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“One of the key measurements of a good insurance company is ‘persistency,’ whether people continue to pay the premiums year after year. At AIA , we had 90% persistency rate, which is even higher than most Hong Kong companies.”
If any company has been at the eye of the storm during the global financial crisis, AIA would be it. The 92-year-old company founded in Shanghai has been indelibly linked to AIG, its parent company, whose bail-out by the US government to the tune of USD 182 billion gave a whole new meaning to the expression state-owned enterprises.
With its too-big-to-fail mother company on its knees, AIA tried on a new identity by spinning itself off as an independent concern. Though courtship by British-based Prudential failed, the company’s IPO on the Hong Kong stock market in October of 2010 saved the day, raising more than USD 17.9 billion on the first day of trading.
With AIG still holding a 33% stake in the company, AIA is still working to carve out an independent Asian identity as the largest publicly-listed pan-Asian life insurance group in the world.
CIB sat down with AIA China’s CEO John Cai to discuss how the company has fared lately, and to learn more about his tenacious climb up the corporate ladder.
How did you get into the insurance business?
EMy father was an engineer in Shandong, and I followed in his footsteps and went to Xi’an Jiaotong University to study engineering, but my interest had always been in business. I graduated in 1989 which was a tough year to graduate; there were no jobs, no opportunities. I worked for a short period as an assistant engineer in the household appliance division of Haier in Qingdao. But when the opportunity came to visit the U.S. in 1991, I took it.
What was it like arriving in U.S. for the first time?
EIt was like facing reality. I landed in New York City and at the time, I didn’t speak much English. I needed to make money right away so I worked as a busboy and waiter for an American restaurant in midtown in the evenings and looked for a day job. I lived near Morningside Heights in New York City, so when I wasn’t job-hunting, I snuck into finance classes at Columbia University. After eights months of this, my English had improved from busboy English into something more comprehensible. When I saw a ‘management trainee’ opportunity at an insurance company advertised in the classifieds, I immediately answered. I had always wanted to become a manager and Lee Iaccocca was my hero.
Tell us about this job.
EThe job was a sales job with Equitable Life. My duty was to sell life insurance to the Chinatown residents of New York City. My manager was also an immigrant from China – from Guangzhou. He showed me his paycheck – he was making USD 100,000 a year. That was more money than I had ever seen so I thought: okay, if he can do it, I can do it. But the first three months were terrible. I almost gave up.
What made it so difficult?
EI was selling insurance door-to-door to Chinese residents in Chinatown. They all spoke Cantonese and I couldn’t speak it. Also, all the networking associations that I could tap into were Cantonese-speaking. I couldn’t make any sales at all and I thought about going back to the restaurant to wash dishes again. But my manager suggested, “Why don’t you try cold-calling?” So right away, I got the most recent phone book for Manhattan and started dialing. I tried the people with last name Cai first. I figured that if they had the same last name as mine they might think I was ‘family.’ After a while, I also could tell by the way that the name was spelled whether they were Taiwanese or from the Chinese mainland. And suddenly, I started making progress.
People have a bad image of insurance salesmen. How did you overcome this?
ESales is less technique and more mental. At the beginning it was very difficult. But eventually I figured that for every 100 calls I could make, I could get about 3-5 appointments. With the three to five appointments, I could close one sale. Yes, that meant 95% of people I called declined, or gave me ‘objections,’ but at the end of the day, it’s a simple number’s game. Out of 100 calls, I could get 3-5 people to come into the office to take a meeting. And out of those 3-5 people, one would buy life insurance, and for every life insurance policy sold, I made USD 1,000. So instead of looking at the 95 calls, or ‘objections’ in a negative way, I thought every single call was helping me make USD 10. Once I changed my mental perspective, it became easy. I also realized that the faster I could get the call finished, the better my output was. On a given night I could make 50 phone calls, so that meant I could make USD 500 dollars a night.
How did you make the transition from sales to manager?
EI made USD 40,000 in the first eight months at Equitable Life. It was the first time in my life I had made so much money. Of the new agents, I was one of the top performers. So when the company offered me a manager position to develop the Asian consumer market in 1993 in Monterey Park, California, I jumped at the chance. I landed in Los Angeles to manage a team of 15 Chinese agents. I stayed in that office for seven years and grew the branch to 100 people.
The big transition for me came in 1998 when many of the insurance companies made a major switch in strategy. AXA entered financial planning. That meant we were going from a commission-based sales unit to fee-based financial planning services, charging our clients anywhere from USD 600 to 10,000. We were selling insurance, mutual funds and bank deposits, and we were also offering tax planning, 401K and IRA planning. It was a very tough transition for the Asian agents and clients. As you know, Asians do not like to talk about how much money they make; many of them stuff money ‘under the mattress’ and they certainly weren’t used to paying fees. Yet, I managed to get 60-70% agents to pass the licensing exams and get certified as financial planners.
