The Society of Actuaries (SOA) China Actuarial Interview Project recently interviewed Sun Hanjie, assistant general manager and chief actuary of Ping An Life Insurance Co. LTD and chair of the SOA 2020 China Committee. He shared his professional insights into hot topics, such as the impact of COVID-19 on the insurance industry, sales channel transformation, the influence of downward trends in interest rates and InsurTech. Hanjie also provided his thoughts on topics such as actuarial education and talent training, and he encouraged the actuarial industry and academia to come together to jointly seize opportunities and promote the development of the profession.
During the interview, we also learn how the corporate culture of Ping An contributes to its success, as well as the importance the company places on training. As the first chair of the SOA China Committee (with a term of two years), Hanjie encourages SOA members and candidates to devote themselves to the insurance industry and embrace the opportunities presented in this era.
Performance Leading and Reform Advancing
You have been with Ping An for 20 years and have witnessed the company’s rapid development. What are the primary factors that have contributed to Ping An’s success? What management tips can you share?
Ping An was founded in Shenzhen in 1988. In 2019, the operating profit of the parent company reached 133 billion, the embedded value exceeded 1,200 billion and the annual new business value was nearly 76 billion. It ranked 29th in the 2019 Fortune 500, seventh in the Global 2000, fourth in the financial industry and first in the insurance industry. With more than 30 years of management, Ping An has been fruitful.
There are many factors that contribute to the success of Ping An. Personally, I believe the following are the most important:
- In the past 30 years, Ping An has achieved one small step per year, achieved one big step every five years and reached a new level every 10 years. This demonstrates great foresight and perseverance. We insist on innovation and reform, constantly promote the strategic transformation of “finance + science and technology” and “finance + ecology,” and continuously deepen data reform to accomplish such great achievements.
- Ping An values its workplace culture—and has a strong one. When we work, we emphasize professionalism, simplicity and performance. Our corporate values radiate through all layers of the organization, as does our focus on work. We focus on creating value for shareholders, customers, employees and society. We are value-oriented and have clear goals.
- Our management culture is also strong. Ping An emphasizes teamwork and crisis awareness. Our comprehensive finance approach requires strong teamwork, while the crisis consciousness in our cultural DNA constantly promotes enterprise innovation.
In my 20 years working at Ping An, I have been engaged in product development, annual report-related evaluations, planning and operation management and the like. At present, I am in charge of the Life Insurance Product Department, which has various teams: market research, marketing, operations, online to offline (O2O), product actuarial, actuarial valuation and so on.
What impresses me the most about Ping An is its forward-looking strategic thinking, unique corporate culture, strong execution ability and cutting-edge business philosophy. Ping An culture emphasizes that our sole responsibility at work is our performance, and interpersonal relationships are relatively simple. As long as one has the courage to strive and dares to go outside the box, Ping An can provide a limitless space for career development.
In terms of actuarial management, I believe it is necessary to do a good job in the top-level design of actuarial team management. Ping An’s Actuarial Talent Method has been in place since 2000 and has gone through many revisions, which has kept the actuarial team at Ping An relatively competitive, stable and professional. At the same time, it is also necessary to maintain rotation arrangements for actuaries. The professional skill requirements of each position are different. Only through continuous rotation arrangements can actuaries develop comprehensive actuarial skills and become independent talents.
Ping An is in the midst of an industry-focused life insurance reform aimed at the world’s leading life insurance companies, with channels, products and technology as the focus. What can you tell us about life insurance reform?
After more than 30 years of rapid development, China’s life insurance market has become one of the largest insurance markets in the world. The market environment, consumer demand and competition all have changed significantly. To adapt to the development of the new era—and maintain and enhance the sustainable competitive advantage of Ping An Life Insurance—Ping An launched this reform.
The reform of life insurance will be upgraded synchronously from the aspects of business philosophy, organization, management, system and the like, so as to strengthen the company’s comprehensive data-oriented management ability. We will exploit the “channel + product” dual wheel and drive science and technology to:
- Strengthen a long-term, sustainable and stable growth platform in the future.
- Create new digital life insurance models.
