Tencent-backed insurer Waterdrop seeks unicorn valuation: report

May 02, 2019 13:06
Chinese insurance startup Waterdrop will leverage Tencent’s existing presence and experience in the field to create as yet undefined blockchain tools. Photo: Waterdrop.

Tencent-backed insurance startup Waterdrop is looking for fresh financing at a valuation of at least US$1 billion, Bloomberg reported.

The disruptor insurance company will work with Tencent to develop new blockchain solutions, focusing on the emerging field of healthcare crowdfunding.

Waterdrop’s flagship product, Waterdrop Mutual, is a software platform that operates likes a collective: members contribute small amounts of money to help those diagnosed with critical illnesses, with payouts of as much as 300,000 yuan (US$45,000).

The crowdfunded health insurance has quickly attracted Chinese tech behemoths’ attention. One of the leading platforms is Xiang Hu Bao, owned by Chinese tech billionaire Jack Ma’s financial technology arm Ant Financial. In general, the platform operators will take a cut for the service of managing the process; Ant will take an 8 percent administrative fee out of every payout.

While there are no premiums or upfront payments required to join Xiang Hu Bao, Waterdrop asks users to have at least one yuan in deposit, which is said to “make users take the system’s terms seriously”, founder and CEO Pang Shen told Bloomberg in an interview. Shen is also one of the co-founders of food delivery and on-demand services giant Meituan Dianping.

The three-year-old company has paid out 440 million yuan (US$65 million) to more than 3,000 of its over 70 million active users. As of the end of 2018, the platform has raised over 12 billion yuan (US$1.78 billion) from more than 400 million donations, according to the company. It targets users based in third- and fourth-tier cities and rural areas across the country, which account for over 70 percent of its Waterdrop Mutual users.

On the other hand, its rival Xiang Hu Bao has attracted 50 million people in the first six months since its inception in October 2018, and expects to sign up 300 million Chinese residents by 2021.

Waterdrop also sells traditional insurance products provided by over 50 third-party financial institutions. As Waterdrop Mutual, as well as Xiang Hu Bao, is not an insurance product, it is not subject to the same regulatory supervision from the Chinese insurance regulator, but the company makes sure to keep government officials updated on its activities, Shen said.

This March, Tencent (00700.HK) led the series B funding round for Waterdrop, which raised 500 million yuan (US$74 million). Its backers also include Meituan Dianping (03690.HK), IDG Capital, Banyan Capital Partners, Sinovation Ventures, DST Global founder Yuri Milner, and several others.

In a bid to compete against its well-funded rival, Waterdrop is seeking to raise fresh capital in Waterdrop’s new funding round.

Shen told Bloomberg that the company will spend the money on automating reimbursements and developing blockchain technology with Tencent.

Fraud and credibility have been among the major problems for charity initiatives in mainland China, especially for fundraising platforms.

By leveraging the blockchain technology, the flow of money during the operating process for crowdfunding projects can be verified and traced with greater transparency, effectively eliminating fraud, Shen said in a previous interview.

Ant’s Xiang Hu Bao is using blockchain technology to combat fraud, which relies on common verification by members. Members who fall critically ill within 90 days of joining the plan will not be compensated.

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