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Insurers go hip to pursue young online
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When insurers team up with Internet players, there seems to be no end of fanciful thinking. So far, the partnership has produced policies for singles, for people newly in love and even for people anxious to enjoy the full moon during the Mid-Autumn Festival.
The insurance for singles is complemented by an online matchmaking website. The “full moon” policy, issued by Allianz, promises a payout if clouds obscure lunar luminescence on September 19.
These eye-catching online promotions are meant to create a splash among young people – a segment in China that has never given much thought to insurance.
But will the strategy create a new class of policyholders for an industry desperately in need of more customers?
In the past three years, premium income from online sales doubled annually from 820 million yuan (US$xxxxx) in 2010 to 3.96 billion yuan in 2012, according to iResearch. Still, that accounted for only 0.3 percent of total premium income in 2012.
Growth in the insurance business has slowed from nearly 20 percent a decade ago to single digits in the past three years. Insurers are being forced to innovate.
The Internet provides insurers lower commission costs than banks, convenient access to young web users and wider range of businesses stemming from e-commerce demands.
However, the Internet has its limits. It works only for simpler products, such as car insurance, travel insurance and investment-type insurance – a product range subject to tough competition and lower margins.
Almost all big insurers now have their own online sales units. The battle for premiums has extended to popular platforms such as Taobao.com, China's largest online marketplace, and to WeChat, an instant massage mobile application that claims to have more than 400 million users.
On WeChat, a price war is brewing after Guohua Life, a smaller domestic insurer, last week lowered its subscription threshold for a universal insurance product from 500 yuan to 100 yuan to meet the demands of mobile users.
The insurer previously made a splash in 2012 by selling 100 million yuan in insurance products through Taobao within three days.
“We find insurers are more active in exploring the mobile internet now,” said Li Zichuan, an analyst with Analysys International, an information provider covering high technology sectors. “The finance network on the mobile Internet is more smart and social, and customized apps like WeChat provide more flexible sales and customer service channels.”
Other industry watchers expressed their concern over excessive price competition.
“To attract more investors, insurers are lowering the threshold and trying to offer a higher return,” Z-Ben Advisors, a fund management consultancy, said in a note. “However, these universal life insurance products present a challenge for the investment teams of insurers.”
On the other hand, Shin Kong-HNA Life is also selling a universal life insurance product on the T-Mall store with a minimum subscription of 1,000 yuan.
Since its establishment three years ago, Taobao insurance has sold 100 million policies, according to Taobao data. About half of the policies are express delivery insurance, sold at 60 cents a pop,
promising to refund delivery fees if consumers return goods bought online for quality or other valid reasons.
The platform is expected to become more competitive after Allianz became the first foreign insurer to open an online outlet in July, and China's largest insurer, China Life, last month announced a tie-up with Taobao to sell insurance on the platform and invest its assets to help Taobao improve logistics.
“There is no channel other than Taobao that can allow us access to consumers all over China,” said Bill Song, deputy chief operating officer at Allianz China General Insurance Co. “Such geographic coverage will allow us to diverge and manage risks more efficiently.”
Opening an outlet on Taobao would also bring Allianz more consumer data, which are crucial for the creation of more innovative products, Song added.
Other e-commerce platforms, such as Tencent’s Tenpay, also have started insurance channels, and China Telecom’s payment company is reported to be in talks with insurance companies for some partnership efforts.
But for many insurance insiders, the online business is a long way from challenging traditional face-to-face sales because insurance products involve complicated terms and personal rapport with consumers is considered vital in establishing trust and loyalty.
“I visit at least two clients each day to catch up with them and understand their needs,” said Daniel Yang, an agent at an insurance agency. “I think the web cannot replace personal communication in finding the best product portfolio for clients.”
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