Third-party Payment Firms Entering Insurance Sector

Third-party payment firms in China have cast eye on the domestic insurance market.

Via inking a credit contract with commercial Banks and a payment contract with property insurers and auto 4S stores, they gain commission revenue. Several property insurers in the market are set to trigger quick indemnity service this month, said sources. The service actually is a platform third-party payment service providers designed on the basis of time-effectiveness under the nation’s new insurance law and through involving the procedure of vehicle insurance claim, they get payment business.

“The commission revenue will be consist of two parts, one from auto 4S stores and the other from property insurers,” Bai Chuan, an executive at the innovation center of YeePay.com, a Beijing-based third-party payment firm, said in an interview. “We fix a rate with both property insurers and auto 4S stores first and the commission revenue will be the rate multiplying related business turnover”.

Auto 4S stores will benefit much from the business mode as the cooperation will not only well solve their capital occupation problem but also end the worry about not taking back indemnity from small- and medium-sized insurers. So, they will become a major driving force of the mode. Third-party payment firms will be under pressure from paying repair fee for property insurers in advance, however, they transfer the pressure and risk to commercial Banks via inking a credit contract with the latter. The mode is new to the nation’s insurers, but it has been operated for a long period of time in such fields as aviation and telecom.

Third-party payment firms have considered entering the market for about three years and with the license from the People’s Bank of China, the central bank, they take move quickly. The revenue they gained in the market is not so much but the market grows fast and is full of potential.

Statistics show that by the end of 2009, 32 insurers in the market including Ping An Insurance (Group) Company of China, Ltd. (SEHK: 601318 and SEHK: 2318) and China Pacific insurance (Group) Co., Ltd. (SHSE: 601601 and SEHK: 2601) had rolled out online sales service and 36 ones had launched telephone sales services. Last year, the premium revenue they captured via online sales service reached CNY 7.77 billion, of which, up to CNY 5.17 billion was from property insurance and CNY 2.6 billion was from life insurance.