Zhong An wraps up registration

The penetration rate is around just 2 percent in China even as premiums have grown about 20 percent annually since 2002, leaving the vast country largely underinsured compared with the rest of Asia, according to a report by consultancy PriceWaterhouseCoopers in December.

But the study said growing concern about the sustainability of the agent sales channel is prompting insurers to come up with new distribution channels.

Traditional insurers are anxious to team up with Internet leaders in an industry known for its conservative business model and high barriers of entry can be transformed into a modern, forward-thinking enterprise, said market insiders.

When Allianz China Life Insurance Co Ltd partnered with Alibaba's Taobao to sell what was called Full-Moon Insurance, the German insurer believed the Internet had become an essential force to generate new ideas and develop new products. Insurance firms are masterful at tweaking and optimizing products, said Song Xuanbi, vice-chief operating officer of Allianz China. Under the policy, residents of 41 cities in China could get insurance in case they could not see a full moon during the Mid-Autumn Festival. For a 20 yuan premium, the Chinese could insure seeing a full moon. If cloudy skies obscured the view the companies would pay out 50 yuan.

The new venture may look "destined for very lackluster results" because of the diverse demographic composition of the two approaches, according to Doug Young, a financial journalism professor at Fudan University and a columnist at the South China Morning Post newspaper.

He argued that the average buyer of insurance is an older adult, probably aged around 45, whereas the average Tencent customer is probably around 22 or 23 and probably seldom thinks of things such as insurance and the average Alibaba user is probably just a little bit older.

"Even at a more fundamental level, insurance simply isn't something that can be sold effectively in China because of the newness of the product, with most Chinese considering such products a waste of money because they don't provide any immediate returns for the investor," said Young.