Case Study: The Road to Corporate Innovation in the Era of Longevity

Abstract

Taikang’s decision to enter the elderly care industry stems from its years of insights into China’s demographic change and social development trends. When China is rapidly stepping onto the track of aging and ushering in the era of longevity, intuition tells me that Taikang, as a life insurance company, should make a difference and take the lead in this era.

Taikang’s decision to enter the elderly care industry stems from its years of insights into China's demographic change and social development trends. When China is rapidly stepping onto the track of aging and ushering in the era of longevity, intuition tells me that Taikang, as a life insurance company, should make a difference and take the lead in this era.

Since we decided to enter the elderly care market in 2007, we investigated the domestic elderly care market and made several attempts in this area. At the same time, we have organized delegations to visit the United States to learn the CCRC model. Later, Taikang Community was established, and the site was selected, designed, and constructed in China. After more than 10 years of research, digestion and localization, we finally make this unique elderly care model take root in China. Looking at the era of longevity from the perspective of entrepreneurs, it is our opinion that the pinch point of the era is that the longer-than-expected life expectancy will put forward higher requirements for elderly care, health and wealth management. However, society today has yet to find an ideal way to resolve this issue. From the perspective of supply and demand, society needs to provide more efficient health and elderly care services and at the same time help people accumulate and expand wealth in various periods to match the equivalent elderly care and health services. From insurance to medical care and then to general health management, Taikang has found the way to integrate insurance and medical care, which is based on its insights into the trend of the times.

This chapter will introduce the case of Taikang’s revolution in the context of the era of longevity, that is, how Taikang, inspired by the innovation and entrepreneurial spirit of the international life insurance industry, has explored and completed the “from cradle to heaven” industrial chain for seniors. Taikang sums up business principles of “innovation, compounding, chain and leverage” and ultimately comes up with the Taikang solution, which makes it a leader in global life insurance industry reform as well as the era of longevity. It is hoped that this chapter can inspire more entrepreneurs, serve as a useful reference for enterprises to innovate and embrace the new age, and lead world development in the era of longevity.

6.1 Case Background

In the process of founding and operating Taikang, I was also observing the development of the global insurance industry. The life insurance industry is a mature industry with a history of 300 years. A great number of Fortune 500 companies are from this industry. However, in recent decades, this industry has shown a decline. Its market share in the fields of pension and health insurance has been continuously taken over by fund and health insurance companies. The reason behind it, I think, is that American life insurers did not anticipate people’s increasing demands in health, retirement and wealth management and failed to grasp opportunities in the potentially huge pension and health insurance market. That’s why they missed out on becoming mainstream in the era of longevity. In view of this, the international life insurance industry has gradually combined payments with medical and elderly care resources, providing inspiration for Taikang’s revolution in elderly care.

In my opinion, the best business model should meet two conditions. First, it should be enough to change people’s way of life, and second, its innovation in technology and model should enable more people to enjoy a better life, as Henry Ford and Steve Jobs did. Business idealism and entrepreneurship make ideals come true and are an important engine to change the world. Revolution in the elderly care industry shares the same idea. To create a revolutionary business model, the introduction of the American CCRC model is only the first step. It also requires a series of independent innovations in products, sales, services and even theoretical systems to support.

Exploration of “Payment + Service” in the Life Insurance Industry

While the world is entering the era of longevity, the life insurance industry has attempted to extend the business toward elderly care based on people’s needs for longevity, health and wealth and embarked on the path of the “payment + service” model. In this process, developed markets represented by the United States, Europe, and Japan have brought new ideas to the industry. However, the integration and synergy between the main insurance business and the physical elderly care business needs further development.

American health insurance has accommodated the financing demand of medical expenses in an aging society through in-depth integration with service resources. The combination of health insurance and medical service resources is a natural result of development: the payment of health insurance depends on the health and medical conditions and guided intervention. Health insurance customers have a high demand for medical resources, requiring quality, reliable and convenient medical resources. For example, Kaiser Permanente, a pioneer in the innovation of payment + service as early as the 1930s, achieved a balance between service costs and efficient medical services through self-built hospitals and self-operated doctors. United Health used medical technology, drug management, and self-built/acquired medical centers to improve health insurance capabilities. There are many successful cases of combining health financing with medical resources, such as the acquisition of Aetna Insurance by the largest pharmacy company, CVS Health Corporation, as well as Pittsburgh Medical Center launching life insurance business by relying on existing medical resources.

Compared with the United States, the United Kingdom is older in terms of population, and the insurance industry has also explored the layout of medical and elderly care services. For example, Bupa Insurance in the United Kingdom meets the needs of insurance customers through senior services and elderly care communities and copies its experience to Spain, Australia, New Zealand and other countries through global operations. Bupa began to acquire and build its own medical service capabilities from the 1960s to the 1970s and then extended to hospitals, outpatient clinics, dentistry and other medical service institutions. Later, in line with the adjustment of the United Kingdom’s regulatory environment and policy incentives, Bupa came into the elderly care industry in the 1980s, providing home care, day care, and dynamic and comprehensive elderly care communities. Bupa currently has 130 elderly care communities in the United Kingdom with a total of 7700 nursing beds. Compared with China, the British financing mechanism for elderly care services is relatively advanced, and a mechanism has emerged with various payment methods corresponding to various elderly care service institutions.

Japan entered an aging society as early as the 1970s. With the encouragement of government policies, the Japanese insurance industry has a number of elderly care entities, including Nippon Life, Meiji Yasuda Life, Sompo Holdings, Tokio Marine Nichido, Mitsui Sumitomo Insurance Group Holdings, and Aioi Nissay Dowa Insurance. The most representative example would be Sompo Holdings, which is now the second largest operator of senior communities in Japan. At present, Sompo boasts more than 25,000 nursing beds and nearly 700 elderly care facilities established in various places. The insurance business of Sompo Holdings is embedded in the community in long-term interactions with customers, gradually develops the life insurance business, and meets the nursing needs of seniors in an aging society. Its service covers home care, senior-friendly facilities and the provision of nursing beds.

While the United States, the United Kingdom and Japan all made innovative steps in medical care services via the “payment + service” business model within the insurance industry, issues still exist. For example, American insurance companies did not combine payment and services. This is because the growth of the middle-class population and the aged population are not at the same pace, and the insurance industry has failed to see the elderly care demand resulting from an aging society in a timely manner. In addition, the elderly care service industry in the United States witnessed early and rapid development, and there is no space for insurance companies to step in. Unlike the United States, Japan has combined insurance and elderly care services because Japanese insurance regulations clearly prohibit commercial institutions from paying for medical institutions and intervening in medical services. That is why Japanese insurance companies did not start from the medical field. In addition, it is difficult for commercial insurance institutions to replace the relatively complete and mature elderly care insurance payment mechanism, and those institutions have not been able to form a commercial solution that matches the insurance company’s own products and service resources. While Bupa Insurance in the United Kingdom has both medical and elderly care capabilities, this cannot be copied directly to China, as the United Kingdom has a complete financing mechanism for elderly care services and a relatively mature pension system, which enjoys many advantages in itself.

Today, China has become the world’s second largest life insurance market and faces unprecedented demographic challenges. Whether it is elderly care or medical financing, it is necessary to find new solutions that are more suitable for China’s national realities rather than copying experience from other countries directly. Looking back on Taikang’s practice of becoming an ecological health enterprise, it is a process of actively absorbing overseas mature experience, combining China’s national conditions, embracing elderly care and health, and bringing new solutions to the world through repeated exploration and innovation.

Business Idealism and Entrepreneurship Changing the World

In the era of longevity, the extension of life expectancy and the sharp increase in the number of seniors will bring about expanded demand and supply pressure of health and elderly care services which requires the joint efforts of the government, enterprises, individuals and families. Entrepreneurs coexist with the modern enterprise system and are the direct allocators of production factors. They seek the optimal allocation in accordance with the laws of the market and formulate business solutions to social problems through enterprise innovation, which can play a conducive role in at least three aspects. The first is to create wealth and bolster the foundation for payment. The second is to expand supply and revitalize the industry. The third is to innovate the business model, improve the efficiency of resource allocation, and even create new demand.

Entrepreneurs are born in response to the call of the times, and their achievement, in turn, makes the time they live a glorious history. The Oil King John Rockefeller, Steel King Andrew Carnegie, and Car King Henry Ford are the most typical examples of the industrial age. At the end of the nineteenth century, they all grasped the pulse of the times and launched industry changes, which enabled the United States to quickly enter a mechanized, industrialized and modernized society. The country created a development miracle and became the world leader. When entrepreneurs get a whim of where the society would go, they will actively seek new business opportunities to meet social challenges and seize the opportunities of the times.

Two great companies, Ford and Apple, are the most typical examples. They are representatives of business idealism and entrepreneurial spirit. They have brought ideals into reality and changed the world. Henry Ford’s dream back then was to allow his workers and everyone in the world to drive a Ford’s car. He proposed mass production of cars, which would have the simplest and most practical design and the lowest price, so that they could be affordable for every ordinary family, and consumers could enjoy the car with their loved ones. Because of this idea, he led the standardization revolution at the beginning of the industrial age, improved the production model of the assembly line, increased production efficiency, and reduced production costs, which made cars accessible to ordinary middle-class families and turned his business ideal into a reality.