How did you make the move from California to China?
EIn 2002, the AXA CEO asked me whether I wanted to go back to Asia. I was very excited because this had always been my dream. When I arrived in Hong Kong in 2002, again the morale was very bad. A lot of companies were poaching our agents; we had just lost a third of our agents to other companies who were offering 200 to 300 times our bonus. There was no way we could fight again that. And of course, I was in Hong Kong, which was also all Cantonese – it was deja-vu of my first year at Equitable Life in Chinatown.
How did you fare in Hong Kong?
EBy 2007, I had become CEO for AXA Hong Kong, and at this point, I met the biggest challenge in my career. We were facing acquisition of two companies, MLC and Winterthur. Acquisition is easy; integration is difficult. It was 18-months of integration and it was a very tough time. We had to be cost-efficient, yet retain key staff and do customer relations.
So why did you move to AIA?
EShortly thereafter, new management came in at AXA and I decided that it was a good time for me to leave. When AIA came to me, I had already been looking for a platform to return to the Chinese mainland, and the best platform I knew was AIA, the most successful foreign-owned insurance company in China with the longest history, founded in 1919.
You moved in 2009, after AIG had been bailed out by the U.S. government.
EI moved in July 1st of 2009, and when I joined AIA, our company had already announced our IPO. For AIA, our 100% focus was on Asia, which is the fastest growing region in the world. When I was in Hong Kong, my impression of the Chinese mainland market was that it was under-developed and not as professional. But I was immediately impressed by what I saw with the people at AIA. The quality of people, the professionalism of the agency-staff, the hunger for knowledge – it was all here.
One of the key measurements of a good insurance company is ‘persistency,’ whether people continue to pay the premiums year after year. At AIA , we had 90% persistency rate, which is even higher than most Hong Kong companies. Also our employees’ regulatory knowledge of the Chinese mainland was impressive.
I spent the first three months in Shanghai talking to people and talking to competitors and our agencies to come up with a strategy which we called, ‘Fast-Forward Strategy’. It’s a strategy for five years with clear goals. AIA had always set the benchmark for China, and we wanted to return to being the forerunner, and setting that benchmark again. We were the first ones to introduce the agency system in China in 1992, which completely transformed the way insurance was sold in China. Until then, people came to the insurance company to buy insurance and there was no outreach.
The trend in insurance in China has been very aggressive growth, focused on sales and volume, and not looking at the bottom line. The five-year strategy was formulated to get the company back on a sustainable path that is about risk-management and value-centered.
Can you talk about the Prudential acquisition?
EI have to say that we were all very surprised when the Prudential acquisition was announced. We had all been working towards the IPO [for AIA] in Hong Kong.
Did you lose a lot of staff during this period?
ENo. Our turn-over for the staff was less than 10%, which is very low in China. Our business increased significantly, despite the global financial crisis. We made a public announcement to all our customers who had surrendered their policies that we would reinstall their life insurance plans without the mandatory check-up. The response to that offer has been tremendous. In terms of life insurance, we are now back to our pre-crisis level of persistency, which is over 90%.
Can you talk about some of the products that AIA is selling in China?
EWe have three major products: life insurance, which constitutes 80% of our sales; accidental and health coverage, which is about 15%; and group insurance, which is about 5% of our business. We’re operating as a WOFE (wholely-owned foreign enterprise), and our geographical presence is limited to certain regions, namely Shanghai, Beijing, Guangzhou, Shenzhen, and Jiangsu Province.We currently have over 2,000 employees and 20,000 agents.
That’s a lot of agents. How does this number compare to other companies?
EActually, that’s not a high number. In China, there are about 3 million agents. That’s a huge growth from 10 years ago, when there were none. But when you have a quick growth like that, then the quality of the agents is uneven, and sometimes you’re sacrificing quality for quantity. So in turn, the status of agents in this society has become lower and lower and we want to change that, which is why we launched the Agency 2.0 program to change the compensation structure to reward productivity, service quality, and of course, results.
Who are your top competitors?
The biggest companies are China Life, Ping An, and CPIC which are the top three insurers in China.
What are some of the biggest challenges to working in China?
EIn China, there are too many temptations and opportunities to make a profit, unlike in other developed markets where opportunities are few and far in between, so the key is to stay focused and focus on 100% results.
The other major challenge is the speed of development here. We always ask ourselves: how can we transform ourselves and respond quickly to the market? It’s taken China 10-15 years to what it took the US 40-50 years to do. In the US, there is a US-centric focus, and the same might be said for the UK and other European markets, but in China, the best international practices are brought here by companies from different countries, so a company needs to be nimble and responsible to adapt to the changing market.
