Innovation is the key to the development of the insurance industry, said Mr. Wu Xiaohui, Chairman and CEO of Anbang Insurance Group. He shares his thoughts with Asia Insurance Review in this editorial based on his speech at the Beijing Insurance International Forum.
Humans are engaged in a constant innovation to survive, evolving from the primitive society to the modern Information Age. The biggest innovation China has made is the reform and opening-up of the national economic system, which has enabled China to be the second biggest economy in the world. In the insurance industry, innovation also has become a prerequisite for further development.
China has achieved the goal in providing the critical illness insurance for 800 million rural residents and the agricultural insurance across the country. Following the initiative of “Be the insurance to insure”, we need to protect people from accidents, to protect the property of companies, to protect the liability risks of society and the wealth of the nation. To achieve all the goals, innovations in the insurance industry must come first.
The size of China’s insurance market now ranks in third place globally, thanks to its continuous innovation. Nevertheless, there is still a huge gap between the demand and the supply in terms of insurance products and services. Insurers must keep innovating to meet the expectations of our country and society.
Like a plane is defined by three points, I believe the innovation of insurance industry should fall into the following three aspects, to meet the demands and bring a better future for the industry:
Innovation in product development
First, insurance companies should be innovative in the development of products. In the era of experience economy, the insurance industry cannot satisfy the needs of customised experience without being innovative in products.
People choose to buy insurance products either for protection or decent returns. We, as insurers, should take the responsibility to protect customers instead of just educating them. To achieve this goal, insurers must endeavour to meet customers’ demands and win their trust through innovated products and services. Only in this way, can we see a promising future of the industry.
With the development of driverless cars, mobile internet, Big Data, genetic engineering and smart logistics, insurance products need constant innovation to reflect the development of human society and customers’ demands.
The innovation in product is the lifeline of a company. China will be better off if its 1.37 billion population are all insured.
There is a story about a British shoe businessman in Africa who found that locals did not wear shoes. Some people considered this as a huge market while others saw the opposite. This is exactly what is happening in the Chinese insurance industry: there are still a lot of barefooted people without the protection of insurance and product innovation is needed to explore the market.
Adopt a more effective operation system
The second field where an insurance company should be more innovative is in its operations. We shall upgrade from traditional “high cost” mode to a “high efficiency, low cost and more responsive” one.
The scale of an insurer does not have to be too massive, to ensure that premium incomes from customers is used to generate returns and provide protection rather than sustain the operation of a large enterprise.
Insurers need to adopt a more effective operation system that consists of four aspects – a flat organisational structure that ensures the operation cost stays lower than the income; the application of internet thinking; a comprehensive budget plan and a result-oriented risk control system that balances the risks and interests, and shares the responsibility between individuals and the company.
At present, compared with other mature market, China still has huge potential for innovation in the depth and density of the insurance market. Early in 2005, Anbang first created several operation models, including “policy issued upon payment” and “claims deposited directly to the customer’s card to avoid fraud”. There were doubts and sceptics in the company and industry at that time, but these initiatives were justified by practice and later became the industry standard and the backbone of the healthy and stable development of the industry.
Insurers must encourage operational innovation to assume greater responsibility, to protect national wealth and promote economic growth under the New Normal. Chinese IT giant, Huawei and ecommerce company, Alibaba, could never survive without innovation, which works the same for the insurance industry.
Insurance can improve investment and financial structures
The third innovative field lies in the assets management.
The innovation in asset allocation would not only help meet the needs in healthcare, senior care, education and other aspects, but also facilitate the reforms in the financing structures, operation management and corporate governance of listed companies.
The investment and financing structure can be improved by leveraging insurance, which will provide capital support for startups, SMEs and infrastructure and is of highly importance for China.
Capital support nurtures Google, Apple and other world-class enterprises in Silicon Valley, while the blue-chip investments made by Chinese insurers in the stock market is also a kind of capital support to nurture future star enterprises. Meanwhile, the asset allocation to senior care, healthcare, education and other aspects will also pave the way to people’s happiness.
Thus, insurance companies should ponder the approaches of asset allocation with innovative ideas and strive for a win-win situation between insurance industry and the society.
Anbang’s acquisition of VIVAT
With the fast growth of Chinese economy and the wisdom of Chinese people, Anbang Insurance acquired Dutch insurer VIVAT with assets of CNY500 billion (US$74 billion) in 2015. It only took us less than a year to turn VIVAT from a loss-making company into a profitable one, which delivered a record profit of CNY4.3 billion in the first half of 2016. VIVAT adopted Anbang’s philosophy of “Customer Centric” and implemented a “Comprehensive Budget System” to improve operational efficiency.
Tong Yang Life Insurance in Korea
Tong Yang Life Insurance (“Tong Yang Life”), a Korean insurer acquired by Anbang, is another example. Tong Yang Life’s turnover and profit doubled in the past year, and customer satisfaction was elevated substantially. In Korea, Tong Yang Life’s innovative approach is recognised as a successful story against the low-interest rate environment. These results reflect the export of knowhow and management skill of Chinese enterprises.
Recently, Tong Yang Life issued a loan facility to a Chinese company in Shandong, which proves that the global asset allocation can support the development of Chinese companies as well as the Chinese economy.
Great China Dream
Anbang’s overseas financial affiliates can facilitate the growth of domestic SMEs with loans. We will leverage our international platform and capital strength to help fulfil the “Chinese dreams” of startups and entrepreneurs and provide financial support for “mass entrepreneurship and innovation”. The cheap capital we obtained from the developed market can lower the financing cost of Chinese enterprises and entrepreneurs and support a sustainable and high speed growth.
We are committed to build a promising future for Chinese insurance industry through encouraging innovations in the abovementioned fields.
Here we are, in the great China Dream era. It is time for the innovators, rather than the conservatives, to take actions rather than make hollow promises. The transition of the Chinese economy, the nationwide, industrial-level and enterprise-level innovations will surely improve people’s life and build a brighter future for China.
From Asia Insurance Review