Steve Jobs returned to Apple in 1997, saving the company from crisis. Like all new tech heroes who started from scratch in Silicon Valley, dreams were the brightest beacon of that era. The difference between Steve Jobs and many Silicon Valley heroes lies in his dedication and even madness to business ideals—“To live is to change the world.” He has a genius sense of where the industry would go and has an almost devil-like taste for perfection for products and technical details. He created a new market pattern and consumer demand. After personal computers and the Internet swept the world, Steve Jobs led the era of mobile Internet and became an important force in changing the world.

If Ford’s cars represent the industrial age, it brings business ideals into reality through technological innovation. Then, Steve Jobs’ Apple represents the postindustrial age and the information age, combining technology and art, so that business idealism can unleash unparalleled power, bring surprises to consumers, and make the world a better place. Apple and Ford also represent the two most important aspects of business-induced social change: one is to change people’s way of life, and the other is to reduce costs through innovation so that more people can enjoy a better life.

To seize the opportunity of history means to follow the trend of times. The era of longevity will shape the world outlook ahead, and the longevity economy will become a new trend in the development of human society. The world needs leadership of companies with business ideals. Entrepreneurs must continue to practice and innovate business models to provide practical business solutions to challenges that human society is about to face. I firmly believe that as China has the largest number of seniors, such companies will inevitably be born in China, and they will launch a elderly care revolution on this vast land.

In China, entrepreneurs are leading the change. The 40 years of reform and opening up is a magnificent history of the development of Chinese entrepreneurs—may it be the entrepreneurs of the “1984s”, “1992s”, “internet gurus returned from aboard” or those who start businesses today. Among them, the “1992s” is a term I coined, which refers to the group of entrepreneurs who went into business at the same time as me. Our group demonstrates the very distinct characteristics of the time. First, the year 1992 is when China’s elites went to the business field. Second, this group of people are entrepreneurs who truly understand the market-oriented modern enterprise system, and they are the leaders of modern Chinese enterprises. Over the past 40 years, China’s entrepreneurs have experienced development, and a group of quality leaders are coming in place. Any entrepreneur who is persistent, steady and down to earth and who can be admired, imitated and learned by others must be a practitioner of business idealism. With the advent of the era of longevity, I believe that Chinese entrepreneurs will be the groundbreaker of the longevity economy.

6.2 Taikang’s Road to Innovation and Entrepreneurship

Founded in 1996, Taikang Insurance Group Co., Ltd. is a leading insurance and financial service provider in China. Its core businesses include insurance, asset management, and medical care. Taikang has five subsidiaries, including Taikang Life Insurance, Taikang Asset, Taikang Pension, Taikang Health Investment and Taikang Online. The Taikang Insurance Group has been among the world’s top 500 since 2018.

In 1996, the Taikang Insurance Group was formally established. As the founder of Taikang, I led this traditional insurance company into the elderly care industry in 2007 and continued to explore the field of medical care and health in the past 15 years. At present, our longevity community, rehabilitation hospital, medical service and memorial park constitute a network of “medical care, elderly care, rehabilitation and end-of-life care”, which makes Taikang stand out from other insurance companies in China. By integrating insurance, asset management and medical care, Taikang has developed an innovative business model to provide customers with “cradle to heaven” products and services, which covers the whole cycle of life. Its practice is quite inspiring, which is why Taikang’s elderly care revolution was listed as a successful business case in Harvard Business Review in 2020.

Origin and Exploration of Elderly Care

For years, while expanding and strengthening the life insurance business, Taikang has also been observing the trend of China’s demographic changes and the future path of life insurance. One of the main risks faced by life insurance companies is longevity risk. With the development and maturity of the insurance business, Taikang has furthered its understanding of longevity and life. How to expand the life insurance industry chain beyond traditional life insurance and how to seek weaker cyclical and more long-term investment opportunities to allocate capital are the questions that the company must answer in the process of development. With the advent of the era of longevity, is there any other way for insurance companies to participate in elderly care projects other than paying products such as personal annuities and pensions?

In March 2007, an employee wedding banquet turned out to be the opportunity for Taikang to enter the elderly care industry. Inspired by the success of the Home Inns chain model, Taikang’s founding team discussed setting up a chain of service agencies through a custody model in the wedding. Through study and research, we found that this home inward model came us nowhere. Later, we studied the national policy and decided that home care is the largest market. In January 2008, we conducted a trial run of a nursing care center in Wangjing, Beijing, to provide home-based nursing services for the elderly in residential communities. It was not a big investment. This experiment also failed due to a number of issues, such as locations. The most important reason, however, is that the asset-light business did not have synergies for the long-term capital of the insurance company, nor did it empower our main business.

To find solutions to elderly care issues, since 2007, Taikang’s senior management team has launched large-scale overseas research and visited institutions in Europe, Japan, the United States, Taiwan and other countries and regions (Table 6.1). I was deeply impressed by a number of communities, including Sunrise in Charlotte (North Carolina), Willow Valley (Pennsylvania), and Erickson Retirement Community in Riderwood (Maryland).

Table 6.1 Partial itinerary of Taikang’s delegation

What truly caught my eyes was in April 2010, when I led the Taikang board members to conduct a 10-day visit to the United States. We went to the Sun City retirement community in Phoenix, Arizona. Sun City, founded in 1959, is the first retirement community in the United States. After 50 years of development, it has become the most famous retirement community in the world, with more than 100,000 senior residents. When we visited the community, there happened to be an old man who had just turned 100 years old. Wearing a nurse hat with a red cross on it, she looked healthy and cheerful. I held her hand and felt her firm handshake. It was the first time in my life that I saw a 100-year-old with such energy.

In the end, I was attracted by the new American concept of CCRC. The American retirement community has subverted China’s traditional “family” model. The core of its business model is to build a new and open society, or community. It profits come from the sale of real estate or through the provision of elderly care facilities and services with charges of membership fees. After several rounds of visits and inspections, Taikang Insurance Group’s strategy has been formed, which is to set off a elderly care revolution, change the opinions of Chinese seniors toward life, and create a brand-new lifestyle that is unique to Chinese seniors. This is also Taikang’s original intention to enter the elderly care industry.

• (1) Elderly care Revolution in China

  Taikang’s elderly care practice has been implemented rapidly under the guidance and support of national policies. At the end of 2008, the General Office of the State Council issued “Several Opinions on the Promotion of Economic Development by Current Finance”, which pointed out that “relevant insurance institutions should be supported to invest in medical institutions and elderly care entities.” At the end of 2009, after several rounds of reports with the former China Insurance Regulatory Commission, Taikang became the first insurance company to obtain the qualification to invest in retirement communities. In 2012, Taikang Community, Yanyuan, was launched in Changping, Beijing. In 2014, the State Council issued the “Several Opinions on Accelerating the Development of the Modern Insurance Service Industry” and once again proposed “supporting qualified insurance institutions to invest in the elderly care service industry and promoting the integrated development of the insurance service industry and the elderly care service industry”. Yanyuan and Shenyuan were officially put into operation in 2015 and 2016, respectively, and Taikang became the first insurance company to successfully invest and operate elderly care facilities in the insurance industry. From a dream in 2007 to the booming operation of Yanyuan in 2015, it took a decade to come to where we are today.

  During the construction of Yanyuan, we established a national strategy and a clear roadmap. At the end of 2012, the Taikang longevity community settled in Shanghai, successfully initiating the strategic layout in the Yangtze River Delta region; in 2013, Taikang set foot in the Greater Bay Area; in 2014, Taikang entered the second-tier city Suzhou for the first time; in 2015, Shuyuan and Chuyuan were established in Chengdu and Wuhan, the new first-tier cities; and in 2016, Taikang came to Hangzhou, improving its development in the Yangtze River Delta. At present, Taikang has opened 10 communities in 9 cities and has been planning to expand to 24 cities across the country. In 2021, Taikang set up a second community in Shanghai, making the city the first in China to have established an elderly care network. By the end of 2021, a total of 10 communities in Beijing, Shanghai, Guangzhou, and Chengdu were put into operation, and more than 5000 seniors were enjoying their vibrant senior lives in Taikang Community. In the next 3–5 years, Taikang plans to open 25–30 communities across the country to achieve a nationwide network and promote municipal networks in developed cities.

  Globally, there are large elderly care enterprises in Europe and the United States. In 2020, Orpea, the leader of the industry, boasts a capacity of 100,000 beds. Korian comes second with 80,000 beds, and Brookdale ranks third with 70,000 beds. In the future, the Taikang Community, with a capacity of 55,000 beds upon full operation, will become the leader in China and will undoubtedly be among the world’s leading elderly care providers.

  Taikang’s practice has allowed the longevity community with international standards of “continuous care, migratory chain, and combination of medical and nursing care” to take root in China, and a brand-new elderly care model has officially started in China. This kind of elderly care is based on the business philosophy of “dynamic and cultural elderly care, combination of medical care and elderly care, and technology-based elderly care”, which meets the seven core needs of elderly individuals: “social interaction, sports, food, culture, health, financial management and spiritual belonging”. It also provides residents with a five-in-one lifestyle, i.e., a warm home, quality medical care center, open university, vitality center, and a home of the heart and spirit.

