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The most direct motivation behind these insurance technology companies flocking to overseas listings often comes from "bet-repurchase agreements."

Text/Daily Financial Report Li Jia

After experiencing an early stage of wild growth, domestic insurance technology intermediary companies have significantly accelerated the pace of IPO listings.

Starting from 2020, Huize, Tianruixiang and Shuidi have successfully listed in the United States; in September 2023, Cheche Technology also successfully listed on the U.S. stock market through SPAC.

Entering the new year of 2024, the IPO process of domestic insurance technology intermediary companies has significantly accelerated, and a small climax of overseas listings has been set off again. In just one week between March and April this year, Youjia Insurance and Zhibao Technology were successfully listed on the Nasdaq in the United States, which attracted the attention of the industry.

Not only that, the Hong Kong stock market is also a favorite listing destination for a number of insurance technology intermediary companies. Currently, Xiaoyusan Insurance Brokerage's parent company Shouhui Technology and Haier Group's Zhongmiao Chuangke are both making comprehensive preparations for their listing.

Recently, on May 30, the internet insurance intermediary platform Yuanbao announced that it had obtained the approval of the China Securities Regulatory Commission and would soon go public in the United States. Then in early July, Aiyunbao's IPO in the United States was also registered by the China Securities Regulatory Commission.

However, looking back at the IPO history of insurance intermediaries, none of them has been successful. Although the number of intermediary companies that have been listed or are waiting to be listed has increased, the current market performance can only be said to be far from expectations, and it cannot alleviate the anxiety of the intermediary industry, which is currently in an increasingly severe survival and development dilemma.

The more severe challenges come from two aspects: First, when "listing and breaking the issue price" has become the norm, it may not be the best time for insurance intermediaries to go public. Second, for a long time, the sales model of insurance intermediaries relying on commissions as the main source of income has become a thing of the past. With the rapid development of technology and the continuous emergence of new talents, the business model and role positioning of insurance intermediaries are undergoing profound changes and reshaping. In this transformation process, not only Internet insurance brokers, but even the entire intermediary industry are facing a series of common and urgent challenges and problems.

InsurTech intermediaries have different development models

“Bet-back buyback” becomes a key factor in the rush to go public

Yuanbao and Aiyunbao, which have recently made significant progress in their listing, are both relatively young companies. Although they are both Internet insurance technology intermediaries, there are still certain differences in their operating models and main businesses.

According to public information, Yuanbao was established in September 2019. It is a technology-driven Internet insurance intermediary platform headquartered in Beijing, dedicated to providing customized, inclusive insurance products and protection services to the public. The company currently has millions of paying users, covering more than 90% of the country, and has in-depth cooperation with well-known insurance companies in the industry such as Ping An of China, Taikang Insurance, China Life, PICC, and ZhongAn Insurance.

It is reported that Yuanbao, which only officially started operations in 2020, has received four rounds of financing in just one year, setting a new record for the financing speed of the Internet insurance industry, especially the nearly 1 billion yuan C round of financing in 2021, which has attracted a lot of attention in the industry. According to media reports, Yuanbao recently completed another round of large-scale financing.

From the product level, Yuanbao has cooperated with more than 20 insurance companies on more than 50 products, focusing on medical insurance, serious illness insurance, accident insurance, etc., forming a diversified product matrix of "long-term insurance + short-term insurance". In Yuanbao's long-term development plan, health insurance is still the focus of efforts. For this purpose, a large health ecological platform has been laid out to create a large "insurance + medical" service ecosystem, providing users with integrated services of health management + insurance + disease management.

In terms of listing, Yuanbao has recently received a registration notice for overseas issuance and listing from the International Cooperation Department of the China Securities Regulatory Commission. It plans to issue no more than 64.5 million common shares and list them on the Nasdaq or New York Stock Exchange in the United States.

