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Digital innovation pushes Chinese insurers to the top

In the top ten of biggest insurance companies, the numbers 2, 4 and 8 are Chinese. Thanks to their large home market and thanks to smart digital innovation, those Chinese companies teach their competitors a couple of lessons.

At the end of 2020, the EU concluded an investment agreement with China. This will create more opportunities for European financial companies in China, thanks to the removal of joint venture requirements and foreign equity caps. However, the implementation of the agreement will still take years, and meanwhile Chinese insurance companies continue their growth.

In the above mentioned ranking the number two is Ping An, with 10,5% growth in 2019. Number 4 is China Life Insurance, with 7,5% growth and number 8 is People’s Insurance Co of China, with 10,8% growth in 2019.

A bit more than a decade ago, Belgium got to know Chinese insurance companies. In 2007 Ping An bought 4,18% of Fortis. Today Ping An is still a major shareholder in Ageas (the insurance heir of Fortis). Some 10% of Ageas is in Chinese hands, with Fosun besides Ping An.

A less successful Chinese investment was made by Anbang, in Belgian insurer Fidea and in Bank Nagelmackers. Anbang ran into trouble in China and had to divest.

Digital innovation

Of course, the size of their home market gives Chinese insurers a competitive advantage. But most of all, they lead the way in the digital innovation, making it a digital revolution.

Most adult Chinese are active mobile internet users, and the insurance companies try to offer them a wide range of services and try to be very present on the internet. To illustrate this strategy: the well-known Chinese digital platform WeChat is called ‘China’s app for everything’.

Chinese insurance companies got to where they are now in three steps. The first was to digitize their basic business. Online channels were set up, to reach out to customers and insurance agents. Procedures were automated. This is still traditional insurance business, but in a more efficient way.

Step number two is the creation of new offers. Digital services to help customers with day-to-day activities. Activities with a certain link to insurances, such as buying cars or homes, or making appointments with doctors. In this way, the number of contacts with (potential) customers increases a lot.

Step 3 is the merger of the digital services with the financial services. By putting everything in the same ecosystem, insurance companies get to known their customers better, they know what they (could) need and when they need it. They can offer them tailored solutions. And they can reach many people.

Pexels jiawei cui 2310885

Ping An

The most successful of Chinese insurance companies is also the most innovative one: Ping An. In the first semester of 2020 alone the company submitted 4.625 technology patents.

Ping An has four vertical portals: auto, health, finance and real estate. In each portal many digital offerings can be found. This led to a situation where Ping An has 153 million customers and 400 million users. The difference being that the users only use the different apps and platforms. But of course, it’s only a small step from user to customer. With the third step explained earlier, Ping An is able to offer the right insurances and other financial services to people who for example bought a car via the Ping An auto site.

Of course Ping An uses all the new technologies: big data (facts about the life of customers), cloud computing (high computing speed at affordable prices), artificial intelligence (using technology to make better decisions), blockchain (the upcoming technology that enhances security and lowers costs), the Internet of Things (collecting data from different sources). And all of this to support the 1,4 million insurance agents in their sales efforts.

Those agents are now selected using artificial intelligence; one of the job interviews is with a machine, that judges their answers. Ping An also uses customer data, to quickly make lending decisions. And mobile-phone sensors to price a car insurance. Ping An Good Doctor is a portal that uses AI to improve medical diagnoses.

Ping An is also very good at cross selling, selling customers from one part of the company products or services from another part. They took this one step further with Zhong An Online P&C Insurance Company. This is an insurance company, founded by Ping An, Alibaba (the Chinese Amazon) and Tencent (company behind the already mentioned WeChat). It’s part of 5 major ecosystems, has 400 million customers and 10 billion policies sold. Zhong An has more than 200 insurance products, mostly small and with a short life cycle.

Can we copy?

Every comparison has its limits. China is different from markets in Western Europe. China is much bigger and had a sharp growth in recent years. Regulation is different, the concerns related to privacy for example are very different.

However, lessons can be learned. First lesson is to be open for innovation and to give it a central place. Western financial companies have their ‘fintech incubators’, their ‘insurtech’, but innovation is more than technology. It’s a business model.

Lesson number two is the focus on the (potential) client. What is he/she doing, buying, searching and what can we do to help? New activities are emerging everywhere in the economy: e-commerce, sharing economy, … where are the opportunities for insurers?

Final point: find partners to deliver the products and services customers want. Link your activity to related sectors. Or find technology partnerships.

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