ZhongAn Insurance Intends to Penetrate Online Clinic Sector
COVID-19 and China
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ZhongAn Online P&C Insurance Co. Ltd (ZhongAn Insurance, 众安保险) announced on July 24th that it had obtained the online clinic license and would soon launch Internet healthcare services.

Ping An (601318 SH), the largest Chinese insurance company by all indicators, Tencent (00700.HK) and Ant Financial count among the company’s largest shareholders.

Due to the fact that the three shareholders are dominant players in their respective fields, ZhongAn chooses to operate online insurance only to leverage their strengths.

The company went public on HKEX (Hong Kong stock market) in September 2017 under the code 06060. Though ZhongAn bears little similarity/resemblance to Ping An Good Doctor (01833.HK), a Ping An subsidiary and online healthcare company, they have one thing in common: Negative returns.

Ping An Good Doctor reported a loss of HKD 1,042.06 million (USD 133.04 million) for 2018; ZhongAn posted a loss of HKD 1,810.16 million (USD 263.75 million) for the same period. Although Ping An Good Doctor, a predecessor in online clinic, is still losing money, ZhongAn is determined to follow it with a move into the market.

The online clinic was once a field that attracted a large number of angel investors and venture capital funds. Analysys, a market intelligence and research firm, finds in a study/research paper, investments in online healthcare gradually shift toward the late stages – Series B and after-Series B financings are the bulk of the deals closed. Investment frenzy in the area has cooled, particularly when the market leader, Ping An Good Doctor, reported losses year after year.

Nevertheless, the dismal prospect of profitability at this stage doesn’t seem to deter ZhongAn, as it looks set/is poised to push deep into the market.

The company may have some advantage. With roots in online insurance, ZhongAn has the natural tendency to connect with clinics, hospitals, pharmacies, and other healthcare institutions. The core “online” feature of its service also offers convenience as it directs/refers its insurance customers to the online clinics, compared with those traditional and offline insurers.

The online clinic can effectively involve insurers, clinics, hospitals, pharmacies, and other facilities and form a complete online healthcare ecosystem regardless of the geographical constraints.

According to previous EqualOcean articles, China has a severe shortage of healthcare resources. It finds itself on the shallow end of a talent pool, and the existing resources are unevenly allocated. The shortage of healthcare resources and the absence of family doctor initiatives can be somewhat addressed for via online clinics.

The market exists for more reasons. There are other explanations for the existence of the market. The online clinic is a gateway for the insurer to attract users and potential clients to its platform and finally retain these users via services offered within the ecosystem.

The ecosystem can be further strengthened with the addition of online clinic service, lab result, payment, insurance coverage pharmacy and so on. Insurers can benefit from the data accumulated in the online healthcare services.

The design and pricing of an insurance product hinge largely on/relies heavily on healthcare data such as the incidence of certain diseases among a population and risks associated with changes to underlying assets.

Ping An has the incentive to launch Ping An Good Doctor – albeit loss-making to date – and ZhongAn has the motivation to make its foray into the market, but we don’t yet if the business logic/model will follow in the footsteps of its predecessor.


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