Lessons from China's Insurtech Leaders

When they hear the word insurtech, many people think of startups. And in many cases, insurtech, which refers to the use of technology and innovation to make the insurance industry more efficient and customer-centric, is, in fact, the domain of small and nimble technology players. That, however, is not always the case.

The insurtech market in China isn't led by the small startups one might expect. In a decade of work in the country, BCG has seen large digitally savvy incumbents—or large internet companies—command the emerging and still-growing market. Certainly, big Chinese insurers such as Ping An Insurance, Taikang Insurance Group, and Sunshine Insurance Group do partner with small innovative companies, but they also aggressively take the lead and drive innovation internally. Western insurers should follow China’s insurtech leaders and develop a clear strategy for fostering and managing digital innovation.

Enablement, integration, and commercialization are the three fundamental insurtech strategies:

• Enablement. The company’s goal is to enhance the capabilities of its workforce and the efficiency of its operations by deploying such technologies as big data, the cloud, and artificial intelligence (AI) to improve product development, claims management, and customer service. Insurer Ping An, for example, uses cloud technology to link its underlying customer databases, core claim management platforms, and an AI risk management system. The goal is to create an intelligent motor insurance claims-handling system. The resulting AI auto damage image recognition system—which is 90% accurate—has drastically reduced fraud and driven huge efficiencies. Approximately 80% of the insurance claims filed with Ping An are small claims, and the AI system handles about 95% of these. In the first half of 2017, claims losses declined by 7.8%, or roughly $480 million.
• Integration. In this case, the insurer extends the technology benefits of its own value chain to other industries to create ecosystems. For example, Taikang is leveraging a $250 million annual technology budget to create Health Cloud, an integrated insurance and health ecosystem. The company is offering this service to about 1,000 nursing homes, several thousand dental clinics, retirement communities in 14 cities, and around 1,000 hospitals. Taikang’s goal is to connect these thousands of “data islands” to create a single customer relationship management (CRM) system with common IT, infrastructure, and data standards so that data can be pulled quickly from anywhere without the need for intense data scrubbing and matching. Once fully in place, the integration of services through CRM will radically improve the customer experience, claims management, and risk control for insurers.
• Commercialization. A few Chinese insurers are pursuing a third—and even more sophisticated—insurtech strategy: selling technology products to other industries. Ping An for example, is selling its facial-recognition technology to the travel industry. And Zhong An, a new insurance player, sold tens of different technology products to 200 clients in 2017, generating sales of $6.4 million.

Four Lessons in Digital Innovation from China’s Insurers

When it comes to digital innovation in insurance, western insurers certainly face challenges—not the least of which are tight regulatory environments and legacy IT systems. But drawing on lessons from innovative Chinese players, a western insurer can take four steps to accelerate its digital transformation:

1. Institutionalize innovation within the organization, creating an innovation group that has enough independence to move nimbly.
2. Recruit a diverse team of experts from other industries, offering competitive compensation to keep that talent.
3. Commit to the technology strategy and make the sizable investments required.
4. Cast a wide net for potential partners who can support its technological innovation and the creation of ecosystems.

With these principles driving their technology strategy, western insurers may find that—like their Chinese counterparts—they can become digital leaders.