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Baidu and Allianz team up to grab slice of China’s online insurance market

The financial services arms race between China’s big three internet companies is heating up

PUBLISHED : Thursday, 26 November, 2015, 9:14pm
UPDATED : Thursday, 26 November, 2015, 9:13pm

The arms race between China’s big three internet companies is heating up in financial services as online search giant Baidu, global insurer Allianz and Asian investor Hillhouse Capital Group form a digital insurance company on the mainland.

This new venture, called Bai An, hopes to expand the domestic market for digital insurance products, in which many traditional property and life insurance companies have yet to participate.

Baidu’s foray into insurance followed its announcement last week of a strategic cooperation deal with China Citic Bank to establish Baixin Bank, which will offer loans and other financial services directly to clients online.

Analysts said those two initiatives represented an aggressive bid by Baidu to bolster its capabilities in financial services against rivals Alibaba and Tencent.

“Baidu is playing catch-up in a 10,000-mile journey,” said Sandy Shen, a research director at Gartner. “Its two main competitors have each established a foothold in banking and insurance, as well as online payment and e-commerce, with a large number of real customers. We have yet to see how Baidu will fare in attracting customers to its two financial services ventures.”

Baidu is playing catch-up in a 10,000-mile journey
Sandy Shen, Gartner

In November last year, Alibaba and Tencent joined forces with Ping An Insurance – the mainland’s second-largest insurer – in setting up Zhong An Online Property Insurance to tap growing local demand.

While life insurance still relies heavily on sales agents, digital insurance products were gaining customers for travel, automotive and property coverage, Shen said.

Robin Li Yanhong, the chairman and chief executive of Baidu, said the digital insurance market was not simply about selling insurance online.

“It’s about offering insurance products that cover scenarios generated by everyday internet use,” Li said.

Bai An is expected to meet demand for “more diversified, customised and scenario-based insurance products”, according to Baidu.

It said scenario-based insurance consists of small, situational insurance protection offered for high-frequency, location-based or internet transactions, including online travel and various online-to-offline (O2O) services.

That would play into the strengths of Baidu, which has more than 640 million monthly active users of mobile search and operates 14 mobile apps, each with over 100 million daily active users.

Baidu also has the fastest-growing O2O ecosystem that connects people with services, covering a wide range of insurable scenarios that include tourism, dining, takeout delivery, travel and health care.

Munich-based Allianz said it has extensive experience in scenario-based insurance product innovation. Its risk management and control capabilities have enabled the insurer to cooperate with the likes of BMW, Airbnb and Uber to launch innovative insurance services.

Partnering with Baidu would also help boost the profile of Allianz in a market where foreign insurers have struggled to win market share due to the slow pace of deregulation and increasing local competition.

Data from the China Insurance Regulatory Commission shows that foreign life insurers’ market share on the mainland declined to 5.6 per cent in 2013 from 8.9 per cent in 2005. Foreign property and casualty companies have failed to grow market share from 1.3 per cent since 2005.

Forrester Research analyst Charlie Dai expected Baidu’s insurance venture to be approved by regulators since the central government’s “Internet Plus” policy encouraged digital innovation in industries.

According to the Insurance Association of China, online insurance premiums on the mainland grew 260 per cent year on year to 81.6 billion yuan in the first half of this year. That made up 4.7 per cent of overall industry premiums in the same period and almost equalled last year’s total online insurance premiums of 85.9 billion yuan.

The association estimated there were 96 insurance companies on the mainland that offered digital insurance products at the end of June.