  In the process of Taikang’s advanced exploration of the elderly care industry, we have accumulated valuable practical experience for society and industry. On the one hand, we can address the elderly care issue through innovative business models and market economy methods. However, we give full play to our social responsibility. By promoting Taikang’s decades of experience in elderly care services, the Big Health Industry chain and the supply chain to society, we have empowered local governments, private institutions and families. The “Yicai Qianjia Nursing Homes” public welfare program, established by Taikang in 2018, has now become an exemplary case of “targeted poverty alleviation” and “professional empowerment” in the subsector of elderly care and poverty alleviation. Through the program, we have funded more than 100 institutions across the country, benefiting 30,000 elderly people. Building on funding for capital and equipment and the improvement of hardware facilities, we are also trying to move toward public welfare and carry out elderly care training in poverty-stricken areas such as “Three Regions and Three Prefectures”¹ and have trained more than 15,000 elderly care practitioners. In addition, we also help elderly care institutions establish information management systems and provide technological empowerment to improve the management capabilities of various institutions and provide better care for low-income seniors. These public welfare practices focusing on the elderly care industry are of great value. I also call on companies in the field of big health to jointly take responsibility to achieve substantial improvement of the overall elderly care in society.

• (2) Happiness Guide

  In 2012, the first insurance annuity product in China’s insurance industry connected retirement communities. Happiness Guide was officially launched. This innovative product combines virtual insurance products with physical retirement communities through a “confirmation letter”, providing customers with a package of solutions covering financial planning and living arrangements after retirement and connecting insurance customers with retirement services. Customers can enjoy the professional financial management services of insurance companies by purchasing elderly care insurance when they are young, live in Taikang Community when they retire, and use the insurance money to pay for their living expenses. What excites us is that An Appointment with Happiness is well received in the market as soon as it was launched. In 2013 alone, more than 3000 products were sold. This high-net-worth annuity product directly pushed up the growth of Taikang’s high-end customers and the New Business Value (NBV). Before the introduction of this product, the average premium of Taikang insurance products was only more than RMB 4000, and after 17 years, there were only 5600 high-end customers. At that time, there was no clear concept of high-end customers in the insurance market. In the nine years since the launch of Happiness Guide, the number of Taikang’s high-end customers has grown faster and exceeded 140,000 by the end of 2021. The total number of products sold also surpassed 130,000.

  After the successful launch of the annuity product, in 2020, Taikang further innovated and upgraded the product, focusing on youth under the age of 18. The overall premium for the teens is significantly lower than that of the adults, which allows customers to start saving at an early stage of their children’s life and plan ahead to arrange their future pension funds and community occupancy rights. By prolonging the accumulation time of the compounding and reducing the overall premium amount, the compounding will bloom over time. More customers with long-term planning awareness can also enjoy the new lifestyle advocated by Taikang. Since its launch, An Appointment with Happiness targeted for teenagers has experienced continuous growth in sales, thus providing an alternate path for the elderly care industry. In the future, it may no longer be just about providing financial support by the younger generation for the older generation but could be the other way around. In this way, the wealth of individuals and families will be continuously accumulated and passed down through the series of products of happiness, and the compounding will continue to display between different generations.

  Taikang’s first happiness appointment customer, Mr. Cao Yuanzheng, a famous economist, once shared his understanding of this product. “Planning for retirement has become a social issue and a common phenomenon. It is not an accidental phenomenon but an inevitable product of China’s economic development to this stage and the changes in the population structure. To support the elderly requires collective effort, which is an important turning point in China’s elderly care industry. Taikang has provided such a support.”

• (3) The new career of the health wealth planner is unveiled

  While exploring the combination of insurance with medical care, we have created two competitive products: one is a quality franchised longevity community, and the other is Happiness Guide series. Both products can provide service to the growing middle class and help them cope with the coming era of longevity. How to better deliver these two products to customers, what kind of sales team should be built, and what kind of sales system should be established to connect products and customers are questions for my team and I to think about.

  When we have the four-in-one series of happiness appointment products and Taikang Community, which leads the way of retirement life, the customers are no longer individuals seeking traditional life insurance products. An increasing number of high-end customers similar to those of private banks are drawn to our products. Just over a year after the launch of Happiness Guide, the sales volume exceeded 3000 orders. Such a growth rate shows that the product and service system provided by Taikang precisely meets the needs of China’s high-net-worth individuals.

  To build an A-team that can connect Taikang Community and An Appointment with Happiness with customers, in July 2013, we held a small certificate awarding ceremony and officially established the F1 club. “F1” represents both future and fortune. Finally, in 2017, we launched a profession on the basis of the F1 club—Health Wealth Planner (HWP). HWPs are positioned to be professionals who serve the full life cycle and the full wealth cycle of high-net-worth individuals to further help people cope with challenges in the era of longevity.

  Since its launch, this new profession has responded to the call of the longevity era and the urgent needs of customers and has become a promoter of Taikang’s one-stop health wealth management solution. By the end of 2021, the number of HWP members exceeded 7400. Meeting the requirement of Taikang’s four-in-one business model, HWPs are a new profession that combines the roles of junior general practitioners, insurance agents and senior financial advisors. They are committed to formulating all-round solutions tailored for individuals in the longevity era. To equip this team with the highest professional standards and knowledge, we jointly organized training programs with Wuhan University on medical care, health, wealth management and other disciplines in the era of longevity. The purpose is to cultivate professionals with determination and devotion to lifelong study, lifelong service, and lifelong practice. In January 2020, HWP was officially approved as a professional qualification by the Ministry of Education, filling the gap between professional training and certification in health wealth management. While providing an enabling environment for talent, it also made every choice they make a transcendent achievement.

• (4) Toward a Big Health Industrial system

  While building a big health ecology, we are also working actively in putting a network of medical specialties in place. Inspired by Bupa, which successfully operated a dental clinic chain in Spain, we acquired the controlling interests of Bybo Dental Group (later renamed Taikang Bybo Dental) in 2018, which operates more than 200 dental hospitals and clinics in more than 50 cities in China. As people’s living standards improve, they start paying more attention to medical specialties, such as dentistry, cardiovascular and brain. By establishing strategic investment relationships with specialized hospital chains such as Bybo Dental, we are constantly enhancing our capabilities in resource integration in the Big Health ecology. In medical and health services, we have been exploring integrating medical services and insurance products into a new business model to create stronger synergy. For example, in 2019, Taikang Group launched a corporate dental insurance plan for corporate employees through Taikang Bybo Dental. In 2020, a “Dental Care Ambassador” program was launched jointly by Taikang Bybo Dental and Taikang Insurance. As a part of Taikang’s closed loop of health services, the closed loop of dental insurance came into an early shape.

Explorations were also made in the specialty of rehabilitation. As early as we were planning the longevity community business, it was made clear that rehabilitation hospitals should be built within longevity communities. The goal is to meet the needs for rehabilitation and health management of seniors and people with chronic diseases, and to truly integrate elderly care and rehabilitation. In our efforts to build a Big Health ecology, one of the key priorities was building our brand and expertise of rehabilitation. Another priority was to wield the power of chains and the network of facilities, including both facilities within Taikang’s own system and the ones acquired externally. Moreover, we invested in Donglei Brain Doctors Group in 2020. Such an investment in a new medical specialty was Taikang’s another endeavor in the building of the Big Health ecology.

In the transformation toward a Big Health ecology, we are working hard to improve our own network, build connections with external partners and strengthen cooperation with top medical institutions. Taikang’s network of medical care and insurance services, “Jian Bao Tong” (“health, insurance, connection” in Chinese), includes over 700 physical examination centers, 2,000 public hospitals, 30 private hospitals and 10,000 senior doctors. Taikang has been making great efforts to jointly build a Big Health ecology for cooperation to provide medical and health management solutions both online and offline. To ensure clients have easy access to Taikang’s health management services, various functions have been built into Taikang’s smartphone apps, “Taikang Life” and “Taikang Doctor”. In these apps, users can make reservations of services such as physical examination, cancer screening, vaccination, genetic testing, dental health care and medical consultation. In the future, more new technologies, such as digital medical care, artificial intelligence (AI) and the Internet of Things (IoT), will be adopted and applied to Taikang’s medical care, health and elderly care services. With the aid of technologies, Taikang strives to improve the quality of services while lowering the costs of services, sealing our promises of being “more secure, more convenient and more affordable” into every inch of Taikang’s Big Health business territory.

With over a decade of down-to-earth firsthand frontline business experience in the Big Health Industry, Taikang has built a primal industrial layout consisting of medical care services, professional teams and the ability to integrate resources. Shortly after the COVID-19 outbreak, epidemic prevention supplies were in shortage everywhere in China. Under such circumstances, Taikang, as a leading enterprise in medical care and the Big Health Industry, made a donation of epidemic prevention supplies to approximately 1,300 elderly care facilities across China. With business sensitivity built on our long-term research into population, elderly care and medical issues, Taikang quickly recognized the importance of developing research on public health. We immediately established a Public Health Fund for designated purposes, which are to support the building of a basic health system and an epidemic prevention and control system. A donation was made to the State Key Laboratory of Virology at Wuhan University to support the research. All the actions demonstrated Taikang’s undertakings and a strong sense of social responsibility as a leader in the Big Health Industry in the Era of Longevity.

