Alipay’s XiangHuBao, Disruptive P2P in China, reached over 100 million users

In this article, I am going to talk about the development of of P2P insurance in China, including the innovative mechanism and features of XiangHuBao (相互宝), a P2P product launched on Alipay platform since October 2018.

What does P2P insurance mean?

Let’s first briefly explain what is P2P insurance, the short form of Peer-to-Peer insurance. It is an insurance that applies the concept of sharing economy. Generally speaking, it has the following characteristics.

• A group of individuals, who share similar insurance risk, pool premiums together
• When there are insurance claims, the amount would be paid by the premium pool
• When the insurance period ends (usually one year), if the amount of insurance claims is smaller than the amount of premium paid, the money balance in the pool will be returned as cashback or discount for the following year to the policyholders

Introduction of XiangHuBao and its distinctiveness

XiangHuBao is a P2P product offered to Alipay users who are gathered as a pool of members to mutually pay for claims of critical illness. Although it is free to join, only Alipay users whose Zhima Credit Score (https://b.zmxy.com.cn/index.htm?scene=alipay) , which is derived from factors including the usage of Alipay, consumption and payment records, activities of social network and so forth, is 600 or above are qualified to become a member.

Number of members joined

Since its launch on October 2018, the number of members has already succeeded 100 million in November 2019. Alipay has announced that it aims to have over 300 million members in two years.

Number of claims & Income from management fees

In terms of growth, the number of claims increase exponentially compared to the number of members. In the first few months since launch, there was only a handful of number of claims, likely due to the screening through eligibility requirement, disclaimer obligation as well as the Chinese New Year in February. As time goes by, the number of claims has been increasing, leading to the increasing amount of management fees paid to Alipay.

Distinctiveness

In the case of traditional insurance, as profits for insurers = premiums — operating expenses — claims, the lower the insurance claims, the higher profits insurers could earn, there is conflict of interests exist between insurers and policyholders.

In the mechanism of XiangHuBao, when insurance claims is filed and confirmed, all the members are obliged to share the total payment of “insurance claims + management fees”. The portion of management fees are received by Alipay. In this case, as the number of claims increases, the profits for insurers increase accordingly, and the conflict of interests between insurers and policyholders is eliminated.

In addition, XiangHuBao also has the following distinctive characteristics.

• Since members are required to pay premiums only if claims occur, theoretically the risk of the amount of claims exceeding premiums in the pool does not exist
• There is a maximum limit set on the amount of premiums to be paid by members, hence once that limit is reached, Alipay is obliged to pay the remaining amount of insurance claims
• Members can cancel the policy at any times

Details of XiangHuBao

On the enrollment page, once “$0 to join” is clicked, Zhima Credit Score is checked automatically, after the confirmation of body health status, the enrollment is complete.

Transparency

Every time after the claims payment is settled, which occurs two times in a month, information including the number of members who have shared the claims payment, number of claims, the corresponding case details of claims ( basic information of insured, details of illness, claims amount etc) is disclosed to all Alipay users.

Another P2P insurance in China

Shuidihuzhu

https://www.shuidihuzhu.com
Year Established：2016
Parent Company：Shuidi
Company Coverage：Cancer, Personal Accident

• The company mission is to have all citizens protected by health coverage
• 1 million members enrolled in the first 3 months, and the pool has officially been set up
• After 3 years, the number of members has exceeded 70 million and over 3,000 people got insured
• The enrollment can be done on WeChat or Shuidihuzhu’s app, and the enrollment fee only costs CNY9
• Around four times every month, the submitted documents of every filed claim, including the details of illness, are disclosed for the members to review. Til now, the shared amount of claims paid by members cost less than CNY1.
• The statement of pool balance is disclosed every 3 months

Conclusion

In the “new” form of P2P insurance illustrated by XiangHuBao, The key success factor is the tremendous number of members. Not only could that benefit insurers from increasing management fees as number of claims increase, the amount of premiums paid by every member should potentially be smaller as well.

While P2P insurance has been widespread overseas, it is yet to be available in Japan. On 5 July 2019, justInCase, Inc. has admitted to Regulatory Sandbox to experiment and introduce the first P2P Insurance in Japan. We are actively looking for strategic business partners and insurers to approach more potential customers who are truly in need of insurance to benefit from the P2P mechanism. We envision to make P2P be a standalone insurance category serving various insurance needs.