The recent AXA Global Media Summit in Shanghai brought together heads of universities, local banks and AXA executives on all sides of insurance. Among other topics, such as digital insurance sales and the need for life insurance, there was much talk about life insurance in emerging markets, most notably China and Indonesia.
Emily Holbrook: To start off, I want to know how you feel about China and other BRIC nations and whether you feel they’re a great growth opportunity for life insurance, and if so, why?
Benoit Claveranne (photo, right): I think it’s all about the combination between what I would call “macro” opportunities and “micro” opportunities, and what we are witnessing here is this rare combination. You have the scale, you have this historical moment where this growth is going to be here, and presented before and happening later; that’s the macro part.
Insurance is a business where people have to have something to protect to buy insurance. So when you are in these early phases of economic development, you have, so-to-speak, nothing to protect. Meaning, you are not rich enough to have something to protect. But the moment you cross a certain threshold of development, then you think about, “How do I protect what matters to me, in no order of priority; my life or the life of those who I care for? How do I plan for the education of my children, and how do I plan for my own protection or for my own pension?”
This is what we call the “protection gap.” These were meant for if something happens to you, the cost of the event would be one amount. So we look at it not only for China actually, we look at it for all of Asia. China is more massive, but the reality is, today, Indonesia is already in that phase.
So very simply, you have those two, you combine them and that’s the perfect combination.
EH: We write a lot about digital life insurance sales. For a lot of our readers who are life insurance agents, that’s a huge worry for them. They’re wondering if they’re even going to be needed in the future.
A couple of years ago, MetLife tried to do kind of like what ICBC-AXA has done with the ATM-like terminals selling life insurance, annuities and other insurance products through a terminal where consumers don’t have to interact with an agent. MetLife tried that in Walmart with life insurance — to try to get the middle market or maybe a lower income market — and they failed.
But it seems ICBC-AXA is succeeding in that area where other life insurers have failed. Why do you think that is so?
BC: The answer I am going to give you, I would not have given three years ago. Three years ago, I would have said what you said, which is our physical distributors are a bit worried with this evolution. In a way, we all thought that digital would replace physical distribution.
Three years later, I think that we have, again, a combination. Why? One, because distributors have shown interest in most countries, and in Asia, an incredible ability to embrace the digital opportunities.
There is this book; I don’t remember the name, where the author says, “We have to understand that from now on we will have two lives; the real life and the digital life.”
I think that this is what our distributors are finding more and more. They keep on being agents in real life and they are more and more becoming agents in the digital era, so that’s one. Two, there are some products, some commoditized products, which can be sold digitally without a great amount of advice or sophisticated degree of intermediation, if you would; term life and those things.
We are in a “test and learn” mode. We are testing; we are trying to find the right balance between, if you sell something that is too simple, it’s not going to fill the needs of the people. If you try to make it too complex, there is no point there. You can sell it without intermediation. You see, that’s a bit of a paradox.
You can do it online, you can do it digitally, but it will be a combination. And again, I think that many people have evolved in the past years and we have been searching. I think at the moment, we are convinced about the hybrid, one. Two, we are more and more convinced that you have different faces in the customer service process. You have, what I would say, the normal servicing process and then you have the claims process.
The thing that we are trying to differentiate; the kind of digital offer that you have to provide at any given moment. That being said, we are being very digital. For AXA, we are convinced that digital is one of the enablers to be a truly client-centric company. Why? Because with the digital tools, there is a way to make sure that we set a certain level of standardized customer experience across the region. And whether your agent is in Mumbai or in Shanghai; if you have a certain level of digital apparatus, you can ensure that there is a similar level of customer experience. This is how we look at it.
Not only do I think that, compared to three years ago, we have made a lot of progress, but for Asia, I have never come across one agent who has told us that he or she would fear digital.
In Asia, I spent many, many meetings on this issue with agents. I have not been to one meeting with an agent that I meet telling me this is going to be disruptive, etc.
EH: Definitely. That’s very forward thinking of Asia. In the U.S., it’s a graying insurance workforce. The traditional insurance agents are many times opposed to drastic change in this industry. They are used to the traditional way of selling insurance, prospecting, and gaining new clients and this is what scares them, that they’re not needed anymore. And it is sometimes a valid fear. Here in Asia, as you’ve just told me, you don’t experience that.
