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Innovation is the key for insurance industry

By Wu Xiaohui | China Daily Europe | Updated: 2016-11-06 13:57

Human beings constantly innovate in order to survive and by doing so have evolved from primitive society to the modern Information Age.

The biggest innovation China has made in recent years has been the reform and opening-up of the national economic system, which has enabled the country to become the second-largest economy in the world.

Innovation has also become a prerequisite in the insurance industry.

China has achieved its goal of providing critical illness insurance for 800 million rural residents and agricultural insurance across the country.

We need to protect people from accidents, protect the property of companies, protect the liability risks of society and protect the wealth of the nation. To achieve these goals, the insurance industry must innovate.

The size of China's insurance market now ranks third in the world thanks to continuous innovation. Nevertheless, there is still a huge gap between the demand and the supply in terms of products and services. Insurers must keep innovating to meet the expectations of our country and society.

I believe innovation in the insurance industry should meet three criteria:

First, companies should be innovative in the development of products. In the era of the Experience Economy, the insurance industry cannot satisfy the need for customized experiences without being innovative.

People choose to buy insurance products either for protection or for decent returns. Insurers must endeavor to meet customers' demands and win their trust through innovative products and services. Only in this way can we ensure a promising future for 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 society and customers' demands.

Innovation in products is the lifeline of a company. China will be better off if all of its 1.37 billion population is insured.

There is a story about a British shoe salesman in Africa who found that locals did not wear shoes. Some saw this as a huge opportunity while others saw the opposite. This is exactly what is happening in the Chinese insurance industry: There are still a lot of 'barefoot people' without the protection of insurance, where product innovation is required to explore the market.

The second field in which an insurance company should be more innovative is in its operation. We need to upgrade from traditional high-cost mode to a high-efficiency, low-cost and more responsive one. The size of an insurance business shouldn't be too great, in order to ensure that customers' premiums are used to generate returns and provide protection rather than sustain the operation of a large enterprise.

Insurers need to adopt a more effective operation that consists of four aspects - a flat organizational structure that ensures operational costs stay lower than the income; the application of Internet thinking; a comprehensive budget plan and a result-oriented risk control system that balances risks and interests and shares responsibility between individuals and the company.

At present, compared with other mature markets, China still has huge potential for innovation in the depth and density of its insurance market.

Early in 2005, Anbang created several operation models, including "policy issued upon payment" and "claims deposited directly to the customer's card to avoid fraud".

There was doubt and skepticism 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 its healthy and stable development.

Insurers must encourage operational innovation to assume greater responsibility in protecting the national wealth and promoting economic growth under the "new normal".

Chinese IT giant Huawei and e-commerce company Alibaba could never survive without innovation and the same is true for the insurance industry.

The third innovative field lies in asset management. Innovation in asset allocation would not only help meet needs in the healthcare, senior care, education and other sectors, but would also facilitate reforms in financing structures, operation management and corporate governance of listed companies.

Investment and financing structure can be improved by leveraging insurance, which will provide capital support for startups, SMEs and infrastructure, and is of great 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 are also a kind of capital support to nurture future star enterprises.

Meanwhile, asset allocation to senior care, healthcare, education and other aspects will also pave the way to people's happiness. Thus, insurance companies should ponder their approach to asset allocation with innovative ideas and strive for a win-win situation between the insurance industry and society.

The author is the Chairman and CEO of Anbang Insurance Group.

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