A “From Cradle to Heaven” Product Portfolio

Taikang’s main business has expanded from insurance to the elderly care industry and to the Big Health ecology. In such practice, we keep developing new products and improving services. From the early innovative annuity product “Happiness Guide”, our product and service portfolio has developed into the current “Four-Sphere” system of products and services, integrating “Vigorous Elderly care, High-End Medical Services, Excellent Wealth Management, and Superior Hospice Care”.

Through the Happiness Guide product and high-quality elderly care services provided by Taikang Community, the lifestyle of “vigorous elderly care” has been introduced to the middle class. This lifestyle meets their needs for elderly care and security, and it reflects the human solicitude in insurance. The popularity of the Happiness Guide proved the fact that people’s rigid demands are no longer food, clothing, housing and transport, but entertainment, education, medical care and eldercare.

Quality medical services have also become a rigid demand for the middle class. While building longevity communities, Taikang launched a “High-end Medical Care” insurance product based on the combined network of Taikang’s own medical resources and services and the ones we are in cooperation with partners. “High-end Medical Care” products aim to provide clients with high-end personalized diagnosis and treatment services and satisfy their demands for health management and health care throughout a full life cycle. Meanwhile, having noticed the demands of the middle class for professional and diversified wealth management, we developed “Excellent Wealth Management” products relying on our capability to allocate assets globally and the mature system of wealth management covering insurance, funds and asset management. The “Excellent Wealth Management” products aim to manage capital investment in a professional way to gain compound interest and add value to the wealth of our clients.

Different from the above three products, which are the fruits of our longstanding R&D in insurance products, the launch of “Superior Hospice Care” was an inevitable extension of Taikang’s value and view on life. At that time, I was reading Being Mortal: Medicine and What Matters in the End, and the ideas within that book were perfectly consistent with the elderly care lifestyle Taikang was actively advocating for. The book reflects on the lifestyles of our parents’ generation and explores how decisions should be made in spending one’s later years. From reading it, I realized that what medical treatment could offer is limited and that people request the last dignity toward the end of life. I was inspired to think about what are truly important and meaningful for people in the last phase of life. Through Taikang longevity communities, we aspire to change how Chinese people’s look at old age lifestyle and elderly care. We also hope to change Chinese people’s views on death and their attitudes toward life by building memorial parks and providing palliative care and hospice care.

By the end of 2021, we completed the construction of four memorial parks in China. We incorporated elements of traditional Chinese culture in these parks, and they are operated as memorial parks/tourism spots. We hope that it would make it easier for people to accept memorial parks. The parks are all surrounded by mountains and rivers, but each of them was built with different cultural elements and landscapes. Each park represents the local culture of its location: “Zen Yard” for the Zen culture cultivated south of the Qinling Mountains; “Bamboo and Tea Garden” for Shu Yuan (Chinese Schools in ancient times); “Wetland Garden” for the Jing-Chu Culture (traditional State Chu culture in ancient times, near Hubei Province today); and “Memorial Woods” for the New China Revolution Culture. These memorial parks celebrate the beauty of life with unique cultures from different regions of China and encourage people to channel their commemoration of individual lives into the appreciation of nature and culture. In the “Bamboo and Tea Garden”, people could sit in tea ceremonies performed in the same way as in the Song Dynasty or work as tea farmers for an old-time tea farmer work experience. In the “Zen Yard” in Luofu Mountain, people could study meditation and read Buddhist scriptures or take their children to spend a day with their deceased elders in the memorial park. Some young people even decide to hold their wedding ceremonies there—which, I think, is the perfect proof for the ongoing changes in people’s views on life and death. Additionally, our medical and elderly care teams are starting to provide palliative care and hospice care services. Palliative care and hospice care wards are set up in Yan Yuan and other longevity communities to provide better hospice care and continuous palliative care for patients with incurable conditions, bringing comfort to the living and peace to the deceased.

“Vigorous elderly care” is a continuation of our initial intention of starting a revolution in elderly care services in China, that is, to change the life philosophy and lifestyle of older people. The purpose of “superior hospice care” service is to change people’s views on life and death. It will become another culture-leading brand in Taikang’s product portfolio covering the full-life-cycle chain. With “Superior Hospice Care” being put in place as the last sphere of our “Four-Sphere” system of products and services, Taikang has truly built a “From Cradle to Heaven” product portfolio.

The “City Name Card” Program Serves people’s Livelihood

As longevity communities, rehabilitation hospitals, general hospitals and memorial parks were established one after another, I gradually realized that these entities we set up are of great significance to the local economy, culture and public life. As urbanization progresses, cities are going through constant changes. Infrastructure construction will add to the inner growth momentum of cities, and higher quality of public space will elevate cities’ levels of civilization.

In the Era of Longevity, a city should not only have good primary and middle schools to educate the youth but also prestigious universities and enterprises to attract and keep talent. A city should also have high quality elderly care facilities with supplementary medical care, rehabilitation and palliative and hospice care facilities, so that people who have dedicated a lifetime to the building of the city can have a place to spend their later lives healthily and happily. These facilities are the infrastructure of modern services in the Era of Longevity, and they can improve urban functions, build momentum for the longevity economy and will become a city’s name card. From 2020, we started calling this city-based regional compound layout the “City Name Card” program. Cities are built for people, and the civilization level of cities is usually reflected by how people treat elderly individuals. The signature of a city should in no way be the cold, concrete and steel buildings, but a picture of people living and working in the city in peace and content, sharing the joys in life and living the golden years of their lives. In an era where the livelihood of people is valued more than anything, Taikang’s strategy is to invest in the construction of clusters of facilities in major cities in China, including insurance, medical care, elderly care, rehabilitation and superior hospice care facilities. Taikang will introduce this new business model to cities and incorporate our commercial innovation and practice into cities’ key livelihood projects in the future.

Two decades after Taikang started its business, the Taikang Insurance Group was established in 2016. It marked the transformation of Taikang from a traditional life insurance company into a conglomerate of insurance and financial services with three core businesses, i.e., insurance, asset management, and health and eldercare. At that time, we already owned subsidiaries such as Taikang Asset, Taikang Pension, TK.CN, Taikang Community and many others, which provided much more room for Taikang to join key livelihood projects. In 2018, Taikang landed on the Fortune Global 500 for the first time and remained on the list for the following four years consecutively. Taikang spent 30 years pursuing our business ideal, and Taikang’s rise is an epitome of Chinese entrepreneurs in the Reform and Opening up.

Continuous Innovation

In a signed article published in Economic Daily in December 2019, I wrote, “Innovation is an eternal theme. The innovations of technologies, services and business models will create new opportunities. After four decades of development and accumulation, Chinese private enterprises have developed past the phase of imitating innovation and entered the phase of independent innovation.” Since its foundation in 1996, Taikang has gone through three large waves of innovation, and we are now surfing on a fourth one. From all the experience, we have gained a very deep understanding of the evolution process of innovation.

In our early days, Taikang Life studied from the advanced experience overseas for inspirations and then transformed and landed our learning in China based on China’s reality. The saying “Innovation starts with imitation” perfectly summarizes our first wave of innovation. Taikang Life was founded in 1996, and by that time, the life insurance industry had been developing globally for 300 years, and it was already a mature, sizeable industry. There was once a time that there were 50–60 life insurance companies on the Fortune Global 500 list. Shortly after Taikang was founded, I led a team of Taikang’s executives and employees to visit over 20 top insurance companies in Taiwan, Japan, the US and Europe. In these trips, we learned in-depth about almost everything in these companies. In China, we have a saying about imitation that goes “drawing a water ladle by looking at a gourd” (in old times, gourds were cut in half to make water ladles). I called our early study “drawing a water ladle by looking at the finest gourds in the world”. Our efforts laid a solid foundation of “professionalism, standardization and globalization” for Taikang’s future development. Since its founding, Taikang started as a high-level company that set its benchmark toward global leading players.

A lot has happened since then. Companies that have survived brutal market competition and remained vigorous have all, with no exception, gone through localization and independent innovation. In 2001, I observed the growth of the middle class and sensed that they would become the major consumption force and target clients of wealth management. Therefore, Taikang Life took the lead in proposing the concept of “New Life”, where “Car, House and Insurance” are the three most important purchases in modern life, which was followed by the launching of the “One Insurance Policy for the Entire Family” plan. This “New Life” wave was arguably Taikang’s second wave of innovation, which aimed to provide insurance services following the realities in China to the growing middle-class families.

The third wave of innovation came along after Taikang entered the elderly care industry. Taikang combined virtual insurance with health and elderly care services, established Taikang Community, started receiving Taikang residents, launched the “Happiness Guide” product and created a new occupation, health and wealth planner (HWP). Step by step, Taikang gradually completed the restructuring of the traditional life insurance model. In Taikang, the connotation of innovation has been evolving constantly. We started with imitating innovations, and now we are on the path of independent innovation. The Big Health Industry has many subindustries, and building a Big Health Industrial system imposes much higher requirements on enterprises in terms of their integration, network coordination and cost control. To achieve our goal, Taikang will embark on our journey of studying again to learn from global leaders in the Big Health Industry.

