What Do Insurance Licenses Mean for Internet Healthcare? (I): The Value of Insurance Broker Licenses

In the field of internet healthcare, health insurance payers play a significant role, making them the most prominent avenue for many internet healthcare startups seeking viable business models. As policies increasingly favor commercial health medical insurance, life insurance has naturally become a key target in the competitive race for insurance licenses. In 2014, the commercial health insurance sector experienced substantial growth. Health insurance products covered four major categories: critical illness insurance, medical expense insurance, long-term care insurance, and disability income loss insurance. With more than 2,300 products available on the market, premium income reached RMB 158.63 billion, representing a year-on-year increase of 41.9%, while claims expenditures amounted to RMB 57.24 billion.

However, regulation of the insurance industry has always been stringent. Even if policies are favorable to insurance operations, obtaining a new insurance license is by no means an easy feat. Through this article, VCBeat’s Internet Healthcare Research Institute conducts a preliminary analysis to explore what various types of insurance licenses entail and assess their true value. Who currently holds health insurance licenses? And just how difficult is it to persuade the China Insurance Regulatory Commission (CIRC) to issue an additional life insurance license?

Part I: How Valuable Is an Insurance Brokerage License?

Some healthcare startups that have been talked about in the industry are applying for or have already obtained insurance intermediary licenses, not insurance licenses. In fact, an insurance intermediary license does not grant the right to underwrite insurance products; it only permits the agency sale of insurance products or provides operational authority to advise clients on purchasing insurance products and related services.

Although both insurance brokers and insurance agents fall under the category of insurance intermediaries, there are distinctions between them. Simply put, insurance agents serve insurance institutions by selling their insurance products, whereas insurance brokerage firms serve clients by providing insurance-related consulting and procurement services, as well as assisting with claims settlement and other follow-up procedures.

Holding an insurance brokerage or agency license merely signifies eligibility to collaborate with insurance companies in the policy sales process. An insurance agency or brokerage license is a mandatory permit for non-insurance companies to sell insurance products. In other words, this license is required to sell insurance.

With an insurance brokerage license in hand, what are the prevailing strategies? The most straightforward approach is to leverage existing patient and physician traffic to cross-sell health insurance products and earn commissions on premiums. Secondly, online medical services can be bundled with insurance policies for joint sale; the inherent synergy between these two product categories may prove more attractive to users. Thirdly, online medical platforms serving employer groups can simultaneously recommend and advise on group insurance products, thereby expanding their service scope while better addressing employers’ needs in employee health benefits. Let us now examine the current landscape of the insurance brokerage industry that many players are seeking to enter.

How Many Insurance Intermediary Companies Are There?

According to the report from the China Insurance Regulatory Commission (CIRC), by the end of 2014, there were a total of 2,546 specialized insurance intermediary agencies across China. Among them, there were 1,764 specialized insurance agencies, 445 insurance brokerage firms, and 337 insurance loss adjusting firms. Specialized insurance intermediary agencies differ from concurrent insurance intermediary agencies; specialized agencies focus primarily on insurance product operations as their core business, whereas concurrent agencies have other primary businesses. In the context of internet healthcare startups, insurance intermediation is a concurrent business activity. So, how many concurrent insurance intermediary companies are there? By the end of 2014, there were over 210,000 (210,108) concurrent insurance agency outlets nationwide.

In fact, beyond the internet healthcare sector, many internet companies with certain ties to the insurance business have recently expressed interest in or already applied for insurance brokerage licenses. For instance, in the online travel industry, where transportation accident insurance is relevant, players in this field have also secured insurance brokerage licenses in recent times, such as Qunar and Tuniu.

