Forbes Global 2000: Insurance as entrée to tech

“We are not afraid to take calculated bets”: Ping An tech czar Jessica Tan
 

Ping An Insurance is China’s biggest insurer, but it really reigns supreme as the industry No 1 by profit and return on equity. Its market capitalisation, at $180 billion, is 74 percent larger than the country’s old standard, China Life, and 64 percent above the largest listed pan-Asia insurer, AIA. By this measure it is the world’s largest insurer except for Berkshire Hathaway.

To make sense of these startling numbers—and of Ping An’s rise to No 10 on the Forbes Global 2000—look beyond the stodgy insurance business and into the realm of high technology whose tentacles reach into every aspect of commerce in China and eventually show up in the mobile handsets of Chinese consumers.

Ping An has early-mover advantage in mobile apps and underlying technologies from artificial intelligence (AI) and blockchain. Spreading across Ping An’s vast territory in finance, encompassing insurance, banking and asset management, are 10 startups it has spawned in the last six years.

The engine and incubator is a wholly owned fintech offshoot, Ping An Technology, which leads the FinTech Top 100, a global survey by consultancy IDC, as China’s top player, ahead of rival Hangzhou-based Hundsun Technologies backed by Ant Financial. The effort bridges financial big data with health care management.

From this wellspring came startups including peer-to-peer lender Lufax, set up in 2012, fetching a valuation of $18.5 billion in a fundraising two years ago; Ping An Good Doctor, a health care portal with 30 million-plus monthly active users whose recent IPO raised $1.1 billion in Hong Kong; and Ping An Healthcare Technology, a mobile app for booking hospital visits used by 800 million customers across 70 percent of cities in China.

To consumers, the offer is often free mobile apps. But there’s a business-to-business app: OneConnect, linking 2,400 banks and nonfinancial institutions and valued at $7.4 billion in its last funding round.

Ping An’s technology czar is Jessica Tan, a 41-year-old Singaporean who travels back each week to see her family from her base—and the group’s tech centre—in Shanghai. She joined in 2013 from McKinsey after 13 years as a consultant and is the group’s No 2 after founder and CEO Peter Ma. Formally, Tan is deputy CEO, COO and chief information officer.

Ma set up the company in 1988 with a dozen people and founding shareholders China Merchants Group and ICBC, China’s largest bank (and today No 1 on the Global 2000). As early as 1994, Morgan Stanley and Goldman Sachs came in as foreign investors, the first in a mainland Chinese financial institution. In 2002, HSBC bought in to be its single largest shareholder but later disposed of its entire 16 percent stake to the Charoen Pokphand Group for $9.4 billion, making the Thai conglomerate its largest shareholder.

When Tan was relocated by McKinsey from the US in 2003, Ping An became her first client through the HSBC link. With a master’s degree from MIT in electrical engineering and computer science, she since has overseen the growth of Ping An’s tech team from 3,000 to over 22,000. It competes in a field that includes China’s technology giants—Alibaba has Ant Financial, and Tencent has its WeChat platform—but Tan says Ping An’s insurance scale gives it an edge.

She spoke to Forbes Asia from the company’s floorwide international office in Hong Kong’s IFC skyscraper (as edited):

Q. FORBES ASIA: How do you benchmark with an insurance ­company or a finance company that combines with technology?
Tan: It does not exist. Six years ago, we put all our systems on the cloud—this is unthinkable. No organisation in the world was doing this. No financial institution in the world comes even remotely close to what we are doing. We have been very lucky in our being in China, a big, high-growth market with reasonable margins. We could afford to invest 1 percent of our revenues into R&D, which is 10 percent of our profit every year, on new technology for 10 years, above and beyond whatever traditional insurance companies and banks do on their IT expense.

We are not afraid to take calculated bets. It is very difficult for such a large organisation to adopt this kind of culture. We are number one in AI medical imaging, for instance, with more than 95 percent accuracy in the authoritative LUNA rankings for imaging in two categories for lung diseases, ahead of Alibaba Health.

Chinese doctors spend on average, per patient, three to four minutes, especially in top-tier hospitals. Informal statistics show 30-odd percent of misdiagnoses or missed early detection—we drop it down to only 8 percent.

We started developing this technology two years ago. By the end of this year we should cover 35 different types of illnesses and about 600 million patients.

In April, Shanghai’s Ministry of Health signed with us to ensure quality of diagnosis and service. With this agreement, all hospitals in Shanghai must connect to our system in real time. This is a huge impact on the quality of people’s diagnoses, and it saves costs and lives.

Q. How much of the group’s revenue or profit can be attributed directly or indirectly to its online initiatives, including all the online platforms or apps? Tech is formally only 1 percent of revenues.
Two measures: The first is the 16.4 percent of group profit contribution directly from the ten tech [startup] businesses. The other is the 36 to 40 percent of new financial customers coming from the mobile apps. No financial institution in the world has this: 436 million internet users, 166 million financial services customers.

Q. What’s behind Ping An’s transformation into a technology-based insurance group? How did it get started?
Five years ago we already had our own proprietary facial recognition team; four years ago we started working on voiceprint. Whatever the language, Spanish or Sichuanese, as long as we have 20 seconds of your voice, we can translate it into a mathematical matrix as unique as your thumbprint. Our brain can only remember the voices of about 150 people. Our system can recognise unique voices of 100,000 people.

In the last three years, our system has been trained to recognise micro-expressions, the tiniest movement of our eye muscles and around the lips, within milliseconds. We use this in our real-life loan interview done on the mobile app by our credit assessors who ask random questions just to see if a borrower is lying—more than 80 percent positive prediction rate.

