Analysis: Softbank pushes link-ups as insurance strategy takes shape

Ping An Healthcare and Technology Co

16/10/2018 11:32

By Eric Auchard and Simon Jessop
    LONDON, Oct 16 (Reuters) - Softbank's Vision Fund plans to
pump more money into insurance, a sector it sees as both ripe
for disruption and a potential booster for its bigger bets in
cars, health and financial services, a Vision Fund executive
told Reuters.
    In the past year, the world's biggest private technology
investor has backed China's largest online insurer ZhongAn
 6060.HK  as well as PolicyBazaar, India's biggest online
insurance distributor, and app-based U.S. home insurer Lemonade.
    And these and other insurance bets totalling nearly $3
billion are just the start, Vision Fund dealmaker David Thevenon
said. The Vision Fund has raised nearly $100 billion, almost
half of it from Saudi Arabia's sovereign wealth fund.
    "We believe that technology and how data is used, processed
and collected is going to transform insurance," Thevenon said.  
    Softbank believes a new breed of "insurtech" companies can
work with other firms within its portfolio such as local
transport juggernaut Uber and office sharing firm WeWork to roll
out new products and services to their massive base of clients.
    Three of the 10 biggest investments in new digital insurance
firms over the past year -- PolicyBazaar, Lemonade and Nauto --
were led by Softbank, according to data from Willis Towers
Watson and CB Insights. 
    Including its stakes in ZhongAn and two units of China's
biggest insurer, Ping An  601318.SS , it made half the dozen
biggest insurance investments in the year to June. 
    "We are going to have to place several bets," said Thevenon,
a former Google executive. "The nice thing about insurance is
that this is so big, it's not exactly a market where you make
one investment and you suddenly have 90 percent market share."
    Insurtech will represent just under 10 percent of the global
insurance market by 2023, or more than $400 billion in premiums,
against just 4 percent in 2018, according to a recent Jupiter
report.
    
    SEEKING SYNERGY
    At his annual SoftBank World event in July, CEO Masayoshi
Son told an audience of its portfolio company executives to
imagine a world in which customers of Paytm, a Vision Fund
Indian payments company with more than 300 million users, could
receive real-time insurance quotes from China's ZhongAn.
    "Imagine how wonderful, how innovative," Son said.
    Vision Fund investments range from chip design firm ARM to
ride-sharing giants including Uber, DiDi, Grab and Ola and new
financial and business services like WeWork. 
    But its willingness to make huge bets in areas like
commercial real-estate and its close ties to Saudi Arabia have
put parent company Softbank under pressure, and its shares have
fallen 16 percent this month. 
    Son talks about how new artificial intelligence and big data
technologies will tie his disparate investments together, though
concrete examples are scarce.
    An early example of insurance synergy could involve India's
PolicyBazaar, which raised $200 million in June in an investment
round led by Softbank. 
    The decade-old company is investing in new services
including lending for medical and death expenses and
subscription-based healthcare. It hopes these businesses will
help it glean deeper insights into consumer behaviour that in
turn could be used by the companies that sell insurance on its
platform to better package and price their products.
    PolicyBazaar Chief Executive Yashish Dahiya said he's keen
to work with Softbank's network of companies to develop these
businesses.
    The company is already working with Ping An Good Doctor,
operator of a one-stop medical services portal with 200 million
users in China, to develop an Indian version it calls DocPrime.
    Initially this amounts to knowledge-sharing, but could
eventually lead to a full-blown partnership or joint venture.
    Ping An Good Doctor  1833.HK  has meanwhile formed a joint
venture with ride-sharer Grab to expand its online healthcare
services across six countries in southeast Asia. 
    Softbank's global tie-up this month with Toyota  7203.T  to
develop driverless vehicle services, including ones they say
could function as mobile shops or even hospitals, gives another
glimpse of how its insurance investments could play out.
    Announcing the venture, Son cited insurance as a plank in
its broader transportation offering. Autonomous driving is still
a legal no man's land where basic liability questions need to be
settled, and new types of insurers could thus play a big role. 
    One such insurtech company is Nauto, a Silicon Valley-based
start-up whose vehicle safety technology helps insurers assess
how commercial fleet drivers handle their vehicle. Softbank and
venture firm Greylock led a $159 million funding round for Nauto
in July 2017, joining existing investors BMW, GM and Toyota.
    
    WINNING OVER INSURERS
    Softbank has also been in discussions with big insurers
about partnerships or other tie-ups that could see them supply
underwriting and regulatory know-how to the new-model insurance
companies in its portfolio.
    Reinsurers act as insurers to insurance companies, and their
expertise in areas like mortality and longevity tables remains
unmatched, industry experts say. Their vast reserves of capital
act as a backstop to insurers, enabling them to shoulder the
risks of hard-to-price markets.
    In January, Softbank sought to take a stake worth as much as
$10 billion in global No. 2 reinsurer Swiss Re  SRENH.S . Those
talks ended in May, and Softbank and Swiss Re declined to
comment on the reasons.
    But Thevenon said Softbank continues to hunt for ways to
accelerate the digital upheaval in the insurance industry,
including tie-ups with unspecified reinsurance players. 
    "We have talked to big insurance groups to figure out where
we can play, what might be interesting," he said. "There are
several similar combinations and permutations about a bet we
could place."    
   

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Softbank's Insurtech Move over past year    https://tmsnrt.rs/2OXYj7J
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 (Additional reporting by Sam Nussey in Tokyo and Carolyn Cohn
in London; Editing by Catherine Evans)
 ((eric.auchard@thomsonreuters.com; +44 7775 028 015; Reuters
Messaging: eric.auchard.thomsonreuters.com@reuters.net))