Something was brewing in China’s fintech sector: online insurance lead generation.
About a week ago, Shuidi Huzhu, an online ‘mutual insurance’ company, announced its CNY 500 million (US$ 74.5 million) Series B round led by Tencent. Although the company has a whole suite of products, its main revenue generator was leads for insurance companies.
I love turbot
A business in Hangzhou called 我爱多保鱼 (literally “I love turbot”) has already raised tens of millions of dollars and is allegedly very profitable. Alibaba and Tencent are also entering the fray.
For insurance companies, that allowed them a new route to sell cheaper products to consumers, because the channel cost now is lower (You do not have to pay offline agents who typically have a very low conversion, and thus costly).
Chatter from many of the current and ex-P2P players we have been hearing also confirm that many are secretly transitioning their business into insurance lead generation. “The industry will take off very soon,” one said. “Growth will be exponential.”
But this might not happen.
Last week, China Banking and Insurance Regulatory Commission (CBIRC) issued a stern notice to “fix the chaos in the online insurance intermediary market”. The notice specified that any internet platform without a proper intermediary licence should NOT engage in such activity.
The good news for Turbot lovers is that they actually have the licence.
Why certain regulators are more active than others
Those familiar with tech development in China would know that the regulators would sometimes act swiftly to prevent things from spinning out of control.
In 2017, the People’s Bank of China (PBOC) banned ICOs just as the sector was taking off. The move was heavily criticised by industry enthusiasts as anti-innovation. Retrospectively this was quite prudent.
As far as banking and fintech are concerned, regulators tended to move quite slowly. The reason is not hard to understand: the country needs credit to keep fuelling the economy, and any too-abrupt action from regulators would risk derailing the very delicate economic situation.
This was especially sensitive at the heyday of the trade war waged by Donald Trump. So any news you hear about clamping down on P2P is likely to be false.
CBIRC was formed last year as a result of the merger of China Banking Regulatory Commission (CBRC) and China Insurance Regulatory Commission (CIRC). Its web site is still being updated to reflect the merger.
CIRC always had an easier job than CBRC because there are not many licensed insurance companies in China, hence the burden on the regulators tends to be lower.
How will the combined body effectively supervise the about-to-boom online intermediary market remains to be seen.
People will come out with permutations to go around this rule. However, precisely because there are not that many insurance companies, this job might not be that difficult at all.
You just need to tell insurance companies to stop working with the ones that are not licensed.