As a financial services and health care provider, we need to verify who the customers are when everything is done on the mobile. The MIT computer science-AI lab dedicated a professor to work on a project with us over the past four years.

Q. How do you pick a business to focus on?
A big problem in China is the lack of affordable, good-quality primary care, very different from Taiwan, Hong Kong or Singapore, where one can just walk into a medical centre to see a doctor.

Offline, we built a technology platform that set standards for outside clinics—65,000 of them now—to standardise customer records, set pharmacy and medication and procurement standards, with links to social security.

In the city of Chongqing, where over 60 percent of people are likely to contract chronic inflammatory lung disease, with the Ministry of Health’s in-depth study of health records we built an AI-powered system to predict the likelihood of a person getting this disease based on records, including home-life conditions, such as a house with an open chimney (three times more at risk) as opposed to a modern ventilation system.

Q. Much of the group’s technology is homegrown. How have you managed to pool talent, the right strategy and execution? Do you have an incubation centre in Shanghai?
We no longer have an incubation centre. We have top-down and bottom-up approaches. The top-down is at the beginning to identify where we want to be. Then we set up a company. The bottom-up is the management team tasked to get the business off the ground. We close down underperforming companies.

We can bring a lot to auto insurance—we are China’s second-largest auto insurer and its largest auto-dealer financier and the largest in car financing. We bought New York-listed Autohome two years ago, the only business we did not build from scratch. We turned it into a car portal from an advertisement media company, increasing its size by 3.5 times in two years.

In smart cities, we worked in Shenzhen to ease traffic congestion. Last year traffic jams during the Golden Week lasted 21.7 hours. This year it was zero, after the Shenzhen traffic police used our technology for congestion management.

Q. You have a core competence in handling city traffic?
Our insurance claims ratio is the lowest in the industry, helped by our AI capabilities covering 360 Chinese cities. In a car accident in China, drivers—a lot of them first-time drivers—have to stay there for traffic police to handle the liability allocation.

Our investigators would arrive at the site within five to 10 minutes 90 percent of the time, even faster than an ambulance or police—no small feat and only possible with ­technology. Our AI capabilities can predict where acci­dents are likely. We analyse the past 20 years of auto claims for what the likelihood of accidents is at different times of the day and week, weather conditions. We are building a platform for accidents in all cities. We will be consolidated onto this platform, and drivers can, instead of waiting for the traffic police, take pictures of the accident, upload them, with our AI modules analysing the degree of damage, and the liability [is determined]—as straightforward as you can go.

About 90 percent of cases can be streamlined. We built these services over 20 years in a repository for claims for everything, from the cost of every auto part in different cities and the labour cost involved and fraud, with the help of car mechanics in constructing these models.

Q. How would you prevent the contagion effect of risks spreading across various financial units—banking, insurance, online lending, brokerage?
Each of our units has its own regulators, with capital ratios for each of them publicly available and run as separately legal entities to answer to their own regulators. You can say they are operated independently.

Q. Cross-selling is a feature of Chinese finance.
China is not like a developed market where people tend to cherry-pick individual services. The 1.4 billion people of China have ­varying degrees of financial-services awareness, capability and trust. Each of our apps has a magic gate to this one portal, which links hundreds of [our] systems. Our view is: “One customer, multiple products, one-stop shop, one account.”

But we have strict rules about cross-selling by cold calling. One business unit cannot give away the customer information to another unit. Our insurance agents, 1.39 million of them, build trust with policyholders and that can lead to the sale of the Ping An credit cards, for instance. We don’t cross-sell, per se, because it is unthinkable for a person, even our life insurance agents, to be proficient in so many products. That is why everything is on the app. And we try to make sure that everything can be done online.

Q. China is imposing new regulations on financial conglomerates. On the other hand, the market is opening up to foreign investment. Could this change how Ping An operates?
I am not in a position to speculate on regulatory or future regulatory matters.

Q. Do you plan to expand outside of China?
We believe the models and technology are replicable. Foreign banks are using our OneConnect services, good for retail risk assessment. Our OneConnect and Lufax, the peer-to-peer lender, already opened an office in Singapore.

Q. What’s the end goal? What shape will Ping An take down the road?
In the next 10 years, our strategy is very clear: to have our core financial services businesses continue to grow. We want to provide financial services as well as technology expertise. When we first started to do this, frankly, there was internal debate and worries that we would be helping our competitors. Peter [Ma] was very strong in saying that we want to serve the entire market, we don’t want just ourselves to be very good. This is something that we stuck to throughout the past 10 years, and we will continue to do for the next 10 years. Our consumer lending was completely offline four years ago. Now it’s completely online.

At my former employer, McKinsey, there were in the past very clear sectors—functional, vertical and horizontal. These days everything is blurred. Technology has reached into all parts of business and is changing them. Technology used to be a sector of its own—now it pervades everything.
When we set up insurance, we learned from AIA; we learned from other models. These things that we are creating now don’t exist in the world.

Q. Chairman Ma founded Ping An with investment from state-owned China Merchants Group in the mid-1980s. Does the state still have influence?
Peter was a human resources manager at China Merchants, but we were not a state-owned company. We have no representatives from the government on our board—we are completely a publicly listed company.

In state-owned enterprises, there are state representatives in the management—we never have had any shareholder in our 30 years send representatives to the management team. They have board representation, yes.

We do have government stakes investing in us because we are a very good investment.