The business philosophy of the Taikang Plan is reflected not only in its model innovation but also in efficiency improvement. On the basis of BMI, enterprises must persist in cost reduction and efficiency improvement through intensified technological empowerment, which will enable more people to enjoy the brand-new lifestyle brought by the innovations. On the one hand, Taikang expanded its scale of business by building a top longevity community chain and reduced costs and increased service accessibility continuously through intensive management and improved operational efficiency. On the other hand, in the context of an era of data, we are also building intelligent longevity communities and reducing costs through 5G, sensing, robots, AI and other technologies so that more people can enjoy a quality life. Moreover, we have given full play to the leverage effect of insurance payments, integrated resources and invested in key livelihood projects to create value for society. As an increasing number of enterprises follow in out footsteps, the competition formed thereby will stimulate more innovations and reforms. The pressure of health and wealth in a longevity society will be eased, social costs will be reduced, and the overall social welfare will be improved.

Adhering to the philosophy of “Knowledge-Action Unity”, Taikang has turned the idea of “From Cradle to Heaven” into a practical business model through continuous innovations and practice. Taikang made payments and services more secure, convenient and affordable, and people’s views on elderly care, health, life and death have been evolving. In the future, through professional operation, Taikang will take advantage of the sizeable chain and introduce cutting-edge technologies to lower the costs of elderly care services, maximize the effect of compound interest through business model innovation, and help solve problems people may face in elderly care financing in the future. As its medical care model matures, Taikang will further expand its elderly care service ecology from elderly care facilities to home care and community elderly care so that more people can enjoy a quality elderly life.

6.3 Taikang’s Business Model and the Business Philosophy Behind the Elder Careelderly Care Revolution

A new era’s arrival brings along the inevitable iteration of industries. In the Era of Longevity, each industry should take proactive measures to accommodate changes in people’s needs. Only through continuous innovation of systems, technologies and business models can industries turn challenges into opportunities, lead epochal trends and make a contribution to human society. Taikang’s business model, which came into shape after many years of practice and exploration, should be of some reference value for life insurance companies in coping with the Era of Longevity. Through channeling virtual insurance with real health care and elderly care services, Taikang reconstructed the traditional balance sheet of life insurance business, extended both upstream and downstream of the industrial chain, and better satisfied the needs of clients for longevity, health and wealth throughout a full life cycle. In this process, we created the Taikang Plan, a complete set of ideas and solutions. It covers all links from financing to services to help companies cope with challenges in the Era of Longevity. The Taikang Plan is the product of an enterprise’s active practice facing the Era of Longevity, and we hope its value could reach beyond business itself to provide solutions for mankind in the Era of Longevity. We also hope that this Plan could serve as a modest spur to inspire our peers to come forward with their insights and explorations of the Era of Longevity, and that it could encourage all walks of life to jointly explore the infinite potential and charm of the longevity economy. The main points of the Taikang Plan are summarized and shared in this chapter.

The Taikang Plan: A Corporate Solution in the Era of Longevity

As a business enterprise, Taikang saw the trend that mankind is about to enter an Era of Longevity, took the lead in practicing our theories in China, and summarized and proposed the corporate solution for the Era of Longevity—the Taikang Plan. It is a combination of a virtual insurance payment system and service systems of real health care and elderly care, and it provides products and services covering the full life cycle to meet people’s needs for longevity, health and wealth.

The virtual insurance payment system in the Taikang Plan refers to various insurance products we provide to clients, including life insurance, health insurance and accident insurance, as well as pension products, corporate/occupational annuities, wealth management products, etc. The payment system covers medical care and all three pillars of social security, and it provides efficient financing for people to enjoy all kinds of eldercare and medical care services in the future. The system of real medical care, elderly care, rehabilitation and end-of-life care and services refers to our longevity communities across China, supplementary rehabilitation hospitals within the communities, key general hospitals located in East, West, North, South and Central China, Taikang Bybo Dental hospitals and clinics in nearly 50 cities, memorial parks with unique cultural elements, and a service network to support all the Taikang facilities. Our system and network are still expanding to provide high-quality elderly care and medical care services to more clients in more regions. In addition, the synergy between the payment system and service system created a closed-loop business model: funds accumulated in the payment system will be invested into the real economy, providing sufficient financial support for the construction of the service system while gaining long-term, continuous and stable returns to accumulate compound interest for clients. In turn, the high-quality services provided by the service system will add benefits and value to the payment system, which supports the development of new products and maintenance of clients on the payment end.

In summary, the Taikang Plan commits to providing a full range of health and wealth management services to our clients in the Era of Longevity. By building the three closed loops, one of longevity, one of health and one of wealth, Taikang invented a brand-new “Four-Sphere” business model containing “Vigorous Elderly care, High-End Medical Services, Excellent Wealth Management, End-of-Life Care” in the contribution to building a Big Health Industrial ecology.

• (1) Building three closed loops of longevity, health and wealth

The three closed loops of longevity, health and wealth are essentially a combination of insurance payment and health care services. In the course of building the closed-loops, we rediscovered the value of the funding system, the elderly care industry and the health industry (Fig. 6.1). To put it simply, the closed loop of longevity enables clients to enjoy elderly care services under the protection provided by Taikang’s life insurance and annuity products; the closed loop of health enables clients to receive medical care services as needed under the protection of Taikang health insurance products; the closed loop of wealth enables clients to enjoy tailer-made financial and wealth management plans to ensure that there are sufficient funds to support their needs of elderly care and health care in a long life. The closed loop of longevity includes life insurance, elderly care, rehabilitation and end-of-life care: clients could enjoy the protection of Taikang’s life insurance and annuity insurance and spend their later years in Taikang longevity communities. As a 100-year life draws near in the Era of Longevity, people need to plan for a prolonged life as early as possible to accumulate sufficient resources for their old age. Therefore, on the payment end of this closed loop, we provide individual clients with comprehensive life insurance and annuity products. Taikang helps clients make professional and long-term investments with their funds and accumulate compound interests on a long-term basis to maintain and increase the value of their wealth. On the service end, a chain of migratory bird-type longevity communities is put in place and operated across China. There is a rehabilitation hospital built in each longevity community that can fully meet the health needs and elderly care needs in the Era of Longevity and enable residents to enjoy quality old-age life. In addition to elderly care products and services, within this closed loop, Taikang provides various elderly care products and services, such as long-term care, rehabilitation, and palliative and hospice care, to serve older people throughout the elder life chain. The Taikang Plan is changing not only older people’s attitudes toward daily life but also their views on life and death.

Fig. 6.1

Taikang corporate plan

The closed loop of health is composed of health insurance and medical services. Clients can enjoy full-life-cycle health services within Taikang’s multileveled medical service network under the protection of Taikang’s health insurance. With the change in the human disease spectrum in the Era of Longevity, people’s main health concerns will shift from disease treatment and postoperative recovery to health management and disease prevention. On the payment end, we have participated in the building of a system of health insurance products and services that covers all provinces and cities across China which fully supports multidimensional medical security plans of the government, enterprises and individuals. Given that medical expenses are mainly paid through governmental medical insurance within this system, Taikang set up a designated business line to provide services in handling or undertaking governmental medical insurance in our pension subsidiaries. At the service end of the closed loop of health, we put most resources in the Beijing-Tianjin-Hebei region, Yangtze River Delta and Pearl River Delta. There are both Taikang’s own general medical centers and medical service institutions Taikang invested in or cofounded, covering general, specialized, public and private facilities. We have actively deployed business along the Big Health industrial chain and formed a full-life-cycle, full-process health service system. It provides services both online and offline, covering all links from disease prevention to rehabilitation. It aims to meet health management needs, especially chronic disease management, so that people can enjoy better health and higher quality of life in the Era of Longevity. We believe eldercare and medical care are inseparable and have been making active efforts to drive the integration of the two. In addition to the rehabilitation hospitals built within the longevity communities, we also provide the residents with medical and caretaking services, including medical services and rehabilitation services. By attending to both short-term treatment and long-term caretaking needs, Taikang has enabled the elderly to live more comfortably in the community instead of traveling between their homes and the hospitals back and forth. In regions where conditions are mature, Taikang is also building brand-new longevity compounds that incorporate medical care, elderly care and rehabilitation. These new compounds will focus on old age chronic disease treatment and management and further promote the integration of health care and elderly care, which essentially drives the integration of the closed loops of longevity and health.

Closely related to the other two closed loops, the closed loop of wealth acts as a cornerstone in the Taikang Plan. It is a closed loop of the wealth management plans and our professional capabilities in institutional investment. Through annuity, pension and wealth management products, Taikang maintains and adds value to customers’ wealth through long-term and stable institutional investment to accumulate sufficient funds for them to pay for elderly care and health expenses in a long life. On the product end, we provide a variety of insurance and wealth management products to individual clients, such as annuities, investment-linked policies (ILPs), public placement and private placement; we also provide occupational annuities and corporate annuities to governments and enterprises to support building funding channels for the three-pillar social security system. On the investment end, relying on the excellent investment capabilities of Taikang Asset, we are able to maintain stable and excellent performance for a long time and provide a full range of wealth allocation options and strategies to achieve long-term sustainable investment returns. Taikang’s closed loop of wealth strives to gain compound interest through long-term investment rather than short-term profit. Within the closed loop, individual clients can optimize their funding plans to meet the challenges in the Era of Longevity, especially the ones after retirement: they can use the fund accumulated by insurance and wealth products long-term to pay living expenses while investing the remaining asset to maximize the value of their wealth or even choose to pass their wealth on to their offspring in the future.

