development
Compared with critical illness and annuity insurance, the demand for health insurance, especially short-term products, has increased.
Waterdrop published a report titled ‘Online Health Insurance Development Trends in 2020 under the New Coronavirus Pandemic Situation’ that summarised the nine major trends in China:
  1. The pandemic situation stimulates health insurance growth
  2. Insurance will return to its protection origin, and the number of users purchasing health insurance will continue to increase
  3. The number of Gen Y buying health insurance is growing rapidly
  4. Million-yuan coverage medical insurance is the most popular health insurance product online nowadays
  5. Long-term insurance also accelerates its online migration
  6. The blue-collar customer group has attracted much attention, and health insurance will further accelerate its expansion in the small-town and rural markets
  7. Health insurance products for the elderly need to be upgraded
  8. The health insurance industry will integrate more value-added services
  9. Health insurance product trends: Vertical subdivision, rapid iteration and intelligent customisation.
Mr Yang said that the pandemic could be important to the reform of the insurance industry, not only for health but also for life. At present, many traditional insurers are accelerating their efforts to go online and competition could become intense.
What if everyone goes online? Mr Xie said that WeSure’s technological capabilities and user base allow it to respond to users’ demand quickly and efficiently. During the pandemic period, WeSure launched 12 new products in a month to respond to the needs of 25m new customers. It would take traditional insurance companies years to achieve that. 
The health insurance chain is long and traditional insurers are good at risk-control and connecting to the long-chain pharmaceutical industry. “We can learn from each other’s strengths and weaknesses,” he said. “I think we are not really competitors, but more of a cooperative and complementary relationship. I believe that 1+1 is greater than two.”
Would he apply for an insurance company license? Mr Xie said that so far he does not see the need. “There is no shortage of insurance companies in China,” he said. “What’s missing is a tandem platform. To create a perfect tandem platform is still our priority.”
ZhongAn believes that online insurance has infinite innovation potential. With data intelligence at the core, insurance can drive the improvement at the actuarial level. Future competition between insurance companies will be on the technological and management levels.
How big is the gap?
In 2018, China’s gross insurance premium income grew by only 3.9%. In 2019, the growth rate returned to double digits, at 12.17% year-on-year, to CNY4.26tn. The growth rate of health insurance is even higher at 29.7% year-on-year, while achieving a gross premium income of CNY706.6bn.
As the world’s second largest insurance market, China’s insurance penetration in 2019 was only 4.3%, far below the level of developed countries and the international average of 6.1%.
Waterdrop has been around for three years and its accumulated newly signed annualised premium have exceeded CNY10bn. “The huge demand for health insurance in China is not newly created, but released,” Mr Xie said. “The demand has always been there.”
Insurance for all
Throughout the development of the insurance industry, economic development has spawned auto insurance and stimulated health insurance, life insurance and pensions. These are people-oriented changes. After the introduction of online insurance, the development time has shortened and parallel developments have been accelerated.
ZhongAn believes that the pandemic will lead to short-term breakthroughs and the long-term development of health insurance.
Traditional insurers have rarely reached the small-town and rural markets. Mr Yang said that 76% of its users come from third-tier cities and below. Demand from such sources has been met to some extent through online insurance. Waterdrop has more than 80m users covering 2988 cities and counties.
Mr Yang believes that in 2020, the online health insurance market will see a period of development. User demand is growing rapidly, online and offline integration continues, product thresholds will be lower and cover larger territories. A large number of cost-effective products will continue to appear, benefiting young people, the elderly and the blue-collar groups while more value-added services will be launched for mid- to high-end users. 
Online and offline
“There is no conflict doing online and offline businesses at the same time,” Mr Yang said. “In the process of serving online users, Waterdrop found that most Gen Y users can easily accept new things such as online consultation and sales and electronic insurance policies but some users still prefer face-to-face communication to understand the products deeper.”
Waterdrop has started to prepare for the establishment of an offline broker team in Beijing. Mr Yang believes that the industry still benefits more from the offline sales channel and Waterdrop hopes to exploit this further.
Meanwhile, ZhongAn is trying to optimise the quality of its online customer service to gain customers. “Smart customer service is currently our core development. At present, 85% of ZhongAn’s online customer service sessions are handled by our intelligent robots. Through accurate capture of language, intelligent customer service quickly responds to the majority of users. During the pandemic period so far, ‘ZhongAn Genius’ has handled more than 700,000 user sessions and served nearly 500,000 users,” according to ZhongAn’s spokesman. A 
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