Technology-driven growth in China: An interview with Jiang Xing

The CEO of ZhongAn Insurance says the industry can generate momentum for growth by taking advantage of trends, preparing for future developments, and increasing investments in digital transformation.

As the digitalization of every industry reshapes our world, digital leaders offer lessons on both the opportunities and the challenges at play. ZhongAn Online P&C Insurance was the first professional institution licensed to provide online insurance in China. The company was formally established in 2013 and listed on the Hong Kong exchange in 2017; today it is among the top ten property and casualty insurance companies in the China market—less than a decade after its founding. As of the end of last year, ZhongAn had served more than 520 million customers and received more than ¥55 billion ($8.5 billion) in premiums.

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For ZhongAn, which has rejected the traditional offline distribution model, this remarkable growth is undoubtedly underpinned by the power of insurtech. Through the integration of technology and insurance, ZhongAn has reshaped its entire value chain, from product design to marketing to claims underwriting, and has taken the lead in achieving a digital transformation.

Violet Chung, partner at McKinsey in Hong Kong, recently spoke with Jiang Xing, CEO of ZhongAn Insurance, about technology-driven growth. Their conversation covered ZhongAn’s digital strategy, technology output, and vision for the future—particularly in the postpandemic era. This article is part of McKinsey’s Insurance Industry Leaders and Shapers interview series and has been edited for clarity.

Sustained focus on the fusion of technology and insurance

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McKinsey: ZhongAn grew quickly over a short time. What can others learn from your experience?

Jiang Xing: ZhongAn Insurance was the first online insurance company in China. Over the past eight years, we have been focusing on the in-depth integration of technology into our insurance businesses to comprehensively serve the entire insurance value chain.

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First, we believe cloud technology is the core driver of technological empowerment for insurance and improved services. ZhongAn put all core systems on the cloud early on, and this has given us a solid foundation for innovation and growth over the past few years. In 2020, we upgraded our self-developed cloud system, Wujieshan, to version 2.0. This has enabled us to process 54,000 insurance policies per second and taken us a step closer to our goal of reaching ¥100 billion in insurance premiums. In 2020, the number of insurance policies handled by our systems exceeded 7.8 billion.

Second, it’s crucial to use data as the basis for production. In this fully data-driven age, digitalization can lead to improved data availability and applicability, thereby unleashing the real value of artificial intelligence. As such, we are increasing our investments in data R&D. We have upgraded our data-intelligence center based on big data and artificial intelligence, building data mid-ends and using data to drive innovation and enhancement along the entire insurance value chain.

The results are measurable: the rate of data utilization within ZhongAn increased by 16 percent last year. Through this type of refined operation, the efficiency of claims underwriting has improved by 20 percent. Currently, over 99 percent of ZhongAn claims processes are automated, and the navigation rate of our smart interactive voice response has reached 97 percent, covering over 85 percent of customer inquiries. This has resulted in significant improvements in both internal efficiency and customer satisfaction.

Third, we are leveraging ecosystem synergies to further enhance our technological empowerment. It is only through mutual cooperation and harnessing the unique advantages of each party that we can serve the increasingly complex business environment and satisfy the increasingly diverse needs of our customers. However, true digital reform is a long-term, systemwide project requiring large-scale investment. Finding a technology partner for in-depth cooperation is of critical importance, particularly for an insurance company or group willing to embrace digital upgrades.

Over the past few years, ZhongAn has invested heavily in technology. Since the company was founded, we have invested a cumulative total of over ¥3.6 billion in research and development.

ZhongAn Technologies, a wholly owned subsidiary of ZhongAn Insurance, currently has three major insurtech products that are ready for the market. These products are digital upgrades for our business production, growth, and infrastructure series, basically covering the front-end, mid-end, and back-end platforms of the insurance business.

In 2020, we also became a member of the first group of state partners for digital transformation, working with various leading insurers and banks and supplying them with our automated marketing platforms and our next-generation core insurance products. The compound growth rate of the revenue derived from our technology offerings reached 109 percent during the three-year period of 2017 to 2020. We are now at the cutting edge of the digital transformation within the industry.

Assisting in the digital transformation of the insurance ecosystem

McKinsey: In recent years, ZhongAn has started exporting technology overseas and developed partnerships in this area in Hong Kong, Japan, and Southeast Asia. Could you talk briefly about the current development of these efforts, and if possible, could you include some examples?

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Jiang Xing: After years of development, our technology offering is no longer limited to a single item but includes comprehensive, systemic solutions. In Hong Kong, ZhongAn has performed quite well over the past two years. In particular, in the first half of last year, both our virtual bank, ZA Bank, and our digital insurance company, ZA Insure, started operation. ZA Bank, the first virtual bank to formally begin operations in Hong Kong, served over 220,000 customers, ages 18 to 93, as of the end of last year, with total deposits of around HK $6 billion.

This past May, ZA Bank officially announced the launch of our life insurance product, which offers the highest ratio of coverage to premiums in Hong Kong and is available to our Hong Kong customers through our virtual bank app. In addition, with regard to other markets, we are actively exploring opportunities to implement digital solutions with our partners. For example, we are offering our core insurance systems to major insurers in Asia. We have also set up in-depth partnerships with internet platforms.

As of the end of 2020, ZhongAn Technologies had served more than 400 customers around the world. Going forward, we will continue to increase our investments in technology, develop domestic and overseas partnerships, facilitate digital transformation in the Asian and global insurance ecosystems, and strive to become the leading brand in the global insurtech market.

Opportunities and challenges in the postpandemic insurance industry

McKinsey: The pandemic has had an enormous impact on the insurance industry, both in China and in the wider world. In the post-COVID era, what core competitiveness do you think needs to be reconsidered?

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Jiang Xing: Yes, the pandemic has definitely become the keyword since its sudden emergence in 2020. I think this has accelerated the digitalization process in the insurance industry, shifting us to the fast lane. Customers’ expectations for digital insurance have significantly increased, and traditional insurers have begun actively pushing digital transformations to satisfy those needs.

In addition to taking advantage of strategic opportunities, we should plan ahead, increase our investments in digital transformation, and increase our support for future growth areas in our country’s economy, thereby gaining momentum from rising trends. Furthermore, with growing awareness of health issues and the evolution of regulations for the insurance industry, the domestic health insurance market will continue to grow. On the other hand, with the pandemic and adjustments in the macroeconomy, competition will become increasingly intense in the insurance industry, making it very difficult to generate profits.

Online insurers may have an advantage; ZhongAn’s premium income showed year-over-year growth of more than 44 percent this May, proving that online insurance is in a stage of rapid growth. We are more confident and optimistic about the growth potential of the market after the pandemic. In-depth user-data mining and innovations driven by customer needs are the keys to developing core competitiveness in the insurance industry of the future.

We believe that the insurance industry is entering an era of customer-centric digital growth. I think that future development is something all of us should look forward to.

ZhongAn’s future development

McKinsey: What will guide ZhongAn’s future development?

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Jiang Xing: We have greatly benefited from ZhongAn’s double-pronged strategy of focusing on insurance and technology, which was clearly defined from the start. The results have demonstrated that the online business model and technology empowerment are potent and constitute a core advantage.

Going forward, we want to continue to achieve data-driven, high-quality growth; invest in independent R&D; and refine our technology capabilities to create long-term value for both the company and our customers. Guided by this aim, we will strive to use insurtech to drive digital upgrades in the global insurance industry.

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