Internet finance has become the newest battleground in China, as more Chinese than ever are getting online for the first time. Traditional insurers, hoping to take advantage of this new lucrative sector, are however frustrated by costs and competition from e-commerce giants.
Increasingly, insurers are diversifying their sales channels through providing third-party online payment services, according to Wang Guojun, an insurance professor at the University of International Business and Economics in Beijing, the South China Morning Post reported on Thursday.
Ping An Insurance Co of China Ltd (SHA:601318), China’s second-largest insurance company, was the first to adopt third-party payment business last month, launching a mobile payment and social networking platform named Yiwallet.
“Ping An aims to develop an integrated financial service platform,” Wang said. “Providing third-party payment services will not only benefit its online insurance sales but also its other internet financial business.”
Other companies, like Taikang Life Insurance, PICC Property & Casualty Co., Ltd. (HKG:2328) and China Pacific Property Insurance, instead partnered with e-commerce giants like Alibaba, to sell insurance policies on Taobao, China’s eBay-like online retail platform under the Alibaba banner.
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The benefit of doing this instead of running a third party payment platform on their own is lower costs, Wang said. But a third-party payment service like Ping An now offers can be used to link up various businesses in the financial industry, including insurance, banking, trust and securities, a Ping An spokesman told the South China Morning Post.
Online insurance sales surged to 29.1 billion yuan ($474 million) last year, a whopping 810 percent increase from just 3.2 billion yuan in 2011, according to data from the Insurnace Association of China.
“The market potential for e-commerce [in the insurance industry] is huge,” said Zhang Meng, an analyst with the Beijing-based information technology consultancy Analysys. “We can see that insurance companies, agencies are selling insurance policies online, while these products are also available on Taobao and online retailer Jingdong.”