Four major courier services to establish insurance JV for fast-growing sector

Updated 2017-10-17 10:31:54 Global Times

Four major Chinese courier services plan to establish an insurance company for the logistics industry with registered capital of 1 billion yuan (1 million), and an expert said on Monday it's likely they will win regulatory approval late next year or in 2019.

STO Express released a notice on Friday saying that it will set up a joint venture (JV) with three competitors: YTO Express, Yunda Express and ZTO Express. Two State-owned enterprises - Jiangxi Financial Holding Group and Shandong Jingjin Holding Group - and a private company, Guangzhou Baogong International Freight Agency, will also invest in the new company.

The proposed name for the insurance company is Zhongbang Logistics Insurance, the notification said.

Zhao Xiaomin, a Shanghai-based logistics industry consultant, told the Global Times that "it's likely for the insurance company to get approval from the China Insurance Regulatory Commission because preparation work has been in progress for more than half a year."

"The move is backed by the Jiangxi provincial government and the State-owned Assets Supervision and Administration Commission of Jiangxi Province, so the policy environment is supportive," Zhao said.

"Whether this insurance company makes a breakthrough will depend on effective cooperation among the stakeholders. For example, will courier companies work together on data exchange and share user profiles? If so, the development potential is enormous," the expert remarked.

"There will be some new issues such as personal accident insurance for couriers who make collections and deliveries. The new organization will facilitate fleet tracking and management for the courier companies," Zhao noted.

The companies have little experience in the financial sector, which might be a shortcoming for the joint venture, the expert noted.

"Another challenge will be the team structure," Zhao continued. "We notice that five out of seven stakeholders will hold 16 percent of the insurance company. So risks may emerge when the board is formed, and who has the final say is still a question."

Zhao suggested the new insurance company should keep the courier business as the main driving engine.

The courier business volume in the second quarter was about 9.82 billion yuan, up by 31.3 percent year-on year, according to the State Post Bureau.

Zhongbang Insurance proposed to launch insurance products to cover basic risks in the logistics industry, such as transportation, property value and liability, the notice said.

Stakeholders initiated Zhongbang Insurance to achieve a win-win outcome for the logistics and insurance industries in China, it said.

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