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Zhong An

China's first online insurance brand, with a quirky approach to selling

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Ping An, Tencent and Alibaba joined forces in 2013 to launch Zhong An, China’s first truly digital insurer. Zhong An is China’s first property insurance company that sells all its products online along with handling claims.

Founded in 2013, ZhongAn has rapidly shaken up the insurance market in China, with radically unusual policies targeted at younger consumers.

One such policy covered people for self-inflicted alcohol poisoning if they got drunk while watching football during the 2014 World Cup. Another pays out for delayed flights while customers are still in the airport, sending them electronic vouchers so they can occupy their time by shopping.

The online-only brand, founded by Alibaba’s executive chairman Jack Ma, Tencent’s chairman Pony Ma and Ping An Insurance, already has over half a billion customers holding more than seven billion policies and is likely to opt for an initial public offering in mainland China this year.

In November 2016, ZhongAn launched its own internal incubator focusing on an ‘ABCD’ strategy of artificial intelligence, Blockchain, cloud computing, and data, aiming to develop new technologies for itself and its partners.

Extract from Wall Street Journal, November 2016

Medical insurance often becomes invalid if the customer is drunk. But during the football World Cup in 2014, Shanghai-based Zhongan Insurance turned that rule upside down by offering Chinese football fans a policy specifically for self-inflicted liver damage.

It cost less than $1 and covered sports enthusiasts against alcohol poisoning for 30 days — paying out up to Rmb2,000 ($290) for hospital fees. It soon came to be known as “watching-football-drinking-too-much” insurance.

This has not been Zhongan’s only foray into more specialist areas of China’s insurance market. Another of its policies, called “high heat”, reimburses customers when the temperature hits 37°C. Another insures against flight delays — and, in many cases, pays out while the customer is still waiting in the departure lounge.

But while such products might seem niche, the company behind them is anything but. From a standing start three years ago, it has sold 5.8bn policies to 460m customers. This has quickly translated into profit. Zhongan went from making a loss in 2013 to posting Rmb168m in net profit two years later. Total assets jumped more than 500 per cent between 2014 and 2015, to Rmb8bn.

Now backed by Chinese ecommerce company Alibaba, internet group Tencent and financial conglomerate Ping An, Zhongan is often cited as a candidate for an initial public offering.

Wayne Xu, chief operating officer, does not dispute the often light-hearted nature of some of its products — admitting that some are simply designed to “make people feel better”.

The flight-delay insurance product gives customers digital coupons on their smartphones that they can redeem while still in the airport. “It gives them a reason to walk around while they wait for their flight,” Mr Xu explains. He sees this as a radical approach in an industry that has long struggled to attract young people.

5.8bn policies sold to 460m customers, has quickly translated into profit. But his big three backers see serious scope for valuable data gathering.

All three investors have already collected user data across vast swaths of China’s internet, through online merchants, messaging applications and bank accounts. Now, when Zhongan underwrites its retail credit insurance products, it can tap into the personal credit scoring databases of the three Chinese internet groups — giving it one of the broadest views of credit data of any company in the country.

To continue the push, Zhongan has prioritised recruiting staff with tech, rather than insurance, backgrounds. “None of us have been working at an insurance company before this,” notes Mr Xu, formerly a product manager at Google.

Henri Arslanian, an adjunct associate professor at the University of Hong Kong who teaches financial technology, says he regards Zhongan as “a technology company that happens to focus on insurance, rather than an insurance firm that is looking at digital as simply another distribution channel”.

Alibaba has acted as the channel through which the majority of Zhongan’s products have been sold, and the insurer’s flagship policy is return shipping insurance for goods sold on Taobao — Alibaba’s online shopping platform. Zhongan’s policies reimburse the cost of shipping when a shopper returns a product.

Last year, on the Chinese shopping holiday known as Singles Day, which falls on November 11, the group sold more than 100m return shipping policies in a single day.

Zhongan is finding it has competition in the market for offbeat insurance policies. TongJuBao already sells specialist policies to cover for the cost of divorce lawyers and for search teams to look for missing children. It also sells insurance that offers income protection for people who leave their jobs to move to a different city.

