Now, companies that sell policies on mobile and internet platforms are targeting the largest and most technologically-resistant part of the sector: the life-insurance industry.
Chinese technology giants including the financial affiliate of Alibaba Group Holding Ltd. and Tencent Holdings Ltd. have been accumulating stakes in Asian life-insurance companies and online insurers over the past year. They are eyeing a large untapped opportunity: the hundreds of millions of uninsured people in China.
Continue Reading Below
Life insurance is a "meaningful product," said Wayne Xu, chief operating officer for ZhongAn Online P&C Insurance Co., a four-year-old company co-founded by Chinese billionaire Jack Ma that calls itself China's first online-only insurer.
ZhongAn, which went public recently and counts Alibaba affiliate Ant Financial Services Group and Tencent as significant shareholders, has built a high-volume business around selling online insurance on everything from drone accidents to flight delays. The company has applied for a license to sell life insurance, seeing it as a way to form more lasting relationships with individuals versus the short-term policies it currently sells.
With life products, "the connection between the customer and the product can last 30 years, 50 years, or longer," Mr. Xu said in an interview. "Few other products can reach such a level."
The challenge is that selling and underwriting life insurance over the internet is much more complex than selling policies to cover small financial losses. Life insurance has also been traditionally marketed by individual agents who have cultivated personal relationships with their clientele. One way online insurers could bridge the gap is by selling cheaper life-insurance policies and targeting a younger demographic that is generally in better health.
ZhongAn, which primarily markets and sells insurance through Ant's popular Alipay mobile-payments network, may try to use its access to a hoard of customer data to develop life-insurance products, according to Mr. Xu.
ZhongAn is leading a crop of so-called insurance technology, or insurtech, platforms into new areas. Other financial-technology companies are also trying to build up or broaden life-insurance offerings, in some cases by working with old-line insurance companies.
In January, Chinese social-media giant Tencent bought a 20% stake in the Hong Kong life-insurance business of British life insurer Aviva PLC. The companies are currently working together to find ways to sell policies online.
"China is the real test bed at the forefront of the disruption," said Alex Kimura, Asia chief strategy officer for Aviva. Tencent, he noted, has embedded itself deeply in Chinese lifestyles, thanks to its popular WeChat messaging platform, and has increasingly used that to sell consumer products to individuals.
Life insurance, however, "is the hardest one to do online" relative to other types of policies like health-care or property insurance, Mr. Kimura added.
The industry's growth potential, especially among a younger generation of tech-savvy Chinese consumers, could be massive. China counted 330 million online-insurance customers last year, up 43% from a year earlier. About 80% of the individuals were born in the 1980s and 1990s, according to financial-data platform CBN. Most of them bought non-life insurance policies.
Premiums written in China totaled $470 billion last year, with life insurance accounting for around 60% of the sum, according to Swiss Reinsurance Co. Online sales for life products made up just 6% of the segment, which was dominated by traditional insurers that have tie-ups with Chinese state-owned banks. They include companies such as Sun Life Everbright Life Insurance Co. and ICBC-AXA Life Insurance Co.
China posted 30% year-over-year growth in life premiums in 2016, compared with 9% in non-life premiums, according to data from Allianz Group.
This past summer, Yunfeng Financial Group Ltd., a brokerage and financial-technology company controlled by Mr. Ma, joined a consortium acquiring the Hong Kong-based business of Massachusetts Mutual Life Insurance Co. Ant Financial was also part of the investor group.
Yunfeng is interested in finding ways to leverage MassMutual's team of 3,000 agents in Hong Kong and Macau. "That is great value to us," Yunfeng Chief Executive Ting Li said in an interview.
She said the agent force is "very complementary" to Yunfeng's financial technology, which includes things like mobile apps for wealth management and personal investing, areas that dovetail with insurance products. The company is aiming to sell life insurance online but needs regulatory approval before it can proceed.
Another way for companies to break into the online life-insurance market could be by initially selling simple variations such as policies that cover loan payments if borrowers die or become disabled, said Cliff Sheng, a partner at consultancy Oliver Wyman. "Online distribution of traditional life products is obviously more difficult," he said.
Write to Chuin-Wei Yap at email@example.com
(END) Dow Jones Newswires
November 02, 2017 01:56 ET (05:56 GMT)