From dollars to doctors: Ping An's unique strategy
How the Chinese financial behemoth is disrupting healthcare
Welcome! This week we explore a Chinese giant’s unique approach to healthcare. If you are new here and are looking for recommendations, you’ll like this article on Edtech and this one on Social Commerce. Cheers!
Jack Ma founded Alibaba, now ~$730 Bn .
Pony Ma founded Tencent, now at ~$580 Bn.
Ma Minghze founded Ping An, now at ~$200 Bn.
Ping An is perhaps the biggest chinese Tech company you would never have heard of. And now, it is making even more waves than ever.
Ping An was set up in 1988, backed by Goldman Sachs and Morgan Stanley. Ma balanced the influences of East and West culture, by bringing in insurance executives from Taiwan and Hong Kong and creating a firm modeled after West. It became the first public insurance company in China in 2004. The Chinese market was opening to foreign trade and Ping An also started focusing on international offerings. That did not work out well however, and instead, it refocused heavily on domestic markets, first offering property insurance, then diversifying into life insurance and then even further. Since then, it has grown to be a $200 Bn company.
However, insurance is just one of Ping An's businesses.
Lufax, a Ping An company, focused on offering wealth management services is a $39 Bn business.
OneConnect, Ping An's cloud solution platform for finance companies, is a $7.5 Bn business.
If you think financial products is all Ping An does, you are wrong. Ping An has a much larger vision.
Finance, for all its history, is just another pillar for Ping An. Ping An wants to become not just the biggest financial company, it wants to become the biggest healthcare company as well. And the biggest auto services and real estate services player as well.
Let's deepdive in the health ecosystem part.
Until early 2000s, India and China were trending along the same health expenditure as a % of GDP.
Since then however, China forked its way and started investing heavily in healthcare. It ramped up primary health care, made medicines accessible to all by removing mark-ups on them and also invested in social health insurance schemes (coverage of 95% by 2017). During this time, Ping An rose to be among the top 3 health insurance players in the country. Along with this growth, the Chinese economy was also adopting new trends of mobile payments. And a new opportunity started opening up in the health space. Ping An decided to uniquely backward integrate its health insurance business.
Ping An Good Doctor (PAGD) was launched in 2014 with the vision of being a one-stop shop for everything health.
What does PAGD do?
Chan, living in Shanghai, is facing some cough. He opens PAGD and is prompted to tell his symptoms. Based on his symptoms and available history (if any), the AI chatbot recommends some solution. Chan doesn't trust AI models (pre-GPT-3) and books a virtual appointment with a doctor. He pays using Ping An Pay. He has a video call with the doctor and the doctor prescribes the medicine.After the call, Chan visits the Health Mall of PAGD app and orders those medicines, which get delivered to his house within 2 hours. The situation does not improve a couple of days. Chan goes back to PAGD and books a physical appointment with a top hospital. The hospital has Chan's medical history available from Ping An's cloud software, diagnoses again and finds lung tumor. Chan has to undergo surgery, he gets admitted to one of PAGD's affiliate hospitals. But Chan is poor, he does not have the money to pay for the surgery. The app suggests Ping An Health Insurance plans (among other third party insurance plans) to Chan, and that's how he covers the cost. Chan goes back home, healthy and happy, preferably with health and nutrition plans from Ping An.
Source: PAGD Annual Report
It has 315 mn registered users (one-third of China), 20% of whom are monthly active. It clocked a revenue of ~$750 Mn in 2019, 52% YoY growth over 2018. Ping An Good Doctor has a network of 1000+ in-house doctors and 5000+ external doctors. In PingAn’s three traffic-oriented framework, full-time doctors provide free online consultation, steps on the pedometer convert to monetary value, and the company purchases medical licenses to run the pharma e-commerce. Then the new users or visitors are guided to seek their potential demand to the company’s four major business segments:
Online Medical Services — private doctor memberships, 1-1 consultations
Consumer Healthcare — diagnostics, vaccinations etc.
Health Mall - e-pharmacy in collaboration with 94000+ pharmacies
Health and Wellness interaction - nutrition plans
with Health Mall forming >50% of revenue.
Profits are however skewed, more towards consumer healthcare as shown below (from Annual Report).
Tencent's WeDoctor (at 215 Mn registered users) and Ali Health (~400 Mn users) are among the largest competitors to PAGD. WeDoctor has healthtech, pharma, cloud and insurance stack (in partnership with AIA) as well. Ali Health is big on e-pharmacy (through Tmall and its own platform) along with online consultations and diagnostics.
What does the Ping An story mean for India?
Indian healthcare is a ~$170 Bn market, majority of which is offline-driven.
While public expenditure paths have diverged between India and China since 2004, they still have similarities in the fragmented nature of industry. India has 69000 hospitals, China ~33000 compared to ~6100 in US. India has ~5L pharmacies compared to China ~ 4L. >70% of health expenditure is in urban areas in both countries. There have historically been limited players that offer the full-health-service-stack for the consumers (before Ping An, Alibaba, Tencent etc).
Has the similarity in industry led to a similarity in the scale of ambition back home? Yes.
Multiple players, like Practo, Care.Fit, Medlife etc offer Diagnostics, Consultations and Medicines already, and are trying to build the full-stack. However, everyone came to this point on their own path. 1mg started with medicines and then diversified into diagnostics. Practo, Docsapp started with tele-consultations and then ventured into pharma. However, no player has incorporated from the insurance layer of the stack.
This is what makes Ping An's approach so unique. For low ticket healthcare delivery, insurance is not necessary. However, as the companies also penetrate further in the ecosystem, controlling the insurance experience would also be critical. Adding the insurance layer allays consumer inhibitions about claim processing and payments, which in turn removes friction from healthcare spending.
Does this mean everyone should enter the insurance business? No, it's a regulatory ordeal and not a core competency for these players, unlike Ping An. However, these firms should be definitely looking to partner with insurance players. Like WeDoctor does with AIA.
Can Indian insurance firms replicate Ping An's strategy here?
Seems unlikely. Ping An, despite its age, thinks and functions like a technology company - fast, nimble and experimentative. Whereas Indian insurance behemoths like LIC, Bajaj are conglomerates and work at their own pace. And nimble companies like Acko, Coverfox are relatively nascent and focusing on getting the core insurance business right. However, they can definitely partner with the health
Ping An has blurred the lines between finance and healthcare with its ambition. More importantly, it has underlined the importance of building a truly holistic, consumer centric ecosystem, a lesson that even Indian players can imbibe.
P.S. Ping An's financial and auto/real estate businesses will be covered in a separate article
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