Tech

Tim Culpan is a technology columnist for Bloomberg Gadfly. He previously covered technology for Bloomberg News.

JD.com clearly wants to catch up to nemesis Alibaba Group Holding Ltd. And why wouldn't it?

The perennially unprofitable Chinese e-commerce player is actually larger, by sales, than its arch-rival. Unfortunately for shareholders, the business model -- holding and selling its own inventory -- doesn't translate to the bottom line, whereas Alibaba delivered $11 billion in net income last year.

That's why JD.com is turning to internet finance.

In comments made Friday at its annual meeting, Chief Executive Officer Richard Liu outlined plans to move into online insurance and become one of the world's three largest financial technology companies by 2020, the South China Morning Post reported.

Life and auto insurance are among the products on JD's agenda, Bloomberg News cited Liu as saying. While life is a big business, it's car insurance that could be a winner.

Alibaba and Tencent Holdings Ltd. have already made a play for the sector, so once again JD looks a little late to the party. That doesn't mean it has zero chance, however. Auto insurance is a huge market, accounting for 74 percent of the non-life business in China, and 16 times the amount of premiums written on commercial property, according to the China Insurance Regulatory Commission.

Car Pool
Auto insurance dominates China's property and casualty market
Source: China Insurance Regulatory Commission, Casualty Actuarial Society
Note: Data is for 2015.

As a note of caution, China's clogged streets and rising pollution have forced local governments to cut vehicle quotas. Yet those restrictions and the rise of ride-sharing as an alternative to self-ownership couldn't stop auto sales from rising 14.9 percent last year.

On the positive side, China's property and casualty insurance as a ratio of GDP still trails the global and developed market averages, indicating there's plenty of upside despite the recent growth.

Laggard
China trails the global average in size of its non-life insurance market
Source: China Insurance Regulatory Commission, Casualty Actuarial Society
Note: Data tracks non-life insurance as a percentage of GDP for 2014.

Even more compelling, online insurance sales are growing at a rapid pace and that trend will continue as bricks-and-mortar finance gets eclipsed by internet providers. 

Get It Online
The proportion of property and casualty insurance distributed over the internet in China has climbed fivefold since 2012
Source: China Insurance Regulatory Commission, Casualty Actuarial Society

With the beachhead already established by its web rivals, the chance of JD.com overtaking Alibaba and Tencent is slim. Yet the unprofitable nature of its commerce business and the room for growth in insurance makes a bet on the non-life market one worth making.

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

To contact the author of this story:
Tim Culpan in Taipei at tculpan1@bloomberg.net

To contact the editor responsible for this story:
Matthew Brooker at mbrooker1@bloomberg.net