The private health insurance business is booming in China, as many companies jump into the market and a more affluent population chooses to supplement government-provided basic health insurance.
In 2018, private health insurance revenue totaled 544.8 billion yuan ($76.2 billion), an increase of 24.1 percent from 2017, according to data from the China Banking and Insurance Regulatory Commission.
China Reinsurance Co Ltd data showed serious illness insurance and short-term medical insurance has been growing at 30 percent to 80 percent per year in the last five years and is expected to grow at double digit rates at least for the next three to five years.
In 2019, health insurance sales exceeded car insurance sales, to become the largest single insurance type in the Chinese market.
In an interview with China Daily, Fang Chao, deputy general manager and chief health officer of Aixing Life Insurance Co, said the government is paying a lot of attention to health insurance, which will be the next engine for social economics.
However, he explained that healthcare is very expensive, so the gap between what the government can afford and total coverage is the opportunity open for private health insurance to step in.
Fang explained that insurance companies are offering a variety of insurance products tailored to patient needs. Some provide specific payments if a person gets one of the diseases listed on the contract.
Also, some insurance policies provide reimbursement for hospital costs that exceed the government insurance allowance. Other types of insurance policies cover disability or long-term nursing needs.
Many companies and other organizations purchase supplementary insurance for their employees. Finally, individuals purchase supplementary insurance, especially protection against catastrophic disease or injury, for themselves.
The government is loosening regulations to encourage more firms to participate in the market. The government is also encouraging health insurance companies to use their money and resources to provide direct healthcare management and lifestyle intervention that leads to healthier lifestyles, Fang explained.
However, the health insurance market is highly competitive and risky.
An August 2016 study by Boston Consulting Group and Munich Re said that challenges in the Chinese market have made most providers unprofitable. Many potential customers don't know about the products, some products are not tailored to meet the needs of customers, and there is the danger only patients who know that they are sick or likely to become so will buy insurance.
But the study concluded that the challenges are not insurmountable.
"Health insurers able to perform sophisticated customer segmentation, create differentiated products, and run their reimbursement related operations efficiently will have a chance to break through in the years ahead."
Yang Yufeng, CEO of Beijing Yueyou Biomed Tech Ltd, a company that specializes in health data analysis, said: "Big data analysis allows companies to design products precisely for different customers - reducing the risk for the insurance companies and allowing them to reduce their margins. For example, an insurance plan designed using big data which is about to launch in Zhejiang province will sell at approximately half the price of previous similar products."
Wang Lei, general manager of the internet insurance department of Sunshine Life Insurance Co, said that social insurance generally lags behind clinical medical technology. For instance, some drugs that are already in clinical use may not be reimbursable. This provides an opportunity for private health insurers.
He notes that the government is supporting tax policies and insurance regulations that allow people to renew their policies, even if they are sick in the previous year. He also noted that the government is closely regulating the companies to ensure their solvency.
Total medical expenditures in China grew at 19 percent per year from 2007 to 2011, 13 percent annually from 2012 to 2016, and are expected to continue growing at 8 percent annually at least through 2025, according to the National Health Commission.
Lu Wenjie, chief product officer of Nuanwa Insurance Technology Co, explained that "it is the nature of social security that it can provide only the most basic medical services. For some value-added services, the government cannot afford to pay for them ... Medical technology has raised the cost of medical treatment, so limited social security funds are not enough to support the national demand for medical services, so the authorities advocate the social responsibility of commercial insurance to supplement basic health insurance."
Lu explained that medical insurance has policy support and large domestic demand.
"In China, there are two fees that are necessary and about which Chinese people never bargain - one is the cost of education and the other is the cost of healthcare," he said.