Launching offbeat policies does not always go smoothly. Zhongan discontinued its product for heavy drinking football fans for an undisclosed reason, and China’s insurance regulator has since issued warnings about companies selling “exotic” insurance.

Some analysts also question the long-term viability of Zhongan’s other policies. It has several hundred low-cost niche products, from drone insurance to policies that cover cracked mobile phone screens and cost only a few renminbi. On these, customer uptake is likely to be slow, the analysts claim.

“We hear that they have many teams developing many different kinds of products but the volume on individual products is still very low,” says Li Jian, a Hong Kong-based insurance analyst at Autonomous Research. “If you don’t have scale the costs will go up.”

A pure online insurance operation also has its limits. Motor insurance is one of the fastest growing categories of property and casualty insurance in China today. But the business requires insurers to have big claims teams that can visit accident sites.

Lacking those capabilities, Zhongan has instead focused almost entirely on niche motoring policies, covering tyres and other individual parts — missing out on covering bigger ticket items, says Stella Ng, a Hong Kong-based analyst at Moody’s.

“Given an operating history of three years, with limited track record of good underwriting profitability, we still believe it remains to be tested over time,” Ms Ng warns.

Extract from Bitcoin News, November 2016

China’s First Online Insurance Firm Initiates the ‘ABCD Plan’

ZhongAn Online Property & Casualty Insurance was China’s first online insurance company. Partners Ant Financial, Tencent, and Ping An founded it in 2013. Now the service has over 460 million customers and 5.8 billion policies under its management. Then in the summer of 2015, it raised 5.78 billion yuan ($931.3 million USD).

The company is now focusing on its “ABCD plan” which aims to harness AI, blockchain, cloud management, and data-driven applications. Soon, the ZhongAn Technology subsidiary will launch its services using the blockchain cloud platform.

“With the creation of ZhongAn Technology, we are developing a new fintech ecosystem, integrating technological research with financial innovation,” said Xing Jiang, ZhongAn’s CTO and chairman. “We aim to be an accelerator for both finance and healthcare sectors.”

Jin Chen, Chief Executive Officer of ZhongAn, said as an internet-based company the firm has created its own ecosystem, tailored to clients. So far, the company has formed two pillars with its customer base: a “connector and a stabilizer.” Now Chen says ZhongAn’s third pillar will be at the forefront of accelerating financial technology, amplifying its benefits to become a “commercial driving force.”

ZhongAn Technology’s Blockchain-Based Open Platform

ZhongAn said the company has already been researching and developing an open blockchain platform. ZhongAn created its blockchain protocol to enable insurance transactions and cushion the growth of its insurance ecosystem. Moreover, the company says the secure platform provides connections between business partners and data of operations within a distributed ledger.

“The open technological platform has much lower technical doorsill and threshold in development and maintenance, reducing barriers to business cooperation, and improving operation efficiency,” the company stated.

ZhongAn Technology and twenty like-minded business partners will create a collaborative alliance. Members include representatives from financial institutions, insurance, construction & decoration, consumer finance, logistics, payment, security, healthcare, and retail services. The group has already established the Shanghai Blockchain Enterprise Development Alliance. The group says it is dedicated to promoting blockchain-focused research and development in China.

ZhongAn’s Blockchain Utilizes The Ethereum Protocol

ZhongAn’s website gives a lot of descriptions of the various use cases its blockchain protocol will offer. The Chinese online insurance firm uses the Ethereum blockchain for its operations.

Ethereum founder Vitalik Buterin said he’s pleased to see ZhongAn implement the technology he helped create.

“ZhongAn Technology has integrated our technology to build an open platform and the Chinese insurance industry is actively exploring the applications of blockchain technology,” he said. “I hope that more and more Chinese companies can tap into this field and help develop this new area.”

In addition to the blockchain alliance and multiple R&D projects, the company is partnering with Fudan University School of Computer Sciences and Technology. The organizations will also develop a “blockchain and information security laboratory.”

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