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Dead Wrong: AIA and Ping An’s Life Insurance Duel for China


The narrative of AIA and Ping An is one familiar to Western brands that enter China - with many fallen prey to the pitfalls of misaligned cultural values. AIA had not fully weighed the taboo of death when it entered the Chinese market and faced significant challenges when selling insurance - stymieing its growth and providing the perfect opportunity for China’s now largest life insurer to seize the market.

As the coronavirus saps the strength of many Western life insurance companies across the globe, China’s largest provider of life insurance, Ping An, has just been named the most valuable insurance brand in the world for the fourth year running. The company has a two-hundred and twenty billion dollar market capitalization, almost twice as much as its most important foreign rival in China, AIA. Ping An is the fourth largest private firm in China by market capitalization and is consistently included in MSCI indexes, benchmark composites that track a portfolio of regionally significant companies as a key indicator of regional growth.

Most surprising is how Ping An came to occupy this central market position. This is the story of Ping An besting its American rival, AIA, to become one of the world’s most important insurers – all the while pretending not to sell insurance. It is the story of two companies, two cultures, two business models, but one winner. 

AIA is older than Ping An, founded by an American entrepreneur, Cornelius Vander Starr, in Shanghai in 1919. Despite originally being known as the American Asiatic Underwriters, China was in the company’s DNA. Due to regional instabilities during that period in China, the company fled twice for New York, once in 1939, and once more permanently in 1949. 

Even after moving its headquarters to New York, the company always kept an eye fixed on China, waiting for the opportune moment to re-enter its home market. By the 1990’s, AIA answered the siren call of China’s booming economy and reestablished a beachhead in Shanghai to begin selling life insurance in Deng Xiaoping’s China.

Despite its Chinese roots, AIA’s understanding of Chinese values had atrophied over the decades. Once returned to China, the company decided against localizing its insurance products and instead chose to market its products much as it did in the US. The company promoted its life insurance products as risk management tools, highlighting the dangers of accidental death and how life insurance could mitigate the financial risks associated with it. In America, this argument made sense – risk management is the bread and butter of life insurance and discussing risk management goes hand in hand with discussing the possibility of death. But in China, discussing death, particularly unexpected death, is taboo. Throughout the history of China, discussion of sudden death was verboten. Fast forward to today and many Chinese highrises still omit the fourth floor from signs and elevators as the pronunciation for ‘4’ is a homophone for “death” in Mandarin.

Managers at AIA’s Shanghai offices reasoned that risk management is what they, as insurers, do best. Despite the taboo, AIA plowed ahead with its sales strategy and encouraged its sales staff to pitch insurance as a tool to mitigate the financial risk for relatives should the customer pass away suddenly. Even if it meant violating a local taboo, AIA managers recognized that their comparative advantage (and profitability) lay in calculating risks. After all, the best way to sell insurance is to simply sell insurance.

Insurance or investment?

Ping An and other local insurers adopted a decidedly different approach. Ping An avoided talking about death and chose to market their insurance products as investment products rather than risk management tools. When Ping An began selling life insurance in Shanghai in 1994, it did not have a single actuary or trained underwriter. The first policies that the company launched were focused on savings as opposed to risk management. One of these products, yanglaoxian, offered an endowment or annuity plan intended as retirement products for parents while a child-endowment product offered parents a way to save for their prized singletons in a society defined by the One Child Policy.

This culminated in a ballooning insurance market between 1996-97. Cheris Shun-ching Chan, a sociologist at Hong Kong University, documented this growth while studying the insurance market in Shanghai, noting that income from life insurance premiums grew 57.3% in 1996 and 98.5% in 1997, with much of this growth inhaled by Ping An. Between 1994 and 1996, Ping An’s market share grew from 0% to 25% and, from 1998 to 2001, the company’s life insurance business in Shanghai grew annually at a rate of 47%.

By 2001, Ping An dominated the market, claiming nearly half of all annual industry revenues. Before 1996, the concept of life insurance was foreign in Chinese society, but it was Ping An that single handedly turned the word baoxian (insurance) into a quotidian concept discussed by Shanghainese at every social level.

Despite impressive numbers, Ping An still struggled to turn a profit. The company was an early practitioner of the Silicon Valley model of growth – before the model even existed. Just as Netflix started offering DVD-by-mail services at a loss to hook customers before switching profit models, Ping An set up shop as an insurance company whose initial growth was fueled by an entirely different product that was popular and cheap, though ultimately not remunerative for the company.

Ping An’s growth posed a challenge for AIA’s Shanghai team. Stunned by their shrinking market share among Ping An’s rapid growth, AIA felt responsible to defend its sales model and pointed out that Ping An was not profitable. While AIA’s leadership insisted that they would prefer profits over growth, they also acknowledged that they had failed to educate local consumers on the importance of life insurance in an approach adapted to the local market.

Ping An’s days on easy street were numbered. By 1999, Chinese insurance regulators began restricting many, though not all, of Ping An’s savings-oriented products. By 2002, Ping An was increasingly driven to sell risk management products similar to those that AIA had been offering. As it transitioned to more traditional life-insurance products, Ping An’s annual profit growth slowed to a trickle at just 1.26% between 2002 and 2004. The company’s market share fell from 46.5% in 2001 to 30% in 2004 while the annual growth rate of China’s insurance market slowed from 52% to 20% in 2003. By 2004, the market’s growth turned negative.

Ever since, Ping An has become more akin to a traditional insurance company. While Ping An and other Chinese insurers do still dabble in the sale of investment products, they are primarily focused on risk management products.

Market share or profits?

The competition between Ping An and AIA calls into question an argument at the core of business everywhere: ‘which is more important – market share or profitability?’ While Ping An became one of the most influential insurers in the world, it was their initial focus on growth over profits – and their shareholders’ long term vision – that allowed them to do so.

In the end, even AIA has indirectly admitted that it has much to learn from Ping An. AIA has suffered from lagging sales for years and, in September 2019, the company reported its smallest quarterly increase in new business ever seen. Their solution: turn to Ping An. Offering a three-year package valued at 7 million dollars, AIA poached Ping An’s CEO, hoping to get their hands on a sample of their competitor’s secret sauce.

The story of AIA and Ping An is representative of the struggle that most Western brands face when approaching the China market: misalignment of cultural values. To succeed, businesses must familiarize themselves with Chinese values before importing their foreign growth model into the Chinese market. AIA had not fully weighed the taboo of discussions of death when it reentered China and, as a result, many AIA insurance agents faced significant challenges trying to discuss death with customers when selling insurance. While China presents a diverse spectrum of massive market opportunities, it is a sink or swim environment and Western businesses should only consider the market if they are familiar with the culture or have consulted with experts who are. Otherwise, they face a similar fate as AIA – a company that has only just begun to gain traction in the Chinese market.

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