Among overseas internet healthcare startups that integrate with insurance services, Sherpaa, which focuses on employer-facing services, is a typical example. In addition to providing online consultation services for employees, it also acts as an insurance advisor for employers, serving both corporate employers and their employees by offering consulting services for insurance plan procurement and claims processing. What sets Sherpaa apart is its unwavering commitment to serving the interests of employers. It pledges no conflicts of interest with any insurance companies, ensuring that the insurance advice provided to employers is absolutely objective and fully aligned with the employers' best interests. In contrast, few companies in China are able to uphold such value commitments and maintain a neutral stance toward their clients.Domestic insurance brokerage firms’ revenue still includes insurance intermediary commissions collected from insurers, and has further expanded to include consulting service fees charged to clients, effectively capturing value from both ends.

How Much Money Can Insurance Brokerage Firms Earn?

Of the RMB 1.3 trillion in life insurance premium income in 2014, RMB 1.14 trillion was sold through intermediaries, accounting for 87.6%. Insurance intermediaries indeed play a significant role in the sales process. However, the share of sales through intermediary channels has shown a continuous decline over the past three years.

In 2014, professional insurance intermediaries generated premium income of RMB 147.24 billion, accounting for 7.3% of China’s total national premium income for that year. On average, each professional intermediary agency generated approximately RMB 57 million in premium income. Although these funds may pass through the accounts of intermediary agencies, the actual revenue of insurance intermediaries is derived from commission fees extracted from premiums. Among the premiums sold by professional intermediaries, property and casualty insurance accounted for the majority, while life and health insurance represented a smaller proportion (5.87%). What is the current operational status of the leading players in insurance brokerage? According to 2014 data, Chang’an Insurance Brokers Co., Ltd. was the professional insurance intermediary with the highest operating revenue in China, recording an annual turnover of RMB 500 million. Given the large number of insurance brokerage firms selling similar products, it is difficult for revenue to be concentrated among only a few companies.

The main channels for the agency sales of life insurance are bancassurance and individual agents.However, the average premium volume per ancillary insurance agency is significantly lower than that of professional agencies, amounting to only a fraction of the latter. In 2014, the ancillary insurance agency channel nationwide generated premium income of RMB 700.89 billion, accounting for 34.6% of the total national premium income in 2014, among which property insurance premium income reached RMB 189.86 billion,Premium income from the ancillary agency sales of life insurance amounted to RMB 511.03 billion. Based on a calculation using 210,000 ancillary agencies, the average premium income per ancillary agency company was only RMB 3.33 million.

In the realm of part-time agency business, there are no typical internet companies in the health and medical insurance sector for comparison; however, we can draw comparisons with internet companies in other sectors. Apart from super-sized platforms like Taobao, Qunar, which primarily sells travel accident insurance and flight delay insurance, ranks among the top in terms of revenue, with its premium sales volume reaching approximately RMB 70 million in 2014.

In 2014, the individual insurance agency channel in China generated premium income of RMB 766.29 billion, accounting for 37.9% of the total national premium income in 2014. Of this amount, property insurance premiums totaled RMB 148.84 billion, while life and health insurance premiums reached RMB 617.45 billion.

The sheer volume of insurance brokerage licenses issued also indicates that their intrinsic value is quite limited. Given a fixed total volume of insurance product sales, the participation of such a large number of insurance intermediaries inevitably leads to intense competition.

What tricks is Da Te Bao, the first internet insurance brokerage firm, playing?

On November 2, 2015, the China Insurance Regulatory Commission (CIRC) issued a national insurance brokerage license to Da Te Bao, making it the first internet insurance startup to hold its own nationwide brokerage license. Although more than 200,000 insurance intermediary licenses had been issued, most were restricted to specific operational regions, with few granting nationwide operating permissions. This gave Da Te Bao a distinct competitive advantage. In July, Da Te Bao secured RMB 180 million in Series A financing. Its investors included Ceyuan Ventures, Ping An Ventures, and Kunzhong Capital, the venture capital platform under Fosun Group—all well-known investment institutions in the internet healthcare sector. Consequently, as Da Te Bao launched its operations, it formed partnerships with various mobile healthcare projects to leverage synergies. On November 12, Da Te Bao released “Tui Tang Gu,” the first fully online diabetes insurance product in China, designed specifically to provide health coverage for individuals already diagnosed with diabetes. The coverage includes four high-prevalence complications: post-stroke sequelae, end-stage renal disease, amputation, and blindness. Da Te Bao will collaborate closely with three leading domestic diabetes health management platforms—Zhangshang Tangyi, Wei Tang, and Xuetang Gaoguan—to offer users a “comprehensive service package.”