However, in the final stage of listing, the CSRC also required Yuanbao to provide additional information on four major inquiries: the compliance of the establishment of the equity structure; the scale of collection and storage of personal information, and the use of data collection; the compliance of the equity incentive plan; and the operational compliance of the operating entities Yuanbao Funing and Muyi Health.

Another company that is going public in the U.S. is Aiyunbao. It was founded in 2015 and is headquartered in Shanghai. It mainly provides "technology + service" solutions for insurance institutions and insurance practitioners, empowering users around the upstream and downstream core product systems - upstream it empowers insurance institutions and provides insurance companies with a series of services including product design, intelligent middle platform, intelligent risk control, etc.; downstream it empowers insurance agents with all-round technology in all aspects of pre-sales, sales and after-sales, improves operational efficiency and reconstructs the insurance agent industry ecosystem.

The latest data shows that as of the end of 2021, Aiyunbao has served more than 25 million users and cooperated with more than 100 insurance companies. The platform's GMV has exceeded 11.3 billion, the output value of agents has increased 10 times, and the revenue in 2021 reached 2 billion.

Unlike Yuanbao, which continues to receive capital financing, after Aiyunbao completed its Series B financing in 2019, there has been no news of it receiving financing in the market.

Some analysts pointed out that the most direct motivation behind these insurance technology companies flocking to overseas listings is often the "bet repurchase agreement." According to this agreement, listing can give investors an "explanation," but if the startup company is unable to go public within the agreed time, it will need to invest a large amount of money to repurchase shares, which is almost impossible for a company that has only been established for a few years.

Listing cannot hide many shortcomings

How to forge core competitiveness?

Going public is important, but it is obviously extremely unrealistic to think that all problems can be solved simply by going public. As mentioned at the beginning of the article, for today's insurance intermediaries, it is no longer an era to compete on fees as a sales channel. If they want to break through the single commission income model, they must transform. This is also one of the most urgent issues for companies at present.

Although some insurance intermediaries are actively embarking on the road of transformation, most intermediaries still face many obstacles in promoting business refinement, service specialization and technological innovation, and it is difficult to achieve significant breakthroughs. At present, the entire insurance intermediary market is committed to eliminating redundancy and improving quality, but to truly promote substantive changes, the first task is to deeply understand and clarify the core challenges and difficulties currently faced by Internet insurance intermediaries. As the saying goes, "grasp the main contradictions, and all problems can be easily solved."

First of all, insurance intermediary companies rely on the simple and crude customer acquisition model of Internet channels, which is very likely to lead to "magic cube business" that is strictly controlled by regulators, bringing huge adverse effects to their own development.

Take Yuanbao as an example. It is very good at promoting products and services by using the Internet to attract traffic. It constantly implants insurance products on many third-party Internet platforms. Whether it is information flow or targeted algorithm recommendation, it attracts consumers to buy with "low prices" without exception. A large number of "0 yuan insurance" and "1 yuan insurance" have become the backbone of its publicity. The "magic cube business" has also been spawned and criticized by the market.

There is no doubt that this marketing model, which takes advantage of users' desire for bargains to increase customer conversion rates, has indeed brought a lot of traffic and considerable profits to Yuanbao. Its official website shows that the platform has gained millions of paying users in less than a year since its launch. At the same time, it is reported that Yuanbao has also achieved a monthly premium growth of more than 100 times, and many leading insurance companies have carried out in-depth cooperation with Yuanbao.

However, the drawbacks of the model that relies solely on traffic to conquer the world are also obvious. The adverse effects of high complaint rates and high surrender rates have gradually attracted the attention of regulators. Moreover, as the "Magic Cube Business" continues to penetrate the market, negative comments such as malicious deductions, automatic deductions, and inducing consumption without the knowledge of consumers have also begun to surface one by one.

