In China’s highly competitive insurance market, Ping An differentiates itself with its ability to use proprietary technology to strengthen the customer experience and enhance cross-sales for its four major ecosystems: financial, health, auto, and small city. The company’s competitive advantage results in a better outlook than peers in terms of underwriting profitability and growth.
The company’s strategy is to position its banking unit as major entry point for customers, via the provision of one-stop financial services and high-frequency interactions for both retail and corporate financial needs. Ping An now boasts one of the largest retail customer bases in China’s financial industry, with over 647 million internet users and 227 million financial customers, delivering enviable 13% and 12% respective CAGRs in internet and financial customers over the past five years. Its customers have higher income and are more receptive to technology, as evidenced by industry-leading profit per customer and number of contracts per customer. Despite such advantages, Ping An is facing larger-than-peer challenges in the high-margin health insurance business due to intensifying pricing competition from small insurers and changing customer behavior amid a slowing economy and threats from low-price, internet-based insurance.
Ping An responded to these challenges by reforming its agent force and leveraging the core resources of hospitals, doctors, and pharmacies in its healthcare ecosystem. Ping An’s “Insurance +” strategy, which combines the insurance policies with various services including health management, home-based elderly care, and high-end elderly care based on precise matching of customers, should be able to meet diversified customer needs. If executed successfully, this should translate to hard-to-duplicate competitive advantage and customer stickiness for life insurance business. However, the implementation of such a strategy will be difficult at the initial stage especially during the current economic downturn, as it will take significant time and effort to achieve a good customer experience.
Opportunities
The company has implemented channel reform to four batches of its business outlets. Data showed outlets after reforms being implemented over 12 to 18 months recorded double-digit growth in VONB in the second quarter of 2022.
Ping An’s customer-oriented operational model and industry-leading technology platform are difficult for competitors to replicate within a short period.
The potential spinoff of its high-tech subsidiaries and exportation of technology should be an upside catalyst and offer more transparency for investors.