If any company has been at the eye of the storm during the global financial crisis, AIA would be it. The 92-year-old company founded in Shanghai has been indelibly linked to AIG, its parent company, whose bail-out by the US government to the tune of USD 182 billion gave a whole new meaning to the expression state-owned enterprises.
With its too-big-to-fail mother company on its knees, AIA tried on a new identity by spinning itself off as an independent concern. Though courtship by British-based Prudential failed, the company’s IPO on the Hong Kong stock market in October of 2010 saved the day, raising more than USD 17.9 billion on the first day of trading.
With AIG still holding a 33% stake in the company, AIA is still working to carve out an independent Asian identity as the largest publicly-listed pan-Asian life insurance group in the world.
CIB sat down with AIA China’s CEO John Cai to discuss how the company has fared lately, and to learn more about his tenacious climb up the corporate ladder.
How did you get into the insurance business?
EMy father was an engineer in Shandong, and I followed in his footsteps and went to Xi’an Jiaotong University to study engineering, but my interest had always been in business. I graduated in 1989 which was a tough year to graduate; there were no jobs, no opportunities. I worked for a short period as an assistant engineer in the household appliance division of Haier in Qingdao. But when the opportunity came to visit the U.S. in 1991, I took it.
What was it like arriving in U.S. for the first time?
EIt was like facing reality. I landed in New York City and at the time, I didn’t speak much English. I needed to make money right away so I worked as a busboy and waiter for an American restaurant in midtown in the evenings and looked for a day job. I lived near Morningside Heights in New York City, so when I wasn’t job-hunting, I snuck into finance classes at Columbia University. After eights months of this, my English had improved from busboy English into something more comprehensible. When I saw a ‘management trainee’ opportunity at an insurance company advertised in the classifieds, I immediately answered. I had always wanted to become a manager and Lee Iaccocca was my hero.
Tell us about this job.
EThe job was a sales job with Equitable Life. My duty was to sell life insurance to the Chinatown residents of New York City. My manager was also an immigrant from China – from Guangzhou. He showed me his paycheck – he was making USD 100,000 a year. That was more money than I had ever seen so I thought: okay, if he can do it, I can do it. But the first three months were terrible. I almost gave up.
What made it so difficult?
EI was selling insurance door-to-door to Chinese residents in Chinatown. They all spoke Cantonese and I couldn’t speak it. Also, all the networking associations that I could tap into were Cantonese-speaking. I couldn’t make any sales at all and I thought about going back to the restaurant to wash dishes again. But my manager suggested, “Why don’t you try cold-calling?” So right away, I got the most recent phone book for Manhattan and started dialing. I tried the people with last name Cai first. I figured that if they had the same last name as mine they might think I was ‘family.’ After a while, I also could tell by the way that the name was spelled whether they were Taiwanese or from the Chinese mainland. And suddenly, I started making progress.
People have a bad image of insurance salesmen. How did you overcome this?
ESales is less technique and more mental. At the beginning it was very difficult. But eventually I figured that for every 100 calls I could make, I could get about 3-5 appointments. With the three to five appointments, I could close one sale. Yes, that meant 95% of people I called declined, or gave me ‘objections,’ but at the end of the day, it’s a simple number’s game. Out of 100 calls, I could get 3-5 people to come into the office to take a meeting. And out of those 3-5 people, one would buy life insurance, and for every life insurance policy sold, I made USD 1,000. So instead of looking at the 95 calls, or ‘objections’ in a negative way, I thought every single call was helping me make USD 10. Once I changed my mental perspective, it became easy. I also realized that the faster I could get the call finished, the better my output was. On a given night I could make 50 phone calls, so that meant I could make USD 500 dollars a night.
How did you make the transition from sales to manager?
EI made USD 40,000 in the first eight months at Equitable Life. It was the first time in my life I had made so much money. Of the new agents, I was one of the top performers. So when the company offered me a manager position to develop the Asian consumer market in 1993 in Monterey Park, California, I jumped at the chance. I landed in Los Angeles to manage a team of 15 Chinese agents. I stayed in that office for seven years and grew the branch to 100 people.
The big transition for me came in 1998 when many of the insurance companies made a major switch in strategy. AXA entered financial planning. That meant we were going from a commission-based sales unit to fee-based financial planning services, charging our clients anywhere from USD 600 to 10,000. We were selling insurance, mutual funds and bank deposits, and we were also offering tax planning, 401K and IRA planning. It was a very tough transition for the Asian agents and clients. As you know, Asians do not like to talk about how much money they make; many of them stuff money ‘under the mattress’ and they certainly weren’t used to paying fees. Yet, I managed to get 60-70% agents to pass the licensing exams and get certified as financial planners.
