- Emerging Chinese credit reporting provider
- Service provider to booming Chinese insurers market
- Levels playing field in Chinese insurance market
- 5.48 billion insuretech market
Everyone has seen the car commercials in the United States that track your safe driving in exchange for a discount on car insurance. This is a huge invasion of privacy, if you wonder how this all got started, it’s because in general people think they are paying way too much for car insurance. According to NerdWallet.com 33% of millennial’s thought that they were paying too much for car insurance. These trends have created a lot of bullish sentiment in the peer to peer insurance sector disrupting the old way to do business. Lemonade (NASDAQ: LMND) made its IPO debut with a 140% price increase on the opening day. Finger Motion Inc. (OTCMKTS: FNGR) stock has also been on a tear higher but it is taking on the wide open Chinese market with their newly announced Big Data Insight Arm called Sapientus. This newly formed business arm will deliver data to the insurance and financial service industries.
If you never heard of the terminology InsureTech you are not alone and in the company of many insurance professionals. Simply put, InsureTech is technology that disrupts the insurance space. In the property casualty insurance space it could be sensors installed in the home to detect water leaks or fire. If you are in a car accident it’s the app that lets you take a picture and file a claim or the driving app that gives you a better rate. If you have health issues it could be the fitness band that tracks the calories you burn.
Worldwide revenue in InsureTech was running $5.48 billion in 2019 and expected to grow to $10.14 billion by 2025. The industry has a CAGR of 10.80% over the next 6 years. The chart above highlights an interesting trend that developed on the funding front during Q1 2020. InsureTech companies raised $912 million across 96 deals.
Deloittes Head of Risk Management from Property and Casualty, Netherlands said;
“New technologies and faster adoption by insurance companies is the key driving factor toward success and growth. There was doubt as to how it would merge with existing services, but the enhancements have been phenomenal. Customers are served more quickly by way of applications and multiple platforms.”
New and innovative insurance products that save consumers money and fraud mitigation algorithms that help increase insurance sales, will eventually be reflected in the bottom line of the insurers.
Booming China Online Insurance Market
China has one of the highest adoption rates for fintech products, but this is spilling over to InsureTech. Zhong An is China’s first online only insurance company, and represents a landmark case study. It is unique because it received the first and the only online insurance license. The company’s backers are Ping An (largest Chinese Insurer) Tencent (OTCMKTS: TCEHY), and Ali Baba (NASDAQ: BABA). In their first year in business they underwrote 630 million insurance policies and serviced 150 million clients the first year they opened their door in 2013. Zhong An has achieved an incredible amount of success, selling 6 billion policies to 460 million people, but they are still pushing boundaries. The platform is processing 13,000 policies a second. They want to reshape the traditional Chinese insurance market by using big data and analytic support to ensure accurate product pricing and risk control so that the internet ecosystem is welcoming to more clients.
David Wu, insurance sector leader for Deloitte China said:
“China’s three giant tech companies have aggressively expanded the reach, scale and accessibility of their digital platforms into the financial services space. The speed and scale of investment has made China one of the fastest growing insuretech leaders in the world”
Emerging Consumer Credit Reporting Agency
FingerMotion’s plan is simple, yet incredibly insightful. In China there are no individual credit scoring agencies to assess consumer risks like Experian (OTCMKTS : EXPGY), TransUnion (NYSE: TRU) or Equifax (NYSE: EFX). In the United States, credit scores define people and determine a person’s access to capital or services like insurance. In the United States credit score is used as a proxy to determine preferential rates on loans, credit cards, home & auto insurance, and phone service. The concept is that a person’s demographic stature is correlated to credit scores. In China most electronic payments are made through the phone including top up and utility payments. This means that a record of the goods and services that are purchased through the phone reside with the carrier. If the carrier was able to parse the metadata they would be able to profile their users.
Auto Insurance – China Style
Unlike the United States insurance market Sapientus will not need a tracking app to be downloaded first. Auto insurance providers like Progressive (NYSE: PGR) All State (NYSE: ALL), and Geico a subsidiary of Berkshire Hathaway (NYSE: BRK.A) have rolled out safe driver apps that assess a discount for good driving habits. These insurance conglomerates see tremendous value and efficiency with Insure Tech because they analyze the driving behaviors of their customers. In essence, these American insurance providers are taking a similar approach as Sapientus, but giving a discount on the back end instead of on customer acquisition. It all boils down to the issue of privacy. In the United States, providers need the customer’s permission to monitor their behavior, but in China there are no privacy provisions. .
Central Repository of Data
The meta data from a Chinese phone is stored at the carrier level in a central repository. Almost any imaginable data point can be analyzed for each individual driver. Simple data points such as speed, route, distance, and time of day on the road. Drivers with more concerning habits such as consistently talking on the phone, texting, or eating while driving can be more accurately risk assessed than ever before. Sapient has EXCLUSIVE access (no one else in China has access to this data, hence no competition) to this central repository. By using its predictive algorithms it can give actionable data to their insurance partners within minutes. Insurance companies will be partnering with Sapientus to offer real time risk analysis as well as precision marketing data that targets customers with good driving behaviors. On the claims side of the business they are going to offer insurance companies big data analytics that can detect insurance fraud allowing claims adjusters to focus on the flagged cases, thereby saving them time and money. The data will be presented in a simple manner to the insurance companies in the form of a risk score.
FingerMotion has the potential to usher in an unprecedented tsunami of meta data on the Chinese people and become the defacto credit rating agency for the country of China. The amount and range of data that can be mined, collected, and presented in an organized, simple manner is limitless. The credit reporting agencies data are mined by marketers in the United States because businesses want to target different demographics. Credit scores are an essential part of their algorithm. Should FingeMotion get any traction in this market segment the top credit reporting agencies in the United States will see this as a must have land grab which could rocket the stock price higher.
Another overarching catalyst is the massive Chinese insurance sector. Sapientus has positioned itself as a big data service provider to the Chinese insurance industry. They can partner with any insurance company providing them the ability to onboard customers quickly and use their data analytics for fraud identification. FingerMotion levels the playing field for all the other insurance carriers so they can compete with the likes of Zhong An. Investment funds may move quickly into FingerMotion to support its business plan because the big data insight division represents a considerable competitive threat to Tencent and Baba, the partners in Zhong An. It is conceivable that one of these giants may just outright acquire FingerMotion after they get traction because they already have existing partnership agreements on top up and a number of portals.
Concept video of how the app works
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Disclosure: Insider Financial and its owners do not have a position in the stocks posted and have posted this article for free without editorial input. This article was written by a guest contributor and solely reflects his opinions.