Apr 13, 2021

Waterdrop’s US IPO delayed due to Chinese regulators

Joanna England
2 min
Waterdrop’s US IPO delayed due to Chinese regulators
Insurance technology firm Waterdrop had planned to list this summer, following a previous delay...

The Chinese insurance technology company, Waterdrop, is facing further delays regarding its US initial public offering (IPO) following pushback from the China Banking and Insurance Regulatory Commission (CBIRC).

Waterdrop, which is based in Beijing, has been planning its IPO since early 2020, and aimed to go public in December last year, say sources, who confirmed that the company had already made a confidential filing for the float.  

But according to reports, the CBIRC has pushed back on the plans, citing Waterdrop’s business risks and therefore slowing down the IPO process. Earlier this month, the company’s founder, Sheng Peng, was also told by the CBIRC that the regulatory body would not support Waterdrop going public at this point. 

Currently, the ‘risks’ CBIRC has referred to, are not immediately clear.

In an emailed statement, Waterdrop has also reportedly denied that Chinese regulators are delaying its capital markets strategy and says that senior managers are in regular communication with regulators. So far, CBIRC has not responded to requests for comment. 

Waterdrop’s success

Waterdrop distributes insurance policies online and provides illness crowd-funding. It is generally considered a highly successful and growing venture. Founded in 2016 by Peng, a former executive at Chinese food delivery and local services giant Meituan Dianping, Waterdrop raised $230m in a pre-IPO round in August 2020, led by reinsurer Swiss Re and Tencent at a valuation of about $2bn.

Waterdrop also counts IDG Capital, Boyu Capital and Meituan as investors.

However, in March 2021, the company closed its online healthcare mutual aid platform, which provided 80 million users with a shared basic health plan covering various types of critical illnesses, amid regulatory turbulence, even though it was not licensed by the CBIRC. As one of the biggest drivers of traffic to Waterdrop’s platform, the loss of the mutual aid program will mean significant remodelling for the company. 

Chinese regulators and fintech

Waterdrop is not the first fintech/insurtech company to come under scrutiny from Chinese regulators. The technology giant Ant Group also had its £37bn IPO stopped in November last year, with regulators citing financial risks. 

However, Waterdrop is an offshore company and is not subject to the same level of legal controls as mainland Chinese companies. Because of this it currently doesn’t require CBIRC’s approval to list its IPO in the US.

Even so, the regulatory disapproval could affect Waterdrop’s share sale plans. So far, backers of Waterdrop’s IPO, Goldman Sachs and Bank of America are yet to comment on the matter. 

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Jun 19, 2021

Insurtechs are winning the race with legacy system companies

Tom Allen, Founder, The AI Jou...
3 min
Insurance has long been due an overhaul. The AI Journal’s founder Tom Allen explains how innovative insurtechs are changing the incumbent narative

Nestled in its own place within the world of financial services, insurance is arguably more unpopular than retail banking.

That’s hardly surprising given that, from a customer service perspective, insurance is something of an off-kilter transaction. You pay a sizable premium in exchange for a service you hope you will never have to use. This image problem is exacerbated by ubiquitous tales of insurers not paying out when it is time to make a claim.

The insurance sector has long been due to an overhaul, and this is where the disruptive force of insurtech comes in - one of fintech’s most upwardly mobile subcategories. Accordingly, last year, insurtech in the UK alone attracted £262m in investment, a growth of 60% on 2019, according to Tech Nation. Insurtech’s momentous growth has been captured in a new report by The AI Journal exploring this burgeoning sector. 

What exactly is insurtech?

Put simply, insurtech refers to technological innovations that seek to make insurance cheaper to buy and more efficient to use. In a similar vein to fintech, the large, established institutions have been dipping their toes into insurtech, but it’s the disruptors who are genuinely looking to shake up the status quo, diving into and exploiting those areas that traditionalists have little imperative to explore.

Examples are price comparison sites (one of the earliest forms of insurtech that was eventually snapped up by the insurers it initially sought to disrupt), claims software, customisable policies, or even smart-tech-enabled dynamic policies whose premiums can fluctuate depending on changing circumstances.

The latter, for instance, could use someone’s fitness tracker or smartwatch to monitor fitness levels, thus reducing the premium of a life insurance policy; or track a GPS system that records the location of a car and assesses risk levels accordingly.

Most consumers tend to shop around for their insurance needs and perhaps end up buying their contents insurance with one provider, their car insurance with someone else, and their pet insurance with yet another underwriter. Managing all these different policies, with their varying renewal dates and payment terms can be complex. This has led to the increase in apps that pull everything together.

More prosaically, insurtechs are developing AI that uses machine learning to act as an insurance broker, eliminating the need for a human intermediary and therefore offering more cost-effective and impartial advice.

Insurtechs and risk

But there are some obstacles in the way of insurtech’s continued evolution.

Insurance companies are averse to risk. Understandably so, as at the crux of the industry is the role of the actuary, whose job it is to analyse and measure the probability and risk of future events. So it’s little wonder that there’s a reluctance among the traditional players to welcome the disruption that insurtech brings.

Insurance is heavily regulated, a minefield of legality and labyrinthine jurisdiction, which means the idea of shaking it up can be anathema. And why would they, when their old-school business models are working perfectly fine?

There’s an understandable nervousness and unwillingness to work with startups, who themselves need to work with the bigger firms in order to underwrite risk.

While it seems like a catch-22 situation, there is growing, if cautious, interest from insurance companies, who can see the benefits of insurance with a friendlier face, innovative solutions, and a competitive edge through differentiation. As that tentativeness dissipates, the growth of insurtech will gather even more momentum.

Tom Allen's analysis is based on the findings of a new report on the fintech and insurtech industries produced by The AI Journal

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