Recently, in the 2022 China Insurance Cup Prize Competition jointly organised by the China Insurance Institute and 13 Actuaries, a team consisting of Dr Zhehao Zhang and PhD student Ruina Xing from the School of Mathematics and Physics at XJTLU and two industry professionals won the third prize for their project "A quantitative analysis of insurtech-enabled insurance development".
The topic selected for this competition included but was not limited to, 11 research directions, including the study of digital transformation and insurance technology development in the insurance industry, the study of international comparison and reference of health insurance development models, and the study of the insurance industry serving rural revitalisation.
Using controlled experiments and applying Double-sort analysis, Dr Zhehao Zhang's team found that technology investment benefits the net profit and payout ratio of companies with different asset sizes and levels of insurtech development, i.e. the application of insurtech has a positive effect on increasing company income.
"In addition, we use a two-way fixed effect, where the level of insurtech development remains strongly and positively correlated with a company's net profit when both province and time effects are fixed. This finding proves that the development of insurtech can boost a company's income and bring positive externalities to the company's productivity and operational efficiency." Dr Zhehao Zhang said.
Ruina Xing said that she was responsible for searching for data and executing the model in the project research, converting the digital results into literal conclusions. On the theoretical side, under the guidance of Dr Zhehao Zhang, she accumulated ideas from the literatures. She used appropriate parameters to analyse and confirm details and critical points in her thesis. She also keeps in touch with two industry veterans working for nearly ten years to ensure the findings are well documented.
Regarding the difficulties encountered in the research, Dr Zhehao Zhang recalls two main points. One was the time constraint, as the team had only two months to complete the final draft when they decided on the topic. Secondly, access to data on insurance companies was minimal, as most insurance companies needed to be listed. Unlike financial companies, data can be mined from databases.
"The existing literature is mainly focused on the provincial level and has a limited scope of data, while we considered a larger proportion of unlisted companies in China, making data collection more difficult. In this paper, we construct a firm-level indicator of the extent of insurtech development, which shows a significant positive correlation with a firm's financial performance." Dr Zhehao Zhang said.
In the future, Dr Zhehao Zhang said he would continue to explore the ROI and risk of insurtech and promote in-depth research on insurtech-enabled insurance.
By Qinru Liu