Ant Financial’s mutual aid platform adds 26 million users in fewer than 3 months

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Users of Ant Financial’s mutual insurance product have surged by around half to 76 million over the last three months while funding has been provided for 597 critically ill users, the Hangzhou-based firm said on Monday.

Why it matters: The product is a disruptor for the traditional insurance industry as it lets users share payments for seriously sick individuals. The low payments and high compensation are shaking the business models of traditional players.

  • Each user paid RMB 0.51 (around $ 0.074) in late June, according to the latest data. The services has attracted low-income individuals who had never considered traditional insurance before.
  • In China, the term “returning to poverty due to illness” is used to describe middle class individuals who run out of assets when paying for treatment due to a lack of full insurance coverage. It is especially common in rural areas, where many of Xianghubao’s users are located.
  • The product covers 100 critical illnesses with a maximum compensation of RMB 300,000 and plugs a gap not covered by the government and traditional insurers so far.

“Xianghubao and insurers are not competitors, we are educating people about risk management and popularize insurance services.”

—Ant Financial Vice-President Yin Ming

Details: Launched less than a year ago, Xianghubao has attracted a great number of users especially in tier-three cities, small towns and villages. However, the product is loss-making.

  • Over half of users are from tier three cities and 32% users are from small towns or villages, according to 36 Kr.
  • Ant did not consider making a profit from the product, but will cut costs by “technical methods” in order to strike a balance, said Yi Ming, vice-president of Ant Financial, who oversees the product.

Context: Launched in October, Xianghubao hit 10 million users in less than a week.  Alipay users who pass a credit evaluation can join the program.

  • Average fees are shared by all members and they pay in between RMB 0.1 to RMB 0.5 twice per month.
  • Xianghubao charges an 8% premium for each time compensation is paid out, which is lower than the 40% average from traditional non-life insurers and 20% from personal insurers.