During the shopping festival, Zhong’an provided over 100 insurance products, including Return Insurance, Cargo Insurance, Credit Guarantee Insurance, and Bank Account Security Insurance. These products were aimed at different groups of consumers from buyers to sellers, and to agencies and platforms. Coverage areas included product quality, seller credibility, after-sales services, transaction safety, consumer finance, and health to name a few.
Success however, did not come smoothly. At the beginning of this year, Zhong’an showed a Q1 RMB382 million (USD$55.52 million) loss including a decrease in revenue. To Zhong’an’s management team, it was not a surprise. As a relatively new insurance company, Zhong’an needed time, as well as capital, to cover the cost of team building, products design, policy test and so on.
From our point of view, the loss was also related to Zhong’an’s business model. As the most famous digital insurance company in China, Zhong’an was set up three years ago by many influential shareholders. Alibaba (which holds a 19.9% share) has the biggest corporate client resources and is an expert in e-commerce. In addition, its database is considered to be the most advanced in China. Ping’an (which holds a 15% share), is one of the oldest and biggest traditional insurance companies in China, holds almost all of the financial service licenses. Tencent (which holds a 15% share), owns the most popular social app QQ and Wechat/Weibo in China. Ctrip (holding a 5% share), is the biggest digital travel agent in China.
As with many things, being born into a privileged family does not ensure success. It could become a tricky situation for so many big players to combine all their resources under one single company and indeed, Zhong’an has experienced difficulties. Until earlier this year, there was limited product selection and the only mature policy it really sold well was the Return Insurance. But it was far from enough for an insurance company valued at RMB60 billion (USD$8.7 billion). Sitting on loads of cash investment, it may generate good income by investing in the capital market when the economy was booming. That was the main method for Zhong’an to generate profits at early days. But as China’s economy slows, that's really no longer possible.
Growing sales are of course exciting for Zhong’an, and also the rest of the market and it highlights the huge opportunity for digital insurance companies in China, but Zhong'an will need to really start to drive sales to continue to build its business. Thankfully things like Artificial Intelligence, the Internet of Things and Blockchain will give them the technology options to really develop something unique.
 Return Insurance covers the risk of returning goods back after online shopping.