The three closed loops of longevity, health and wealth constitute the foundation of the Taikang Plan. Another way to look at it is the circular interactions between the three closed loops form a bigger closed loop where insurance payment, medical care, elderly care, rehabilitation and end-of life care and services are seamlessly connected. The bigger closed loop serves as a platform of longevity, health and wealth and created a whole new dimension of “insurance plus services plus entities”. That being said, implementing these closed-loop strategies will require a specific implementation path, which is an important component of our corporate solution. Taikang created five paths to implement these strategies, namely, expanding payment, deploying services, harnessing technology, building ecology and strengthening soft power. “Payment” refers to insurance in the Taikang plan. Taikang Insurance Group’s subsidiaries, Taikang Life, Taikang Pension and TK.CN are responsible for expanding payments. While developing as many new clients as possible, they must also maintain the quality of services to existing clients. The goal is to scale up the payment system to better leverage resources on the service end. In “deploying services”, the services are provided by the system of medical care, elderly care, rehabilitation, and end-of-life care and services from Taikang’s own facilities and the ones Taikang invested in. The subsidiary Taikang Healthcare Investment is responsible for deploying services, such as Taikang (Longevity) Communities, medical care systems and hospice care. The core strategy is to expand coverage of such services throughout China by building intensified networks in major cities. As for “harnessing technology”, the key is to build a Big Health industrial network through the application of various emerging technologies and techniques to improve efficiency and reduce costs for convenience and benefits. “Ecology Building” refers to the building of the Big Health industrial system through investment and collaboration, creating a Big Health ecology for stakeholders and partners. We are also strengthening soft power by building systems of education, public welfare, R&D and branding to empower the Taikang Plan.

• (2) Reconstructing the balance sheet of the traditional insurance business

The fundamental logic of life insurance business lies in a balance sheet. The insurance premiums paid by clients are the liabilities, while the investment of insurance funds made by insurance companies are the assets. In a traditional sense, selling insurance is an insurance company’s major business, and it usually operates in debt. By making asset investments with insurance funds, insurance companies need to strike a balance between the safety, liquidity and profitability of assets and ensure the delivery of insurance benefit payments. The investment of insurance funds, from this point of view, is more of a necessary tool to maintain financial stability. From the perspective of an insurance company’s balance sheet, the liability end is its sales end, while the asset end is its investment end. Traditional insurance companies are only connected with clients on the liability end, and the focus of the asset end is improving the investment efficiency of insurance funds rather than providing services directly to the clients. Therefore, the balance sheet of the traditional insurance business does not emphasize the interactions between assets and liabilities. At the same time, due to limited asset categories and targets, the balance sheet usually features in “short-term assets and long-term liabilities”. The Taikang plan we proposed is an innovative plan that started by investing insurance funds in the construction of longevity communities. Clients who purchase Happiness Guide, our annuity product, will receive an access confirmation letter of Taikang Longevity Communities. By turning insurance into a lifestyle, Taikang successfully established connections with clients on the asset end, thus upgrading the traditional asset-liability structure and achieving innovation of the fundamental logic of insurance (Fig. 6.2).

Fig. 6.2

Taikang’s corporate plan to transform the balance sheet of traditional life insurance business

Traditional insurance companies would invest insurance funds in stocks, bonds and real estate. The investment in real estate is usually the acquisition of office buildings, shopping malls, or even sports stadiums and amusement parks, which are especially favored by US insurance companies. The acquired real estate then becomes fixed assets and starts generating profit. Although such profit is not high, it is continuous and stable, which is in line with the nature of insurance funds. However, in Taikang’s corporate plan, only a small portion of the insurance funds would be utilized in the investment or long-term equity holding, and it was to our own longevity communities and health and elderly care entities, which provide our clients with real, high-quality health and care services. Taikang’s different approach to real estate investment created a high-quality longevity community chain: Taikang Community.

Happiness Guide was developed for Taikang Community: it is an annuity product that connects Taikang Community with the liability end by an “access confirmation letter” of our longevity communities. This confirmation letter not only represents the access qualification of residence in Taikang Longevity Communities but also a future lifestyle. Traditional insurance products only offer contracts printed on a few pieces of paper, and where the policyholders decide to go for elderly care or to see a doctor has nothing to do with the insurance companies. The difference between Happiness Guide and traditional insurance products is that it materializes insurance policies into real services, which enriches the extension and connotation of insurance products. Happiness Guide has turned insurance from a “cold contract” into “warm services”, and the invisible intangible contractual relationship between the insurance company and policyholders became a service relationship that could be felt and experienced. What the Happiness Guide delivers is not only an investment but also a future lifestyle and a joyous longing for longevity. In this way, Taikang upgraded the liability end in the traditional sense of insurance companies. In the past, the term of a traditional life insurance policy was 20 years at most, and the connection between the company and the policyholder ended with the termination of policies. However, Happiness Guide clients will enjoy the services and companionship provided by Taikang for the rest of their lives.

Taikang’s success with the Happiness Guide created new horizons for the insurance industry to develop medium-to-high-net-worth clients in scale. In the past, one life insurance policy could generate approximately a few thousand RMB of premium every year and probably tens of thousands of RMB of accumulated premium throughout the entire policy term. Happiness Guide, however, started with the clients’ needs for sufficient funds to support high-quality longevity, and the accumulated premium could reach millions of RMB. Undoubtedly, target clients of the Happiness Guide have much higher net worth than traditional policyholders. There were, of course, large policies in the traditional insurance industry, but they were sporadic sales. Before the Happiness Guide, there was no complete system to serve medium-to-high-net-worth clients in the insurance industry in China. Such an operation system was exclusive to private banks, securities companies and wealth management companies. Today, with products such as the Happiness Guide, high-quality longevity communities and our “Four-sphere” system of products and services, Taikang has forged a unique competitive edge in the market of medium-to-high-net-worth clients, built an operation system oriented toward the large-scale development of high-net-worth clients, and gradually accumulated the current high-net-worth client base.

With the Happiness Guide and a high-net-worth client base who are open to new lifestyles, it seemed obvious and only natural that the shaping of a new career path in insurance sales would follow. The connection between insurance products, medical care and eldercare services requires stronger professional capabilities of insurance agents. To meet those requirements, Taikang created a brand-new profession in the insurance industry—“Health and Wealth Planner (HWP)”, which has been approved and certified by the Chinese Ministry of Education as an occupation. We provide multidisciplinary, all-round training programs and field programs ranging from elderly care and healthcare to wealth management for the new HWPs. We encourage them to learn for life, so that they can enhance professional capabilities and expertise. With these resources, we hope they will become planners and lifelong service providers for our clients’ demands for longevity, health and wealth and ultimately insurance entrepreneurs and Big Health partners in the Era of Longevity.

A new way of sales came into shape following the new HWP profession. Under the traditional life insurance marketing system, insurance agents used to work all alone and often had to go from door to door to develop new clients. With the acceleration of urbanization, the door-to-door sales model became increasingly less effective and was eventually replaced by a teamwork approach of both field agents and administrative support. Now, Taikang is setting up marketing campaigns that offer real experience within communities, hospitals, memorial parks and other entities. By doing so, we created a brand-new sales model in the insurance industry—the “experience marketing model”. Potential clients are welcome to visit our communities and experience the new elderly care lifestyle that we brought into China. They are even encouraged to live there for some time themselves before deciding if they want to make a purchase. After all, seeing is believing, and that was what we did to differ from the traditional insurance sales model.

On the liability end, our new products brought new clients, new jobs, and a new sales model. Hence, the entire liability end is restructured, and a new operation system was formed. Along with the changes on the liability end, the asset end is also changing. In the past, the capital term on the asset end was usually ten to twenty years, but now it is more than twenty years. Longer-term capital will indeed bring challenges to traditional investment strategies, but from a different perspective, it also allows more flexible asset allocation portfolios and longer-term investments. The structure of investment will change accordingly, and the proportion of equity investment can be effectively improved, which is a practice of the philosophy of “long-term value investment” advocated by Warren Buffett. It is also a full demonstration of compound interest and long slope theory.

In general, the reconstruction of the balance sheet of the traditional life insurance industry made by Taikang’s corporate plan is an innovation that conforms to the Era of Longevity. It enhances the efficiency of the entire operation system and offers clients a full package of plans and solutions to challenges such as funding and services, in a more convenient and affordable manner. Balanced sheet reconstruction is the essence of the innovative Taikang Plan. Innovations may appear easy to accomplish, but major breakthroughs are difficult to achieve. No innovative breakthrough could be made without years of thinking, reflection and accumulation of experience. Innovative breakthroughs require lifelong efforts, and Taikang’s breakthroughs are the result of hard work, great power, and collective wisdom of many Taikang people.

• (3) A full life cycle covering payment and services

On the time axis of life, the curves of income and expenditure are intertwined. The expenditure curve runs through a person’s entire life. Taking various transfer payments into account, the highs of the expenditure curve appear in the beginning and toward the end of life because of education expenditure and medical expenditure, respectively. The income curve, however, peaks between the ages of 20 and 65, which is the period when people accumulate their incomes. During this period, the incomes are spent on daily expenses, purchases of a car and/or a home, or on children’s education and eldercare for their seniors. Additionally, in the postindustrial era, the needs for entertainment, education, health and eldercare have inevitably exceeded those of food, clothing, housing and transportation.

