Traditionally, one has to be a client of a bank or insurance company before enjoying the services they provide. But China’s Ping An Insurance (Group) has turned this business convention on its head to remarkable effect, according to chief operating officer Jessica Tan.
By offering a limited number of free services and products to potential customers before they start paying, Ping An has been able to develop its internet business in recent years, something that not only generates new revenue but also helps to cross-link the group’s core insurance products and retain customers.
“We believe in serving customers even before they pay to buy our products and services,” said Tan, in an interview with the South China Morning Post.
“In this model, everybody can enjoy some free services from our platform. Obviously there is a limit. You can not ask for free services forever and we do provide products and services that charge the customers.”
Ping An is looking for growth in four business areas: finance, medicine, auto and housing.
Tan said: “We believe in providing these four very important internet platforms for the customers to take care of their personal needs.”
Tan, a Malaysian who worked as a consultant at McKinsey Co in the US and Singapore for 13 years, joined Ping An four years ago as group chief information officer. She was promoted to chief operating officer in 2014.
In this role, she oversees the insurer’s internet finance-related businesses and manages the operations and technology across 26 subsidiaries. She is among the top managers handling all internet business for the group that was founded and is still led by chairman Peter Ma Mingzhe.
Under Ma, Ping An has become China’s second-largest insurer, with its business spanning life and general insurance, banking, wealth management, internet finance and health.
Its business diversity helped deliver a strong set of results in the first half of 2016. The company posted a 17 per cent growth in interim profit even as competitors like China Life posted a 67 per cent slump in earnings, JPMorgan said in a report.
For Ma, the internet business is central to Ping An’s continued prosperity.
“Looking ahead to the second half, we expect tighter integration between traditional industries and the internet,” Ma said last month in a statement to the stock exchange. “Financial innovation will spur this value creation, and service upgrades will be crucial to boost business competition.”
Life and general insurance remain the core business of Ping An, representing 57 per cent of its total profit last year, compared with 23 per cent from banking and the rest from its asset management and securities operations.
Announcing its first half results this year, Ping An for the first time unveiled its internet business performance.
Ping An’s internet finance business, going by the platform name Lufax, lets customers pick from 2,000 mutual funds offered by 500 companies.
Launched in September 2011, Lufax now has 23.42 million users, an increase of almost 28 per cent from last year. Transactions reached 3.2 trillion yuan (HK$3.7 trillion) in the first half, a fivefold increase from the same period last year.
Ping An has said it plans to spin off Lufax in an initial public offer, although no further details have been revealed.
Ping An Doctor, its medical business which has just completed US$500 million in fund raising, now has 89 million users.
Tan said the medical internet platform does not carry advertisements. Instead, it earns money by charging for VIP membership services, and from cross sales of insurance products and delivery of medical services. This pays for 1,000 doctors to provide quality advise to users free of charge.
A recent high-profile case involving Baidu highlighted the potential pitfalls of online medical advertising. The internet search giant faces a slow recovery in its core advertising business amid tough measures imposed by regulators, following public outrage over the death of university student Wei Zexi linked to a cancer treatment he found online.
Tan said Ping An would make sure its business model avoids such problems. “We make sure our doctors are of high quality and we can control what and how to say anything to the customers. We do not accept any medical advertisement,” she said.
On the internet auto side of the business, Ping An bought a 47.4 per cent stake in mainland online company AutoHome for US$1.6 billion from Australia’s Telstra in June. Tan said Ping An wants to provide not just information on car sales, but also loans, insurance, repair and related services for online.
Morgan Stanley said in a report that the acquisition would help Ping An’s car business.
The group has also tied up with real estate agents to offer housing purchase information to customers, as well as the mortgage loans services.
Tan said Ping An is among the few mainland companies to hire international talent like her to manage the company, and this benefits the internet business
“Ping An is good at absorbing all kinds of cutting-edge experiences and ideas. By fusing international talent with strong local knowledge and execution capabilities, Ping An has kept growing very quickly in the past 28 years,” she said.
Tan believes technology, speed and security are vital aspects of building a successful internet business.
“All three are very important – security and speed are pre-requisites, then the technology and business model distinctiveness determine long-term success,” she said.
She believes it is important to apply technology and internet innovation to the group’s core businesses to improve growth, productivity and effectiveness, as well as to create new business models and platforms to capture new clients.
She said among the 300 million online users of Ping An, many go on to become paid customers. In the first half of this year, 36 per cent of new clients buying traditional insurance and banking products from Ping An were online customers, up from 19 per cent last year. Three years ago, this figure was in single digits.
The internet platform provides more services and products for customers, and hence helps to retain them.
“If a company has six to eight products for customers to buy, it is better than the company that only offers a single product. The internet services thus provides a better customer retention rate,” said Tan, adding that the internet business itself could also become a money spinner once customers are willing to pay for the services.