BC: We did a pilot in Hong Kong. The name of the company is a very famous Californian company, which enables YouTube. The interesting part was we went for it and we told ourselves, “What are the Asians going to say?” First of all, massive buy-in for the agents, massive adoption for the pilot; everyone was ready to go on it.
Two, one can always challenge or beat the indicators used for that because it’s not a solid key performance indicator; it’s not quantitative KPIs.
Have you heard of WeChat?
EH: I heard of it when I got to China, yes.
BC: It’s much, much bigger than the American thing: Facebook. So our agents told us, “That’s great, but we want to do that on WeChat, because WeChat is the social media of Hong Kong. It’s in Chinese, etc., etc.” And then we said, “Okay. Then we cannot do it this way; you have to do it yourself, because we don’t have the equivalent for that for the Chinese social media.”
The agents went for it. The agents went for it! There was not one minute spent on trying to convince the rationale of it.
EH: That’s amazing. Very interesting.
So of all the emerging markets strictly for life insurance; in your opinion, which do you see as the most promising?
BC: I’m bullish on every one of them and I mean it. There is not one market where if I was asked I would advise the group to withdraw, not one. The only question we could have is whether it’s not too much to embrace.
I’m extremely bullish on Indonesia.
I’m going to give you a number. I think by 2030, they say, in Indonesia you’re going to have 50 million people existing in the middle class. To put it very simply, it’s close to – and I’m approximating – the total population of Thailand today. So very simply, in the next 15 years, Indonesia is going to have close to the whole of Thailand, in the middle class level.
I was mentioning Malaysia and whether we believe in Malaysia, and I would say yes. Thirty million people by Asian standards is … not large, but by European standards, it starts to be a pretty decent size.
Even Hong Kong and Singapore; one could say that Hong Kong and Singapore are more marginal business.
By 2020, 2025, the Philippines are going to take off. They are today the fastest growing economy of the region in the last years. I’m not saying in this quarter, but in the last years.
They’re going to take off. I know that what we do for the Philippines today it’s not material at the group level, but in 2025 – when I work in the Philippines, I do that not only for my successor, but for the successor of my successor. So genuinely, we will be operational in every country.
EH: But there are plans in the future for AXA in the Philippines?
BC: We have life insurance there.
EH: For life insurance companies, many are hesitant to go into these emerging markets, for whatever reason, but mostly because it’s a high-risk bet that you’re placing, or it could be. Would you say that’s a recipe for failure on their part if they say, “No, I’m only going to stay domestic in our business”?
BC: I cannot comment for the others. But I will say I’m happy if they don’t come.
The reality is, it would be too easy to think that opportunities do not come without challenges, and no one is naïve enough to believe that this is a very smooth journey we have been embarking on. I’ve worked in different countries before joining AXA. I’ve worked in Africa and in different countries in Europe. I’ve worked in the U.S. The thing about this emerging context that people should not underestimate is that high growth goes with productivity. As we say in insurance, it’s the variance.
EH: High risk, high reward.
BC: Exactly. That’s exactly it.
So what does it mean? First, it means when you go to this region you have to be committed for the long run. You don’t come here for a five-year, 10-year thing. Two, that was our strategy and I will illustrate that tomorrow in my presentation. You have to have relationships with the people who know the local market.
We’ve had our group seminar here in Shanghai for three days and we’ve met with lots of Chinese entrepreneurs; very famous ones, and they all told us the same story, which is, “You guys, you will all fail as long as you believe that you can do in China the way you’ve been doing elsewhere.” And the same story holds true everywhere.
This philosophy of having in each country the right partners who are the long-established institutions, who know the markets, who are respected by local business or local clients, and work on joining forces to make this business as success, to me is perfect.
So to play it differently, if you want to join two peoples’ business, be ready for the long run, find a local expert, and be ready to accept change. If you don’t have those three elements, don’t go for it.
EH: Good advice.
BC: Fourth, be ready for fierce competition because the whole world has decided this was one of the places to be, so the level of aggressiveness on the market is very, very strong. Nothing compared to the fierce U.S. market, but I’d say it’s a very strong competition.