- Achieve “prophet, foresight, pioneering” management.
- Achieve our destiny as “the world’s leading life insurance company.”
Cultivate Talents and Embrace Technology
Ping An is like the Huangpu Military Academy for China’s insurance industry—it attaches great importance to actuarial talents and introduced the actuarial examination reward and vacation systems 20 years ago. Please discuss Ping An’s strategy for cultivating actuarial talent. What characteristics should excellent actuaries have?
Ping An always has attached great importance to actuarial work and has signed on many international actuaries to spearhead its actuarial work. Furthermore, to establish a world-class, cutting-edge international actuarial vanguard, as early as 2000 Ping An began to set up its special “Actuarial Talent Management Method,” providing the actuarial personnel with actuarial examination, paid expenses, actuarial rank evaluations, actuarial allowances, job rotations and support, and a series of internal and external training events.
With regard to personnel training, Ping An views the arrangement of rotations as very important. A junior actuary starts with basic work, stays in basic positions for two to three years and then rotates among different job positions—not only within departments, but also between departments and even across different specialties and companies. Through such a deep rotation, actuaries can develop comprehensive and professional actuarial skills. Moreover, in terms of promotions within technical ranks, Class B and Class A promotions are closely controlled—on the basis of not only passing exams, actuarial rotations and vocational skills, but also with requirements for managerial ability. In addition, the company also actively encourages its top actuaries to rotate to nonactuarial positions (such as in the planning and marketing departments) to broaden the scope of actuarial thinking.
In terms of talent promotion, the company will comprehensively consider actuarial personnel’s years of service, actuarial examination scores, job rotations, performance assessment results over the years and the like, while also providing a fast-track promotion channel for employees with excellent performance and great contributions.
Excellent actuaries should first have good professional ethics, rigorous work attitudes and strong curiosity. Second, they should have excellent actuarial skills and a profound understanding of business environments to bridge the gap between actuarial technical knowledge and practical business management, so actuarial work can truly serve real-world business development. Finally, good communication skills are required, and a good actuary must be able to explain complex technical problems in clear and simple actuarial language.
Ping An always has attached great importance to the development of insurance technology. How do you think actuarial work will change in the future in the context of technological progress? Will it be replaced by artificial intelligence (AI)?
That’s a very interesting question. The following is my understanding, which may not necessarily be correct. First of all, I believe, for the foreseeable future, robots cannot replace people—AI is not omnipotent. In the short term, AI mainly should be applied to work that is highly repetitive, structured and standardized. AI is still unable to complete complex work that is highly dependent on judgment.
In essence, actuarial work is not limited to data statistics and data analysis—these are only the most basic tasks of actuarial science. Here are a few examples of the primary work of actuarial science that AI cannot easily replicate:
- Experience analysis. Experience analysis is not a simple display of results. Rather it is the analysis of experience—trends, driving factors and expected changes—based upon recommendations that are made to management.
- Reserve valuation. The Generally Accepted Accounting Principles (GAAP) of Canada reserve, China Risk-Oriented Solvency System (C-ROSS) Phase II and the International Financial Reporting Standards 17 (IFRS-17) valuation are all principles-oriented rather than rules-oriented. In specific applications, each company will make different reserve arrangements according to real-world business operation conditions. Therefore, the formulation of specific plans and the setting of assumptions will have far-reaching effects on the company’s profits and capital requirements, which will require actuaries to give professional recommendations based upon specific conditions, including follow-up analysis—none of which can be done by AI.
- Product development. First, continuous innovations of product benefits require actuaries to carry out risk assessments and formulate relevant assumptions according to new responsibilities. Second, constant changes in regulations require actuaries to ensure new products meet new regulatory rules and make good use of them.
AI cannot easily replace any of these actuarial jobs. However, new technologies such as big data and AI provide new developmental spaces for actuarial work—for example, whether big data can be used to classify customers’ risks and thus affect product development. Experience assumptions, such as continuity rate and mortality rate, can be set according to the customer profile, team profile and so on.
