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May 2021

Short-term stress is a motivator in the long run

Source: Asia Insurance Review | Nov 2020

China’s general insurance market must be one of the most-watched anywhere in the world – because of the rate of growth it has demonstrated over recent years as well as its burgeoning scale. We spoke to Ping An Property & Casualty Insurance Company of China’s Mr Guo Xiaotao to find out how the growth story for the sector looks now.
By Paul McNamara
The eyes of the world are inexorably drawn to China’s insurance sector – in large part because of the enviable track record it has of showing strong and steady growth.
Underpinning this is a society that is one of the most tech-savvy in the world and where, if analysts are to be believed, commerce will become entirely cashless before anywhere else. Big data, AI, machine learning and connected devices all seem to have deep roots in China and this affects the insurance spectrum profoundly.
Pandemic effect
To understand the realities of operating in such a market – especially in the midst of a pandemic - we caught up with Ping An Property & Casualty Insurance Company of China (Ping An P&C) special assistant to the chairman Guo Xiaotao to get a sense of what the financial impact of the coronavirus pandemic has been on business so far.
“In the first half of 2020, COVID-19 inevitably affected offline business and claims work in the insurance industry,” said Mr Guo. “But we gave full play to the advantages of technology and strengthened online services at the beginning of the outbreak. Our Ping An Auto Owner app supports a seamless process from insurance quotation, to application, e-signature, payment and e-policy viewing.”
This reliance on new technology appears to have paid dividends. “In the first half of 2020, Ping An P&C realised the original insurance premium income of CNY144.1bn ($21.4bn), showing year-on-year growth of 10.5%,” said Mr Guo, “significantly higher than the industry average growth rate of 7.62%. At the same time, under the impact of COVID-19, Ping An P&C’s comprehensive cost rate rose by 1.5 percentage points to 98.1%, still remaining an industry leader and generating an operating profit of CNY8.27bn, while maintaining steady development.”
The future in view
Forecasts for the year ahead for general insurance business cannot be easy in the midst of market uncertainty, but Mr Guo seems bullish. 
“At present, our auto insurance products have seen high-quality development and non-auto insurance products are developing rapidly as well,” he said. “In the short term, our non-auto product structure will become more and more diversified, and overall business quality continues to improve.”
Recent regulatory reforms will also have an effect on forward-looking business plans. “Car insurance will face new challenges and opportunities after the comprehensive reforms of auto insurance were rolled out,” said Mr Guo. “Auto insurance is the biggest source of revenue in the P&C market, accounting for about 66% of Ping An’s property insurance business. After the reforms, the premium ‘shrinks’, which will bring certain challenges to the company’s operation in the short term, mainly reflected in a decline in overall underwriting margin. 
“But short-term stress is a motivator in the long run. At present, Ping An P&C is actively promoting digital transformation. We are improving working efficiency through using online management tools and streamlining the process on the platform. Externally, through platforms such as Ping An Auto Owner, we provide customers with auto insurance products and services directly. With the opportunity brought up by the reforms, the company will accelerate the application of R&D results into market,” he said.
Growing business lines
Which business lines will show most growth will be dictated by customer demand, but planning will play a central role too. “In recent years, the proportion of non-auto business in the property insurance industry continues to increase, maintaining a good momentum,” said Mr Guo. 
“In the first half year, we realised original premium income of CNY144.1bn, up 10.5% y-o-y. Original premium income of non-auto vehicle insurance reached CNY40.4bn, up 26.4% y-o-y.”
Growing business lines other than motor seems to be an imperative to catch the rising demand for other products. “In the future, non-auto insurance business will usher in more opportunities,” said Mr Guo. 
“For example, with the increase of public healthcare awareness, the health insurance has broad prospects for development. Ping An P&C, meanwhile, continues product innovation and strengthening the online sales channel. The Ping An Good Life app, an individual insurance life service platform centring around life scenarios such as home, travel, accident and health provides omni-directional, multilevel, differentiated and value-added service to 40m individual customers.”
Focus on sales channels
Leveraging such opportunities will inevitably mean demonstrating agility across a wide range of sales channels. “The property insurance market is changing rapidly, while customers and technologies are also changing,” said Mr Guo. “The development of business sales channels should keep pace with the times.”
Mr Guo sees three main trends emerging. “The first is online distribution,” he said. “In recent years, under the group strategy of ‘finance + ecosystem’, Ping An P&C has continuously increased its investment in technology to provide customers with personalised and customised products and convenient services anytime and anywhere.”
“The second is intelligence,” said Mr Guo. “With the aid of AI, big data, cloud computing, and other cutting-edge technologies, property insurers gradually shifted from focusing on agents and sales experience to precisely matching sales team and products with customers’ demands, using data platforms and smart operations to empower the teams and provide them with the best support and help. We launched the Good Helper app to provide 60,000 agents from multiple channels with online services such as business processing, marketing support, training and so forth.”
The third trend is disintermediation. “With the deepening of comprehensive reform of auto insurance, the rate will decline and intermediary channel will inevitably be impacted,” Mr Guo said.
Technology as a sales driver
In such an environment, the best strategy for using new technologies to drive business growth becomes critical.
“Innovative technologies such as AI are driving the finance industry into an era of automation and intelligence,” said Mr Guo. “In order to grasp the opportunity, we evolved the G1.0 systematisation era, G2.0 centralised era - to promote centralised data back office and server; G3.0 digital era - to build a new generation of system which is mobile and digital and G4.0 intelligence era, to build an intelligent brain to be prophetic, foresighted and pioneering - to see the problem in advance, find the root of the problem and act accordingly.”
The result of tech applications can be impressive. “Taking the Ping An G4.0 as an example, we are customer focused and achieved intelligent marketing, pricing, operation, risk control, claims and management - and empower end-to-end business with intelligent brain,” said Mr Guo. “With intelligent marketing, we can accurately reach thousands of people and serve more than 100m users of the auto owner app. By using the intelligent recommendation engine, the success rate of the one-time inquiry of auto insurance scheme was increased from 27% to 70%.
“In terms of intelligent operation, our robots can achieve ‘listening, speaking, reading, thinking and doing’. Natural language processing, automatic speech recognition, optical character recognition and other technologies are adopted to improve product development and achieve operation process optimisation. In the past, it would take up to seven quotations while the process of sales underwriting and policy distribution took two days. Now, using robots, we undertake three steps - identify the customer - intelligent quotation - pay out,” he said.
Arrival of 5G
Many insurers will be hoping that the arrival of 5G will help contribute to their growth story and Ping An P&C is no exception. “The commercialisation of 5G will bring many changes to the insurance industry,” said Mr Guo.
“On the demand side, with the in-depth integration of 5G with automobile, medical and other industries, new forms of business continue to emerge, which will generate new insurance demand and create new opportunities for insurance companies. For example, smart medical liability insurance, 5G network risk-protection products and others.
“On the supply side, 5G technology can be used to accelerate digital transformation and provide users with personalised insurance services and claims at any time, so as to improve quality and efficiency. For example, an unmanned aircraft system connected with a 5G network can quickly identify how badly affected by disaster agricultural insurance customers are – and provide timely compensation and planting guidance for them,” he said. A 

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