Subsequently, after the regulatory authorities continued to tighten supervision on short-term health insurance business, regulatory authorities in many regions across the country began to call a halt to the "0 yuan for the first month" and banned the "Magic Cube business", sternly warning these unlimited traffic games that are prone to cause disputes and policy cancellations that it is time to stop.

"Daily Financial Report" noticed that there are many complaints about Yuanbao on the online complaint platform Black Cat Complaint, and the reasons involved include false advertising, unauthorized deductions and so on.

Secondly, for many insurance technology companies that focus on empowering insurance practitioners, how to get rid of the label of "flying order platform" and operate legally and in compliance with regulations seems to be often easily overlooked.

The so-called "flying orders" refers to the behavior of financial institution employees privately recommending financial products issued or represented by other third-party institutions to customers. Specifically in the insurance field, according to the relevant regulations of traditional insurance, an insurance agent can only register for professional qualifications in one insurance institution and has no right to sell products of other insurance companies. Once a sale is made, it actually constitutes "flying orders".

Taking Aiyunbao, which has been registered for IPO in the United States, as an example, public information shows that in early 2023, the head of the market development department of Panhua Lianxing Insurance Liaocheng Branch acted as an agent for 30 insurance businesses for customers through the "iYunbao" platform. The five insurance companies involved, including Pacific Property and Casualty Insurance, were not within the company's scope of cooperation, and were therefore punished by the regulatory authorities.

Although this punishment only targets Panhua Lianxing Insurance, we can also see from it that it is an indisputable fact that other insurance agents regard iYunbao as a "flying order platform."

It can be said that "flying orders" have always been an act expressly prohibited by regulatory regulations. This kind of short-term, quick-success-oriented behavior will not only reduce consumers' trust in agency companies and lead to customer loss, but will also have long-term negative impacts on the individual insurance channel.

Finally, currently insurance technology intermediaries are more focused on model innovation and still face the challenge of strong homogeneity.

Customer acquisition and sales are the eternal themes of To C insurance business. The core reason why Internet insurance has been able to rise rapidly and attract widespread attention from users is that the model created by insurance technology intermediaries has cleverly utilized the wave of the Internet and demonstrated an outstanding ability to attract customers. This advantage has prompted many Internet insurance intermediaries to achieve rapid development at a certain stage.

It is true that there is nothing wrong with using traffic to acquire customers, but we must also realize that this kind of innovation centered around traffic and sales is more of a model innovation, and most of the traffic for Internet insurance comes from third-party platforms, so the ceiling for acquiring customers may have reached its peak. This also means that these channels and models will be imitated and learned by peer competitors, and the entire industry will face homogeneity, which will quickly consume market dividends.

For example, nowadays, a large number of insurance technology intermediaries have entered the video platform, such as video account, Douyin, Kuaishou, and Xiaohongshu, sharing the traffic dividend to realize rapid monetization. However, we soon discovered that the problems of homogeneity and low quality of insurance content on various platforms were particularly prominent.

So in such a tight situation, how should insurance technology intermediaries seek change and create irreplaceable value for insurance companies?

As the pace of the times continues to move forward and the digitalization of insurance continues to deepen, there are many directions and answers to this question. However, Daily Financial Report believes that increasing independent research and development and innovation of insurance products may be a relatively more likely tool for insurance technology intermediaries to form differentiated advantages.

Take Huize as an example. In recent years, it has continued to focus on customized products and has cooperated with leading insurance companies such as Ping An and CPIC to launch a number of popular customized IP products, such as the Darwin series and eXianghu, which are favored by the market. These products have received positive feedback in the market, both in terms of sales and word of mouth. Public data shows that the contribution of Huize's customized products to total premiums has exceeded 60% for three consecutive years.

In short, for insurance technology intermediaries that are striving for IPOs, if they want to gain recognition from the market and investors, it is not enough to just pursue short-term profits, but they need to form a refined business model and continue to increase long-term R&D investment and technological empowerment, so as to truly establish their own "moat" in terms of products, technology, services, etc.

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