I also suggest that an actuary always keeps an open mind, continues to learn, and actively embrace new technologies and developments. Taking these actions can improve the efficiency of actuarial work and allow for the exploration of new applications of actuarial science. In the future, with the rapid development of 5G, big data, cloud computing, AI, blockchain and other new technologies, I believe the actuarial profession will surely usher in its own new developmental spaces.
Meeting Pandemic Challenges
As COVID-19 continues to ravage the world, the foreign insurance industry is eager to learn from China’s experience in dealing with it. In what ways do you think the pandemic will have a major impact on the future development of the insurance industry?
The pandemic of COVID-19 is quite sudden, but judging from the current situation, its control in China is relatively good. At the international level, there is no obvious trend in reducing it. The number of infected people and deaths worldwide is quite large.
COVID-19 has brought difficulties and challenges to many industries, including insurance. The current number of insurance claims in China is controllable for the insurance industry, with the pandemic under the management of the government. However, COVID-19 has had a great impact overseas, and some insurance types, such as business interruption insurance and medical insurance, have large amounts of claims.
On the whole, the pandemic has affected the insurance industry in two ways. On the one hand, it is a wake-up call to the insurance industry, signaling that we should pay more attention to the risk management of such extreme “black swan” events and that we cannot take such extreme events lightly. On the other hand, the pandemic has a certain negative impact on both ends of insurance companies’ balance sheets. However, the economic and financial volatility caused by the pandemic is greater on the asset side, while the liability side has a tolerable risk due to strong pandemic prevention and control measures in China.
For the insurance industry at present, offline sales are hindered, and several companies in the industry have been affected to a certain degree. During the pandemic period, sales teams were unable to conduct their business offline, which affected insurance sales. Ping An was impacted to some extent with regard to the growth of new business. However, there are some positive aspects. For example, online sales business is becoming more and more common, which presents a great opportunity to accelerate the transformation of online business. In particular, high penetration of the internet in China has set up a good platform for insurance sales. Now many companies are promoting the development of online business and have made advancements.
In addition, the pandemic is also a good lesson on the benefits of insurance, and the public has a deeper and more specific understanding of the uncertainty of risks. It will further stimulate demand for insurance products, such as life insurance, critical illness insurance and medical expense insurance, which also will be more conducive to people’s purchasing decisions. Therefore, in the long run, the pandemic has had a certain promotional effect on the development of life insurance.
The insurance industry should focus on the opportunity presented by the crisis. It should grasp the developmental opportunity; accelerate layout and application of insurance technology; focus on product development, online and offline integration, ecological construction and other aspects; and truly turn the crisis into an opportunity.
You mentioned the transformation and promotion of online business. Do you think life insurance distribution channels in China will be affected by COVID-19? Is there going to be a disruptive change?
The rise of Internet-based insurance companies has had an impact on sales models. The creation of new sales models has been ceaseless over the past few years. COVID-19 forced sales teams to turn their attention to the internet. The agents are at home and have no way to meet customers in person. They are all communicating with customers, adding staff and selling insurance online. The pandemic has resulted in rapid advances in the online transformation of the mindsets of sales teams—from passive acceptance to active adoption—which will have a profound impact on future insurance sales models in China. However, I believe the evolution of this sales model will not be achieved overnight, but rather it will be a gradual process. The combination of online and offline agents will become a new model for the insurance sales industry. At Ping An, I expect online recruitment and insurance sales business will become the norm and a pattern that is acceptable to teams.
What do you think the life insurance industry should do about the potential long-term downward trend in interest rates and profit pressures across the industry?
The low interest rate environment has a great impact on the insurance industry, and it is divided into several modes. One is V-shaped, where interest rates hit bottom and rebound—this is controllable for the insurance industry. The worry is the L-shaped, where interest rates fall and there is no turning back. This has a far-reaching impact on the industry, as Ping An has learned.
The high-interest policy sold before June of 1999 brought a long-term interest margin impact to Ping An under the L-shaped interest rate decline trend, so the company has been paying close attention to the interest rate risk. We noticed the international interest rate is in a downward trend. Although the domestic interest rate has declined somewhat, it is still within a controllable range. The insurance industry needs to think in advance about business management, avoiding negative interest margin, performing asset liability management and reducing dependency on interest spread in the profit source.
