Frankfurt The Duesseldorf insurer Ergo is about to leap onto the big Chinese automobile market. The subsidiary of the reinsurance giant Munich Re has in principle agreed to form a joint venture with the Chinese automaker Great Wall. Both companies signed a memorandum of understanding in China on Monday.
In the future, the partners want to sell insurance through Great Wall car dealerships and develop new mobility solutions in the Chinese market. The Chinese car market is the largest in the world, with around 22 million cars sold each year. For comparison: in Germany in 2018 around 3.4 million vehicles were sold.
Ergo is thus making an important step in its international expansion in Asia. The insurer wants to "build a leading provider of technology and data-driven product and service solutions in the mobility ecosystem" and thus strengthen its presence in the strategically important growth market of China, said Ergo CEO Markus Riess on the occasion of the signing of contracts in China.
The Munich Re subsidiary already offers life insurance in the Middle Kingdom. At the beginning of 2017, the insurer had set up the new entity Ergo Mobility Solutions, which is responsible for strategic cooperation with the international automotive and mobility industry.
Ergo Mobility Solutions plans to build a strong position in the three automotive anchor markets: China, USA and Germany. "No other insurer in Germany has signed such a cooperation as Great Wall did in this form," emphasized Karsten Crede, head of Ergo Mobility Solutions.
Great Wall is working with German manufacturer BMW in China and plans to sell around 1.2 million vehicles this year. The Chinese have expanded their production network to eight locations.
More than just car policies planned
Wei Jianjun, president of Great Wall, wants to strengthen the company's presence outside its headquarters in Baoding, central China. So the manufacturer plans to export vehicles to Germany in the next few years.
Great Wall collaborates with BMW on the electric mini. Founded in 1984, the automaker previously tried to profile itself mainly with SUVs. The group is one of the fastest growing vehicle manufacturers in China. The extensive cooperation with Ergo in the insurance business "opens the door to the development of new services and integrated solutions," said Wei Jianjun about the joint venture, which still needs regulatory approval.
The new joint venture will not only sell car policies through the approximately 1000 dealers of Great Wall in China. It also intends to offer industrial insurance for the factories of the sixth-largest Chinese manufacturer, as well as commercial and private insurance solutions for dealers and about 70,000 employees, the companies said.
The joint venture is expected to commence operations in the first quarter of 2020, subject to regulatory approvals.
The fast-growing Chinese insurance market is also attracting other major European insurers. For example, last year the Dax Group Allianz became the first foreign insurer in China to obtain the approval to found a holding in which no Chinese company is involved. In addition, Allianz has entered into an agreement for a partnership for digital insurance with Chinese e-commerce provider JD.com.
The French insurance group Axa is also increasingly focusing on the Middle Kingdom. In November 2018, the French had announced that they would acquire the remaining shares in the joint venture Axa Tianping from the Chinese partners. In the building and accident insurance segment, the company is number 15 in China.
The market leader in China is the domestic insurer Ping An, which defines itself as the "largest Chinese service group for financial experiences" and is the highest rated insurer in the world by market value. With innovative technologies, the market leader has built up a platform with diverse, customer-friendly products, which relies heavily on digitization. For example, within the framework of a motor vehicle accident service, a vehicle damage assessment should be completed within ten minutes and the damage claims paid out on the same day.
Desirable market in China
The Group relies entirely on new technologies and employs an army of 23,000 IT developers. In Germany, Ping An has invested in the Berlin-based start-up Finleap, which has also founded digital insurance broker Clark and insurer Element.
The sale of insurance through auto manufacturers and dealers is sought after by insurance companies. Many companies in Germany work closely with manufacturers. Recently, BMW ended its partnership with the Dax Group Allianz and in future will provide the policies of the German subsidiaries of the Italian Generali and the French company Axa in Germany.
The alliance, for its part, works together with Volkswagen in sales, among other things, and recently took over the automobile insurance partnership with the automobile club ADAC from Zurich Insurance. The market is so much in motion.
Limits or fears of contact between different industries are increasingly becoming a thing of the past. Thus, the Berlin start-up Emil, which also offers car policies and is supported by the Gothaer Versicherung, established a cooperation with the telecoms giant Vodafone a few weeks ago.
The market is also driven by the growing importance of large platforms where customers can compare mobility, insurance and other services. So more and more policies are being completed online. This depresses the margins of insurers – and has for years.
On the other hand, car insurance policies concluded by the car manufacturer are on average around 50 percent more expensive than the cheapest tariffs on comparison portals, according to a survey by Finanztip. Customers should therefore, before they even take out insurance for the car, better before compare the prices.
More: Who wants to conclude a policy today, often leaves no advisor in the house. Insurers are getting ready for the benefits of digital services.