What sets Databao apart is its public stance of not acting as an insurance agent, but rather designing and exclusively selling its own products. This claim certainly sounds impressive. However, an unchangeable fact remains: as an insurance brokerage firm, Databao does not hold underwriting qualifications. Therefore, regardless of the products it launches, they are ultimately underwritten by other insurance companies, which also bear the responsibility for claims settlement. Authority follows responsibility; whoever underwrites the policy is responsible for the final product design. Compliance with the regulatory requirements of the China Insurance Regulatory Commission (CIRC) is indispensable, necessitating proper approvals and filings, all conducted through its partner insurance companies.

We believe that, as a new platform, Da Te Bao has undoubtedly adopted the strategy most favored in the “Internet Plus” sector—prioritizing user scale over profitability. It supports competitive premium pricing and attracts cooperation from various insurance companies by significantly reducing its own insurance commission income. Furthermore, regarding the provision of exclusive products, in addition to innovatively developing offerings that better align with market demands to acquire customers, it is essential to ensure that premium prices are more attractive than those of products sold through other channels. If identical products were sold across all channels, insurance companies would likely not permit price competition among channels to spiral out of control.

Da Te Bao may have secured exclusive agency rights for this insurance product or even participated in its design phase; however, the depth of its involvement and the extent of its leverage in the partnership remain unclear. Regardless, any innovation in insurance product design is subject to strict regulation by the China Insurance Regulatory Commission (CIRC). Nevertheless, Da Te Bao’s claim of being backed by actuaries with a cumulative experience of over 50 years represents a significant leap forward compared to traditional insurance agencies that have no say in product development and lack any meaningful differentiation.

Currently, DataBao offers more than ten insurance products, including accident insurance. Its portfolio includes medical insurance products covering critical illnesses, cervical cancer in women, breast cancer in women, cancer prevention for the elderly, and diabetes. Partner insurance companies include Ping An Insurance, Taiping Insurance, China Life Insurance, and Starr Companies (US). Regarding the diabetes-focused insurance product “Tui Tang Gu” developed in collaboration with diabetes management apps, DataBao has launched three different product tiers, each integrated with a respective app. Although the partners differ, there is a significant price disparity among the offerings. The annual premium is highest at RMB 1,475 for the version partnered with Zhangshang Tangyi (Pocket Diabetes Doctor), followed by RMB 996 per year for the WeiTang (Micro Sugar) collaboration, while the Xuetang Gaoguan (Blood Sugar Executive) option is the most affordable. A comparison of service content suggests that the inclusion of hardware devices accounts for the price differences: Zhangshang Tangyi provides a blood glucose meter plus smart hardware; WeiTang offers only smart hardware; and Xuetang Gaoguan does not provide any hardware.

In terms of sales performance, insurance products with simple and clear coverage, such as traffic accident insurance, and relatively low premiums, remain best-sellers. In addition, critical illness insurance, for which consumers have a deeper understanding, is also relatively easy to accept. However, single-disease insurance products, for which purchasing habits have not previously been established, have seen poor sales. Since the launch of “Tuitanggu” one week ago, sales data automatically updated on the Datebao website show that the most expensive products are actually selling relatively well: Zhangshang Tangyi sold 12 policies, Weitang sold 9, and Xuetang Gaoguan sold 7.

On Zhihu, some people have already publicly discussed the price of acquiring an insurance brokerage license, which ranges from 4 million to 8 million yuan. As the saying goes, “If it can be solved with money, it’s not a problem.” However, obtaining an insurance license, especially a life insurance license, is far more complicated than that.

Continued on the next page:What Do Insurance Licenses Mean for Internet Healthcare? (II) How Difficult Is It to Apply for a Life Insurance License

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