People’s lives can be roughly divided into a few phases by the intersections of the two curves. In the working phase, people’s net income is usually positive. This is the phase when funds are sufficiently accumulated, which generates demands for asset allocation to reserve wealth for the future. In the retirement phase, expenditures spent on health, elderly care and medical care continue to rise, and people’s expenditures begin to exceed income. There may also be expenditure on hospice care and inheritance needs prior to death.

People’s needs for longevity, health and wealth run through the entire life. Funding problems appear when there is a mismatch between purchasing power and consumption needs. In the Era of Longevity, funding problems could appear more often than ever. Taikang’s corporate plan is unique in that it provides a system of products and services that covers the entire life cycle of customers through three closed loops of longevity, health and wealth. The Taikang Plan includes not only insurance products but also real services such as medical care, elderly care, rehabilitation and end-of-life care and services, as well as various health services and investment services. As shown in Fig. 6.3, Taikang not only provides long-term life insurance and annuity products with longevity community services but also health insurance products and health services, including maternal and child health care, health management, medical services, dental services, chronic disease management, and rehabilitation care. At the same time, we also provide investment services ranging from education funds, public placement management, private placement management to retirement pensions. After income in the traditional sense begins to decline, Taikang clients will be supported by income supplements generated by Taikang’s products, with their income curve lengthened and asset exhaustion postponed.

Fig. 6.3

The system of products and services covering a full life cycle

The Taikang Plan expands the industrial chain of life insurance both vertically and horizontally, with vertical expansion being the core and horizontal expansion as a supplement. Taikang’s vertical expansion is from life insurance to medical care, elderly care and then to Big Health. The vertical expansion aims to build a complete product portfolio through the vertical integration of the three closed loops of longevity, health and wealth. Horizontal expansion provides products and services to clients throughout a full life cycle, horizontally covering the education phase, the working phase and the retirement phase. Figure 6.3 also implies on the level of client base that Taikang has expanded our services from individuals to their families and even to their relatives.

A vivid metaphor I often use on many occasions to interpret the business model of the Taikang Plan is that we are “rolling the biggest snowball in the world on a wide track covered in thick snow from the top of a long slope”. The long slope refers to people’s life cycle. Our “From Cradle to Heaven” product portfolio will serve our clients throughout their entire life. The wide track is our “Four-sphere” system of products and services comprising “Vigorous Elderly care, High-End Medical Services, Excellent Wealth Management, and Superior Hospice Care”, which aims to serve the life value chain. The thick snow refers to our high-quality clients. Our full-life-cycle products and services are designed to closely fit the various needs of our clients in different stages of life. In a sense, Taikang’s products are tributes paid to each phase of life. This may be the best annotation for the system of products and services covering a full life cycle.

The Fundamental Principle of Corporate Growth

When people talk about innovation, the most eye-catching figure is definitely the “Real Life Iron Man” Elon Musk. Musk’s spirit of innovation was seen in many different fields and industries, and he has launched absolutely disruptive innovative products such as Tesla and SpaceX Dragon. In his well-known interview by TED, Musk claimed that his go-to thinking pattern was “First Principle Thinking”, which originated from the ancient Greek philosopher Aristotle, who defined a first principle as “the first basis from which a thing is known”. A first principle is also defined as “a basic proposition or assumption that could not be deduced from any other proposition or assumption”. For entrepreneurs, whether they aspire to live up to their own ambition or undertake more social responsibilities, the deepest impulse in their vessels is definitely growing their enterprises larger and stronger. What does it take for enterprises to keep up with epochal development and maintain an evergreen status? Referring to the “First Principles”, I believe that there are four basic principles for enterprises to grow bigger and stronger, namely, “innovation, compound interest, chain operation and leverage”. An enterprise may not even need all four of them to grow larger and stronger. The life insurance industry happens to have them all, and the brand-new business model created by Taikang’s elderly care revolution is a perfect example. This business model provides an affordable yet high quality elderly care and brings benefits to clients and enterprises.

Innovation is an eternal driving force for corporate development. It is also a first principle for corporate growth. Innovation is taking the right actions based on insights of future trends, and it requires continuous efforts. Any industry, any business, and any enterprise, whether in traditional industries or of new economic forms, can only achieve continuous growth by forging its core competitiveness from constant innovation. “The Second Curve” is a classic theory often taught in innovation-related courses in business schools. If an enterprise can find a Second Curve that leads to a second take-off while its First Curve (the main business) is still moving upward and achieve growth of the Second Curve before its First Curve peaks, early resource inputs for the Second Curve will be countered, and the enterprise can achieve sustainable and perpetual growth. Bill Gates has a resonating theory that entrepreneurs should never stop looking for a second profit pool. Steve Jobs was also a master of the Second Curve Theory. When Apple launched Macintosh and achieved a huge success, Jobs had already been planning to introduce the music player iPod and enter the commercial music field. After iPod dominated the market, he turned to the design of the iPhone, which was followed by the iPad. Job’s new curves always originated from the existing ones, but they all have very different features. Taikang demonstrated the same logical rhythm on its journey of innovation, adhered to long-term development and avoided making blind actions. Taikang had very similar experiences in innovation as Apple: it started from traditional life insurance, then its innovation expanded to health insurance, pension, Internet insurance, asset management and other insurance fields to elderly care and health care industries. These business decisions may seem random, but they are actually well arranged and logically interconnected: all of Taikang’s businesses are deep digging and expanding the life insurance industrial chain. Each of Taikang’s new curves revolves around longevity, health and wealth needs in a full life cycle. Taikang’s system of products and services directly interfaces with the government, enterprises and individuals and forms a strong synergistic effect. Fairly speaking, not all innovations are drastic and disruptive, especially epochal and revolutionary innovations: they are breakthroughs made out of long-term accumulation.

Compound interest, known as the “Eighth Wonder of the World”, is the fruit of long-termism. It is an exponential method of growth. When quantitative changes are accumulated to a threshold, a qualitative leap will appear. The longer the investment period, the greater the compound interest earned. This is why life insurance can create interests for all three parties involved—clients, companies and agents. I’ve made a metaphor that there will be appearance of compound interest within a 30-year term, a “blossom” of compound interest within a 50-year term, and “Godly miracles” of compound interest within a 70-year term. The importance of compound interest in pension funding has been fully elaborated in previous chapters: investment of pension funds made as early as possible will accumulate wealth exponentially, thus solving people’s problems of having insufficient funds for elderly care and medical care in a 100-year-old life. Through longer-term fund accumulation and the amplification of compound interest, Taikang’s Happiness Guide provides our clients with the guarantee of a healthy longevity with the support of sufficient wealth.

Chains are a fast way of business expansion and growth and are also the key to scaling up for enterprises. The most well-known example of chains is probably the McDonald’s. In 1955, Ray Kroc spent 2.7 million US dollars purchasing seven McDonald’s chain restaurants and their names. Now, McDonald’s has become the world’s largest food company, and its chain restaurants can be seen almost everywhere in the world. The net profit of McDonald’s reached six billion US dollars in 2019. The dominant reason for the success of a large chain such as McDonald’s is that it captured a huge market through high-standard management of products and services, cost control, fostering a good reputation, building a good corporate image and enhancing operation efficiency. Before the emergence of online sales platforms, traditional enterprises expanded their customer base by establishing chain stores, branches and subsidiaries, promoting sales of products and services, and increasing the market influence of their brands. In fact, Internet companies also establish branches in different regions for localized operation in an effort to increase their penetration rate in local markets. Their approach could also be considered a way of developing chains. In addition to market expansion, a more important role of chains is to reduce costs through intensive supply chain procurement. In general, chains require a management system of very high standards and excellent management capabilities. Taikang is also trying to reduce its operational and management costs of the longevity communities by implementing chain operations. Taikang has been improving its management system and enhancing its management capabilities over the years, and now they can be shared and refined through continuous replication, enabling us to offer our clients high-quality eldercare in a timely manner.

Leverage, in its nature, is management in debt. Leverage gives a full play to capital. Like chains, leverage is also one of the ways for enterprises to rapidly expand in size and presence. Generally, the debt capacity of an enterprise represents its power or development potential. Banks, real estate and life insurance companies all operate in debt, and they fall naturally under the same category of the leverage sector. The liabilities of life insurance companies are long-term and stable, which presents unique advantages. However, leverage is a double-edged sword. The risk of using leverage for fast expansion is the highest of all: it could bring financial crisis and bankrupt entities. Therefore, enterprises must control their leverage carefully in development. Enterprises should leverage meaningful causes to improve people’s livelihood. Taikang invested a part of its insurance funds in building high-quality longevity communities, which changed the liability end and formed a long-term annuity product, the Happiness Guide. It has extended not only the term of the liability end but also that of the asset end. By making full use of the leverage effect of insurance funds, Taikang is able to better meet the needs of clients in a full life cycle and serve Chinese people’s livelihood more comprehensively, setting a true example of “from the people and for the people”.

Extending the Value Chain of the Corporate Plan

A successful business model not only maximizes the interests of shareholders but also benefits clients, the industry and even the progress of the whole society.

