China to become key player in insurtech - Allianz
China’s insurtech industry is growing at an “amazing” pace, according to Allianz. The insurer’s newly published study on the industry, titled Is China Winning the Insurtech Race?, says by the end of the next decade, the Chinese insurance market is set to become the world’s biggest in terms of premiums. Insurtech companies in China are very well funded, and present potential for strategic partnerships, Allianz said.
“Traditional distribution channels still form the backbone of China’s insurance industry, especially in the personal insurance sector, where agencies and banks take up more than 90 percent of the distribution market,” said Ludovic Subran, chief economist, Allianz SE. “But internet distribution channels are growing in recent years and technology is being deployed at a massive scale to build highly automated insurance platforms. China has the potential to become the key player in insurtech.”
Factors such as the mobile infrastructure, data availability, 5G and an affinity for technology create a supportive environment for the growth of new industries in China, said Allianz. The huge size of the Chinese market enables companies to scale easily and has strengthened Chinese “self-dependent” innovation.
“This marks a shift from producing Chinese versions of Silicon Valley companies to creating new business models,” said Allianz. “These developments culminated in large-scale ecosystems, offering customers services that encompass various aspects of life, including financial services and insurance. Supporting this shift is the huge amount of money that is being poured into Chinese technology companies.”
Insurtech is a case in point. The funding gap between the US and China has become much smaller over the years: whereas US insurtechs have raised €5.8 billion ($6.4 billion) in total in 2018, total funding in China amounts to €4.1 billion – more than four times the European figure.
The Chinese figure is even more striking against the backdrop of the size of the Chinese insurtech landscape: only 7 percent of the insurtech companies analysed are located in China, but 55 percent are in the US and 38 percent in Europe. As a consequence, average funding per company is much higher in China than elsewhere: €113 million compared to €20 million in the US and just €5.2 million in Europe.
“China will be essential to the insurance world in a platform economy,” said Nazim Cetin, CEO of Allianz X. “The Chinese consumer is a godsend for insurtech companies, and tech-intensive distribution channels and products will experience exponential growth. Global insurance giants can tap into the booming Chinese insurance x tech space. More strategic partnerships and co-investments between Chinese and foreign insurance actors are expected going forward as they look like win-win opportunities.”
