Chinese OEMs are driving a data boom. But insurers could be left behind

Chinese automakers, or OEMs, have built much of their success on their ability to integrate their vehicles into the sprawling digital ecosystems that stretch across China and elsewhere in Asia. Tencent’s vast ecosystem, for example, serves more than a billion active users and boasts an array of services that include messaging, payments, entertainment, gaming, and mobility. Among insurers, Ping An operates an extensive ecosystem that integrates a range of healthcare, financial services and mobility offerings. And early this year Chinese OEM BYD launched its Xuan Ji automotive ecosystem that integrates vehicle manufacturing, supply chain management, smart mobility solutions, and digital services. 

By embedding intelligent vehicles into expansive ecosystems, Chinese OEMs are transforming the automotive industry. They’re shifting the focus from selling cars to delivering digital mobility services.

The high quality, advanced technology and competitive pricing of Chinese vehicles is already driving up vehicle sales in Europe with OEMs such as BYD, MG and NIO emerging as early front-runners. Chinese OEMs now produce more than 30% of all new cars. With their domestic market congested, they’re eager to push further into Europe where they hold less than 10% of the market. But without access to widespread ecosystems to support their vehicles, Chinese automakers in Europe will find it difficult to replicate the success they’ve achieved in their local market.

“Every OEM was betting on extra revenue from data and services. But the reality’s been a little different. The complexity of creating ecosystems in Europe has put a pause on those plans,” says Christophe Di Perna, at Allianz Partners.

Di Perna, who heads special projects and global strategic partnerships at the multinational insurer, is confident Chinese OEMs will eventually triumph in Europe but believes they’ll have to change their approach. OEMs will need to secure partnerships with local service providers to bolster their ecosystems in Europe. They’ll also have to shift from push-driven business models where they focus primarily on the qualities of their products to pull-driven approaches more attuned to the needs of customers.

For insurers and other service providers, the message is clear. If they want to gain access to the lucrative data streaming out of Chinese vehicles, they’ll have to plug into the OEMs’ ecosystems. Even better, they could help the OEMs build those ecosystems.

Di Perna was speaking at an online event hosted by Qorus and Allianz Partners that examined opportunities for providers of consumer finance to use embedded insurance and Chinese OEM partnerships to strengthen their presence in the mobility sector. 

Monetizing data is the stand-out opportunity, according to insurance and mobility executives polled at the online event. Around 42% of them pointed to unlocking new revenue streams for OEMs and partners as the biggest value driver of embedded insurance in the mobility sector. Reducing distribution costs and complexity (25%) was next, followed by enabling seamless digital customer journeys (17%) and enhancing customer trust and loyalty (17%).

The biggest barriers, according to the executives at the online event, are the legacy systems and IT infrastructure at insurers (56%), complex regulatory environments (25%), and misaligned incentives between partners (19%).

Legacy systems and processes are stalling innovation across the board, say the speakers at the online event.

“We’ve seen clients who wanted to aggregate everything and then realized they lacked transparency on pricing,” says Thierry Faure, Chief Commercial Officer at Ayvens SE Asia. 

“When they unbundled, they discovered what they thought was a creative revenue stream was in fact a price cut.”

For Chinese OEMs, the challenge is even greater.

“They are trying to build everything from scratch. They are especially lacking after-sales, insurance, and financing services,” says Sheng Hu, Head of Multinational Corporations Business Development (Europe) at Tencent Cloud.

Di Perna, at Allianz Partners, points out that service providers that want to embed insurance offerings across OEM ecosystems also need regulatory approval. Though it adds complexity, such approval enhances consumer trust.

“Trust is essential in every consumer transaction. Consumers want to know they’re safe within an ecosystem. They want to trust that they’ll not only get a good deal but can also be sure their data will be safe.”

Trust and stability give incumbent insurers a strategic edge as they move to monetize data from Chinese OEM ecosystems. However, to capitalize on the potential of such data they need to make some major changes.

·      Redesign internal systems to handle real-time data: Current systems are often unable to integrate vehicle data effectively. 

·      Embed insurance offerings into the OEM customer journey. Insurers need to position themselves within the digital experiences of consumers.

·      Rebuild pricing around contextual data: Real-time data enables insurers to adopt behavioral risk modeling and flexible pricing.

·      Adapt compliance processes to support shared ecosystems: Insurers need to safeguard against regulatory misalignment when distributing products across multiple platforms.

·      Shift from pushing products to delivering customer-focused services: Access to real-time customer data will enable insurers to deliver personalized offerings tailored to client needs and contexts. 

These changes will help insurers to meet the growing consumer demand for seamless, integrated digital experiences that are flexible and convenient. 

Allianz Partners, for example, is working with technology partner Tencent Cloud to deliver personalized offerings that address three key customer needs: usage-based insurance, assistance services and driver engagement.

Advances in technology and the benefits they can deliver to service providers and their customers are drawing increasing attention among insurers. Yet insurers’ core concerns remain unchanged, says Allianz Partners’ Di Perna.

“Trust, safety and protection are fundamental.”

As insurers look to capitalize on the enormous volume of vehicle data generated by Chinese OEMs across Europe, opportunities to provide trust, safety and protection will depend on their ability to integrate their offerings within key ecosystems. They’ll only unlock the value of this data once they become part of the trusted ecosystems that deliver mobility services to customers.