How did you make the move from California to China?
EIn 2002, the AXA CEO asked me whether I wanted to go back to Asia. I was very excited because this had always been my dream. When I arrived in Hong Kong in 2002, again the morale was very bad. A lot of companies were poaching our agents; we had just lost a third of our agents to other companies who were offering 200 to 300 times our bonus. There was no way we could fight again that. And of course, I was in Hong Kong, which was also all Cantonese – it was deja-vu of my first year at Equitable Life in Chinatown.
How did you fare in Hong Kong?
EBy 2007, I had become CEO for AXA Hong Kong, and at this point, I met the biggest challenge in my career. We were facing acquisition of two companies, MLC and Winterthur. Acquisition is easy; integration is difficult. It was 18-months of integration and it was a very tough time. We had to be cost-efficient, yet retain key staff and do customer relations.
So why did you move to AIA?
EShortly thereafter, new management came in at AXA and I decided that it was a good time for me to leave. When AIA came to me, I had already been looking for a platform to return to the Chinese mainland, and the best platform I knew was AIA, the most successful foreign-owned insurance company in China with the longest history, founded in 1919.
You moved in 2009, after AIG had been bailed out by the U.S. government.
EI moved in July 1st of 2009, and when I joined AIA, our company had already announced our IPO. For AIA, our 100% focus was on Asia, which is the fastest growing region in the world. When I was in Hong Kong, my impression of the Chinese mainland market was that it was under-developed and not as professional. But I was immediately impressed by what I saw with the people at AIA. The quality of people, the professionalism of the agency-staff, the hunger for knowledge – it was all here.
One of the key measurements of a good insurance company is ‘persistency,’ whether people continue to pay the premiums year after year. At AIA , we had 90% persistency rate, which is even higher than most Hong Kong companies. Also our employees’ regulatory knowledge of the Chinese mainland was impressive.
I spent the first three months in Shanghai talking to people and talking to competitors and our agencies to come up with a strategy which we called, ‘Fast-Forward Strategy’. It’s a strategy for five years with clear goals. AIA had always set the benchmark for China, and we wanted to return to being the forerunner, and setting that benchmark again. We were the first ones to introduce the agency system in China in 1992, which completely transformed the way insurance was sold in China. Until then, people came to the insurance company to buy insurance and there was no outreach.
The trend in insurance in China has been very aggressive growth, focused on sales and volume, and not looking at the bottom line. The five-year strategy was formulated to get the company back on a sustainable path that is about risk-management and value-centered.
Can you talk about the Prudential acquisition?
EI have to say that we were all very surprised when the Prudential acquisition was announced. We had all been working towards the IPO [for AIA] in Hong Kong.
Did you lose a lot of staff during this period?
ENo. Our turn-over for the staff was less than 10%, which is very low in China. Our business increased significantly, despite the global financial crisis. We made a public announcement to all our customers who had surrendered their policies that we would reinstall their life insurance plans without the mandatory check-up. The response to that offer has been tremendous. In terms of life insurance, we are now back to our pre-crisis level of persistency, which is over 90%.
Can you talk about some of the products that AIA is selling in China?
EWe have three major products: life insurance, which constitutes 80% of our sales; accidental and health coverage, which is about 15%; and group insurance, which is about 5% of our business. We’re operating as a WOFE (wholely-owned foreign enterprise), and our geographical presence is limited to certain regions, namely Shanghai, Beijing, Guangzhou, Shenzhen, and Jiangsu Province.We currently have over 2,000 employees and 20,000 agents.
That’s a lot of agents. How does this number compare to other companies?
EActually, that’s not a high number. In China, there are about 3 million agents. That’s a huge growth from 10 years ago, when there were none. But when you have a quick growth like that, then the quality of the agents is uneven, and sometimes you’re sacrificing quality for quantity. So in turn, the status of agents in this society has become lower and lower and we want to change that, which is why we launched the Agency 2.0 program to change the compensation structure to reward productivity, service quality, and of course, results.
Who are your top competitors?
The biggest companies are China Life, Ping An, and CPIC which are the top three insurers in China.
What are some of the biggest challenges to working in China?
EIn China, there are too many temptations and opportunities to make a profit, unlike in other developed markets where opportunities are few and far in between, so the key is to stay focused and focus on 100% results.
The other major challenge is the speed of development here. We always ask ourselves: how can we transform ourselves and respond quickly to the market? It’s taken China 10-15 years to what it took the US 40-50 years to do. In the US, there is a US-centric focus, and the same might be said for the UK and other European markets, but in China, the best international practices are brought here by companies from different countries, so a company needs to be nimble and responsible to adapt to the changing market.