AIA Life Insurance executives explain their products to visitors to the Money Fair Shanghai 2014. [Photo by Yan Daming/China Daily]

Risk-aversion seen as potential opportunity to launch new cover products

The rapid development of sharing economy in China brings big opportunities for the insurance industry, according to experts.

That's because sharing economy is characterized by solid demand for certain products and services from risk-averse, cost-conscious consumers.

"For both users and providers of products and services in sharing economy, there are problems of risk, which can be solved reasonably through insurance mechanisms," said Yuan Yong, a consultant with Aon-COFCO Insurance Brokers Co Ltd, a joint venture between Aon Corp and COFCO Corp.

The concept of sharing economy was introduced to China in the early 21st century. All kinds of products are shared through innovative services. Bicycles, umbrellas, accommodation, books, cars, jewelry, expensive fashion, office space ... all these have come to constitute sharing economy in the last four years.

In 2016, the market transaction volume of sharing economy hit 3.45 trillion yuan ($520 billion), up 103 percent year-on-year. The new economic segment also received about 171 billion yuan in funding last year, up 130 percent year-on-year, data showed.

More than 600 million Chinese people are involved in sharing economy. According to the China Sharing Economy Development Report 2017, sharing economy will grow at a high 40 percent annually to reach about 20 percent of GDP by 2025.

China's GDP was 74.4 trillion yuan in 2016, and is projected to surpass that of the United States by 2025, according to Niu Li, director of the economic forecast department under China Information Center.

"By providing conveniences to more people, sharing economy separates the ownership and usage of products, which is hard to define in terms of responsibilities of both parties," said Lu Wenhui, a consultant with Aon-COFCO, a Shanghai-based insurance broker.

Lu stressed that new insurance products should be created to guarantee healthy development of the new economic segment.

Insurers have already provided cover solutions and innovative products to the sharing economy sector. For example, liability insurance and personal accident cover target users of shared bicycles.

It is estimated that by the end of the year, the shared-bicycle sector may have 50 million users, potentially increasing the scope for accident insurance.

"Insurers compensate in time for the actual losses, helping enterprises reduce the loss of profits and eliminate disputes and friction with the parties concerned," said Yuan.

Several shared-bike platforms have already introduced commercial insurance, reducing risks like responsibility and moral hazard to their business.

Online insurer Zhong'an is the first to provide insurance for shared-bike users. According to data from Alibaba Group's financial affiliate Ant Financial, rider insurance against accidents has settled more than 100 claims in the last three months.

Insurance can help companies in the sharing economy sector to mitigate risks in advance, said Yuan, adding that the sharing model not only influences people's mobility choices but changes their social life, entailing new risks.

Using a risk database, the insurance industry provides data support for enterprises to identify and prevent risks effectively, through extraction of some related data, said Yuan.

Insurers can set up better data systems for sharing economy.