From the clients’ point of view, Taikang is striving to change their lifestyles and their views on life and death by providing comprehensive full-life-cycle solutions for them to meet the challenges in the Era of Longevity. In a traditional way of thinking, eldercare means passive acceptance, and “care” implies the need to be taken care of, and all seniors are considered to be vulnerable as a group. Under the influence of such “traditional thinking”, society has not been doing well enough to take older people’s real needs into account: we rarely see infrastructure or services designed to be senior-friendly; for example, swimming pools in the city seldom open to people over 70 years old, and many travel agencies require that tourists over 70 years old be accompanied by their family members. Products and services in the elderly market can only meet their basic needs for clothing, food, housing and transportation, while some functional products are even harmful to their dignity. A US bestseller, The Longevity Economy, pointed out that canned foods for the elderly produced by some US companies were widely unpopular, and the clumsily designed hearing aids were never accepted by the market because the designs of these products were so outdated that people would know at a glance that they were “for old people only”. Instead of accepting, senior citizens refuse to use these “old people products” to avoid embarrassment and humiliation in public. In contrast, presbyopic glasses designed to look similar to regular myopic glasses are very well accepted among elderly individuals. In fact, seniors today are healthier and more energetic than older people at any time in history, and they will live in good health energetically for a much longer time. For many seniors, the sixties and seventies are definitely the prime of their lives as their wealth, resources, wisdom and freedom all peak at this age, and they deserve to have dreams again, create value and obtain spiritual satisfaction.

The idea of enjoying old age advocated by Taikang represents a different attitude toward life, and it is an expression of active choice and subjective initiative. Everyone is entitled to enjoy old age. People should be able to make important decisions for themselves rather than depending on others. In our longevity communities, residents share their life experiences, redefine dimensions of happiness, exert their intelligence and create new value for society. Different from traditional nursing homes, Taikang longevity communities are a small society designed for elderly individuals, where every resident is a “new family member” of Taikang Community. While maintaining their own family relations, Taikang Community residents can take part in activities and communicate with their new “family members”, enjoy their life at an old age, and add value to their longevity. Residents in Taikang longevity communities are a new type of residents, and with their help, the communities are becoming pilots of the longevity economy: the longevity communities and their residents empower and inspire each other, educating the whole society to re-understand the needs and value of elderly individuals. The number of Taikang Community residents is expected to grow to 50,000–100,000 after ten years. At that time, we will be working with our residents to develop programs that offer more quality experiences of longevity. Through time banks, seminars, workshops, remote online education, assistance in the operation of owned media accounts and building expert platforms, we will help our residents continue to be productive using their knowledge and experience they have acquired and accumulated in a lifetime to keep creating wealth for society. A “Third Demographic Dividend” starring senior citizens will come into being. The value of life will be explored and enriched in a longevity economy.

From the perspective of the industry, Taikang have changed the development model of the traditional life insurance industry and led its transformation. Global experience shows that the life insurance industry in mature Western markets has encountered a bottleneck. In the US, since the mid-twentieth century, trends that adversely affected traditional life insurance, such as prolonged life expectancy and the prosperity of alternative products, have begun to appear. US life insurance companies then turned to selling annuities to rich people but lost their health insurance market share. Meanwhile, asset management companies and mutual funds emerged and snatched the market share of middle-class savings, which was originally the safety net for the life insurance business. The life insurance industry has been on a decline since then. In 2020, the premium income of traditional life insurance products in the US was over 170 billion US dollars, accounting for only 26% of the insurance industry, while the same figure was 76% in the 1950s. The premium of annuities, accident insurance and health insurance continued to increase and accounted for 43% and 31%, respectively, of the total premium of the industry in 2020, making them the major products in the business. However, most accident insurance and health insurance products are sold by professional health insurance companies, and those sold by life insurance companies account for only a very small portion of the market share. In the pension market, life insurance companies are performing similarly and cannot rock the dominating position of professional institutions such as mutual fund companies. In China, the growth of traditional life insurance products has stagnated in recent years, and the growth of the life insurance industry driven by health insurance products has also slowed down. However, the core needs of clients have not changed, nor have people’s primary demands for managing risks and planning future life through insurance. More importantly, people’s real medical needs and elderly care needs still have to be met by real entities. Therefore, in the face of challenges, life insurance companies must fully understand and focus on the changes in the demands of the middle class, make early deployment of medical care entities, and take initiative to integrate insurance coverage needs with health and elderly care services provided by real entities.

Compared with other types of business, commercial insurance companies have unique advantages in building an industrial system in the Era of Longevity. Insurance falls under the financial service industry and more so the people’s livelihood industry. Insurance entities truly hope that people can live a long and healthy life, and that they will take initiative to obtain benefits and avoid harm more than any other business entities in any other industry. Therefore, the insurance industry has a natural connection with the elderly care and health care industries. In the Era of Longevity, commercial insurance companies are not only product providers who help individuals and families accumulate funds for health care and elderly care. They are also major participants in the financing of the government’s three-pillar social security system, providers of solution packages of medical care and welfare for corporates, and powerful facilitators of innovation and development in medical care, elderly care and health service industries. The Taikang Plan has not only made innovations to products, clients, teams and sales but also accomplished breakthroughs in the industrial chain and created an innovative business model. Through these efforts, we hope to contribute to the development of the global insurance industry. It is gratifying that an increasing number of Chinese life insurance companies are beginning to deploy services in healthcare and elderly care facilities to integrate insurance coverage needs with health care and elderly care services. This will prompt China’s life insurance industry to transform along its own development course, better concentrate industrial forces and play a greater role in the Era of Longevity.

From the perspective of society, through innovation, Taikang is calling for more companies to join in responding to and addressing the challenges of longevity. Longevity issues are key matters that have a great impact on the future development of human beings. Ensuing the Era of Longevity, the Era of Health and Wealth will affect not only the elderly but also everyone’s life planning of their entire life. How to better cope with the challenges raised by this era is an issue that individuals, governments and enterprises must all consider. Traditionally, business operates for profit, and very few people resort to business for solutions to social problems. I beg to differ as an entrepreneur myself. In essence, the crux of solving social problems lies in how to mobilize social wealth as much as possible and how to match resources more effectively. Business is one of the creators of social wealth, and commercial enterprises pursue the optimal allocation of resources in a market-oriented way. An enterprise with correct values should naturally assume the responsibility of solving social problems. The current elderly care market in China is a diversified market, where as much as 90% of elderly care is home-based care. Community elderly care and institutional elderly care occupy only a small portion of the market. Although institutional elderly care is not the dominant form, Taikang managed to encourage and guide the elderly to play a valuable role and change people’s ideas of the traditional “old age” and nursing homes. It was done by providing quality elderly care services through our own facilities in combination with insurance. The social value and innovative connotation contained in such transformation are vivid footnotes to the longevity economy and have far-reaching significance.

I believe that the Taikang Plan is a more optimized approach. It provides clients with funding and services by marketized means to meet people’s demands for eldercare and healthcare in a full life cycle in the Era of Longevity. Specifically, a more optimized approach of funding means that clients can, through professional institutions such as us, make plans of their wealth in advance and manage their wealth in a full life cycle for maximum compound interest through long-term value investment. By entrusting professional and authoritative institutions, the elderly can enjoy various high-quality health care and elderly care services, avoid loss of wealth or dignity, and gain assurance and peace of mind. A more optimized approach of services refers to the Big Health ecology created by Taikang, which incorporates a full-ranged layout of medical care, elderly care, rehabilitation and hospice care facilities, providing clients with our “From Cradle to Heaven” product portfolio to meet their needs. The synergy between medical care, elderly care, rehabilitation and end-of-life care and services, in combination with the connection between payment and service, has reduced costs all-round and realized convenience and benefits. That is the charm of the Taikang Plan and an outstanding contribution to human beings in the Era of Longevity. Through this optimized approach of financing and service, we have truly realized the ideal of serving the people wholeheartedly in a market economy, ensuring our seniors enjoy elderly care, medical care, happiness and a sense of contribution.

The various problems in the Era of Longevity are similar to a “Gray Rhino”: they are the challenges the society has to face but also opportunities for enterprises to innovate their business models. Only companies with the ambition of solving social problems will strive to find the best solutions by mobilizing resources as much as possible and making continuous innovation. Throughout human history, all civilizations, Western or Oriental, have been pursuing longevity, health and wealth. People have also been thinking about what the ultimate purpose of human society truly is. I believe it is the harmony of society, the happiness of families and the health of individuals. Taikang’s business is closely related to people’s lives. Therefore, Taikang made a determined transition from insurance to health care and elderly care and then to the Big Health and eventually came up with the Taikang Plan for the Era of Longevity. Taikang is a forerunner in China’s elderly care revolution and a committed practitioner of the Era of Longevity theory. The essence of the Taikang Plan is to initiate an elderly care revolution and change people’s attitudes toward life and lifestyles. In the future, the longevity economy will become one of the mainstream forms of the economy, and we believe Taikang will be one of the most active enterprises in the Era of Longevity. We hope that the Taikang Plan will be the starting point for enterprises to explore market-oriented solutions in the Era of Longevity, that it will lead and inspire more valuable innovation and experiments, that it will stimulate the growth of longevity economy with insightful entrepreneurs of all industries, and that we can join the great cause of the building of a harmonious longevity society.