The largest Chinese digital auto insurance platform Cheche Technology has announced it will go public in the US via a special purpose acquisition company (Spac) in a deal that is expected to close in the third quarter of 2023 and result in gross proceeds of about US$68 million.
The China Securities Regulatory Commission and the US regulator Public Company Accounting Oversight Board (PCAOB) have been moving forward in terms of the issue of accounting investigation.
In December 2022, the PCAOB, for the first time, has secured complete access to inspect and investigate registered public accounting firms headquartered in mainland China and Hong Kong, which paves the way for future US listings of Chinese firms like Cheche Technology.
It is popular for Chinese technology companies to list in the US, and the insurance technology sector has seen the same trend. In 2021, Chinese online insurtech firm Waterdrop raised US$360 million from an initial public offering (IPO) on the New York Stock Exchange.
In addition, ZhongAn Online, China’s first internet-only insurer listed on the Hong Kong stock exchange in 2017, raising US$1.5 billion.
China’s insurtech market is estimated to grow at a 36.88% compound annual growth rate between 2022 and 2031 to reach a total revenue of 34.05 trillion yuan (US$4.76 trillion). In 2021 alone, according to data from Research Nester, the market’s revenue totalled 1.51 trillion yuan.
Insurtech helps to solve the pain points existing in the traditional insurance companies, such as inefficient pricing, ineffective distribution management and high combine ratios.
“For intermediaries, commissions have been decreasing over the years as they remain way too high and have been tightly monitored by operation,” says an Chinese insurtech chief strategy officer. “Now, the industry as a whole has very high turnover rates for agents and brokers, and their average years as agents are very low in China.”
Insurtech firms can leverage their technology advantage to calculate a relatively fair pricing of premiums by data analytics compared with traditional insurers.
Some of insurtech players with a strong technology base are looking to provide services other than insurance distribution, or play a different role in the insurance supply chain.
Take Cheche Technology as an example, in the past, it would just have provided products for its own platform, but now it takes on, as clients, other insurers looking to buy digital services like its insurance intermediary software-as-a-service platform or artificial intelligence-driven data analytics solutions, which help them improve operational efficiency and accuracy.
And while Cheche Technology’s revenue is still largely derived from insurance underwriting commissions, they are striving to increase the proportion derived from technology solutions.
The fast-growing electronic vehicle (EV) market in China and government policy support for EVs also provide opportunities for the auto insurance sector as it is estimated that EV sales in China will grow over 30% in 2023, which will bring growth to the sector in the coming year.