In addition to assets and liabilities matching, the management at the entrance of liabilities should be done. This includes:
- Strict product access, which is the requirement of a break-even interest rate and is introduced into the access index of product development. Different upper limit requirements of break-even interest rate are given to products with different durations—the longer the duration, the lower the upper limit.
- For insurance that requires higher investment returns, the guaranteed interest rate should be reduced, the duration of the product should be shortened, and the degree and length of interest risk exposure should be reduced.
- Balanced management of business structures on the whole. Examples include the balance between the protection and savings product structures, balance between the traditional and participating and universal life structures, and balance between long and short duration.
- Doing a good job in the forecast management of interest rate evaluation.
Seize the Opportunity and Keep Pace With the Times
What do you think should be improved in actuarial education? How should the industry and academia interact?
In recent years, the international financial market has been in a state of constant change, and international and domestic regulatory rules are constantly innovating. New regulations such as CGAAP reserve, C-ROSS Phase II and IFRS 17 require rapid development and changes in actuarial practice. The rise of big data, AI and the internet has also brought new spaces for innovation in actuarial practice.
In light of the new situation in the industry, actuarial education can help improve the profession. Actuaries should take advantage of findings from academic research, actively participate in the research of new practices and topics related to the industry, keep pace with the times and help cultivate new actuarial talents who understand technology and rules.
Actuarial education is an applied discipline that needs to combine theory and practice. Actuarial education can be strengthened in these areas:
- Regulations—especially actuarial regulations—and education and training in the application background.
- Practical content education, such as reserve valuation, solvency management and product development based on China’s regulatory requirements.
- Education on the status quo and developmental history of domestic insurance products.
- Ability to apply actuarial software and programming language.
China’s insurance industry has made remarkable achievements in recent years. However, from the perspective of insurance density and penetration, China’s insurance market still has room for development. Compared with other developed countries around the world, China’s insurance industry has a relatively short history, less exposure risk and less accumulated experience. The academic community has unique advantages in research, so it can study more insurance experience in developed international markets and foreign advanced management experience and management technology. Studying the risks and problems exposed in foreign insurance markets can serve as a warning for China’s insurance industry, and it can help China’s insurance industry to grow rapidly.
At the same time, the industry also can actively cooperate with academia to jointly study the problems and challenges in the current insurance business, give play to their respective advantages and jointly promote the development of China’s insurance industry. Strengthening the interaction and communication between the industry and the academic circle, and encouraging company managers to introduce the business to universities, is key. It creates opportunities for college professors to work in insurance companies and promotes and encourages students majoring in insurance to participate in internships at insurance companies.
You are the first China Committee Chair to serve a two-year term. What are your plans and goals for your tenure?
It is a great honor to be elected as the chair of the SOA’s China Committee for this period. During my term, I hope to:
- Continue to popularize actuarial vocational education in China under the leadership of SOA headquarters and provide services for students and SOA members in China.
- Actively cooperate with the China Association of Actuaries to jointly promote the development and growth of the actuarial profession in China and enhance its influence.
- Actively cooperate with Chinese colleges and universities to popularize actuarial education.
- Encourage the SOA to continuously strengthen its resources in China, actively introduce international advanced actuarial practice experience and improve the level of actuarial practice management in China.
- In terms of education and research, the SOA China Annual Conference will enhance communication among members. In addition, the association will continue to organize seminars so experts in various industries can share their experiences and provide members with a platform for learning about industry development trends, actuarial career planning, honing professional skills and other aspects.
What message do you have for all SOA China members and students?
China’s insurance industry is rapidly developing. It is an opportunity given to us by the times to be ready to join or be able to fight in this industry. We should firmly grasp this opportunity, constantly keep pace with the times, break limitations, enrich skills, actively face challenges, embrace change and make contributions to the development of the actuarial profession, insurance industry and China’s economy.
Copyright © 2020 by the Society of Actuaries, Schaumburg, Illinois.