Aixuan Technology Files IPO Prospectus: Empowering Insurers to Unlock the Non-Standard and Elderly Health Insurance Market

According to LeadLeo Research Institute, the market size of China's insurtech industry grew from RMB 56.19 billion in 2016 to RMB 91.85 billion in 2020, representing a compound annual growth rate (CAGR) of 13.07%, and is projected to reach RMB 138.3 billion by 2025.

According to the "Insurtech Insight Report," investment and financing in the insurtech sector grew from RMB 4 million in 2012 to RMB 3.898 billion in 2019, reflecting increasing capital attention to this segment.

As this industry flourishes, it prompts the question: What exactly are insurtech startups aiming to solve?

Precision risk control and pricing, intelligent marketing, and automated underwriting provide the most direct answer to this issue.

According to the “14th Five-Year Plan for the Development of Insurance Technology” released by the Insurance Association of China on December 29, 2021, during the “13th Five-Year Plan” period, the overall adoption rate of cloud computing in the insurance industry was 76.79%, with an average underwriting automation rate of 55.77%, a risk assessment automation rate of 64.71%, an average claims settlement automation rate of 21.48%, and an average proportion of online customers at 41.88%.

This document reiterates a view that appears to have become an industry consensus: technology will reshape the applicability of most regulatory frameworks and the foundational operational basis of the insurance industry, driving profound transformations in marketing, service, operational, and competitive models. It continuously fosters new business models, formats, and industries, serving as a highly efficient “catalyst” for the evolution of the insurance sector’s development landscape.

However,Beyond addressing insurers’ challenges in risk control, pricing, and marketing, what additional value can insurtech companies bring to the industry?

At a time when the industry is fervently debating how to effectively integrate health insurance with health management, is the answer to assist insurance companies in delivering robust health management services?

In the view of Zhang Qingfeng, founder of Beijing Aixuan Information Technology Co., Ltd. (hereinafter referred to as “Aixuan Tech”), one issue currently takes precedence over the implementation of health management: how can non-standard risk groups, such as the elderly and individuals with pre-existing conditions, enjoy more inclusive access to commercial health insurance benefits?

What Kind of Company is AIXUAN Tech? Why Does Its Core Business Strategy Target Non-Standard Risk Health Insurance? Compared with conventional health insurance products, non-standard risk health insurance imposes extremely high demands on the risk control and actuarial capabilities of insurtech companies. How does AIXUAN Tech manage to offer relatively inclusive insurance benefits to individuals with non-standard health profiles while ensuring that insurers’ risks remain controllable? The answers to these questions may be found in VCBeat’s interview with Zhang Qingfeng.

What kind of person is Zhang Qingfeng?

Based on his resume, Zhang Qingfeng has many years of government work experience; he previously served as Marketing Director at AIA Insurance, bringing 15 years of experience in insurance industry operations, product development, and marketing; he also led the founding of an internet hospital.

What stories lie behind the transitions from government to insurance, then from insurance to healthcare, and subsequently from healthcare to insurtech? What were the catalysts for these strategic pivots?

“Venture out into the wider world”—this was a thought that lingered in the mind of Zhang Qingfeng, who was then working in a government agency.

“For me personally, first, I have a strong affinity for tier-one cities like Beijing and Shanghai, as I believe that young people should venture out and explore new opportunities; second, there has always been a fire burning within me. That fire is entrepreneurship,” said Zhang Qingfeng.

Faced with a multitude of industry options, Zhang Qingfeng chose insurance. The reason is that Zhang Qingfeng believes that in the U.S. capital market, a significant amount of capital is tied to insurance and pensions, whereas in China, the insurance industry still holds substantial potential for development, whether in terms of premium income or the scale of investable assets.

The true catalyst and rationale for Zhang Qingfeng to lock his entrepreneurial focus onto the health insurance sector stemmed from medical charity initiatives organized by non-governmental organizations (NGOs) from 2011 to the present. It was through these activities that Zhang Qingfeng met He Jiangang, the other co-founder of Aishuan Technology. These same initiatives also enabled the two founders to recognize the opportunities within China’s health insurance market.

According to Zhang Qingfeng, during the course of the event, he found that the data foundation for pricing health insurance in China was insufficient. There are two reasons for this phenomenon: first, the volume of claims in domestic commercial insurance is relatively low; second, there are significant regional disparities in data.

At this point, Zhang Qingfeng cited an example to VCBeat: at that time, the cost of treating appendicitis in a certain region was approximately RMB 2,400, while in another nearby area, it could reach RMB 4,000; in Shenzhen, the cost might even rise to RMB 10,000.

“In China, due to the large population and vast territory, there are significant variations in disease incidence, treatment costs, and treatment durations. Therefore, health insurance products cannot be priced based solely on a simple, straightforward table. Paradoxically, however, health insurance pricing at the time was often crude,” said Zhang Qingfeng. “Thus, we believe this landscape presents substantial commercial opportunities, and we feel a responsibility and obligation to drive the development of health insurance pricing systems toward greater precision.”

Thus, AIXuan Technology was established.

In the interview,Zhang Qingfeng summarized the positioning and characteristics of Aixuan Technology as follows: “Aixuan Technology is positioned as a healthcare and insurtech company. If we were to describe the core feature of Aixuan’s business in one sentence, it would be predicting mortality and morbidity risks for specific populations, and on this basis, providing product pricing for these targeted groups to insurers and reinsurers, along with risk control systems and refined risk management rules tailored to these special populations.”

Specifically, the specific groups referred to by Zhang Qingfeng are substandard risk individuals and the elderly population. Among them, substandard risk individuals refer to those who do not meet the standard acceptance criteria of insurance companies in terms of health conditions and age-related physiological factors. Examples include individuals with "the three highs" (hypertension, hyperglycemia, and hyperlipidemia) and chronic diseases, those with positive findings for nodules in the thyroid, lungs, breasts, etc., and those of advanced age exceeding the conventional insurable range.

In other words, the so-called "non-standard risks" refer to individuals who have varying degrees of health issues disclosed during the standard underwriting health questionnaire. These individuals may only be accepted for coverage if additional underwriting conditions are applied, such as rated premiums, exclusions, or benefit limits. Furthermore, when purchasing insurance products with different risk profiles from various insurers, this group faces a higher likelihood of declinature compared to standard risks.

Regarding why health insurance products targeting non-standard risk populations are priced and risk-controlled, Zhang Qingfeng stated that there are mainly two reasons:

First, it was based on the assessment of the development of the health insurance industry at that time. “We believe that the domestic health insurance industry is developing rapidly, but at the same time, it will soon reach saturation in terms of product types. Moreover, considering a series of limiting factors such as payment capacity, willingness to purchase, physical condition, and age, the market space for existing health insurance products is also approaching saturation.”

Zhang Qingfeng’s viewpoint is reflected in the relevant data.

In terms of premiums, according to the report “In-Depth Analysis of the Health Industry (Part I): Health Insurance Is Booming, Product Innovation Is Urgently Needed” published by Haitong Securities in 2021, the compound annual growth rate (CAGR) of health insurance premiums over the previous five years (calculated from the report’s publication date) was 28%, far exceeding that of life insurance and accident insurance; however, the year-on-year growth rate declined to 16% in 2020.

Behind this trend, in addition to the indirect impact of the COVID-19 pandemic on household finances in China, another contributing factor is the disruptive effect on sales caused by the explosive growth of “Huiminbao” (inclusive supplemental medical insurance) in recent years, due to its overlap with million-yuan medical insurance in terms of coverage scope and insured populations.

In terms of product types, health insurance mainly includes critical illness insurance and medical insurance, as well as long-term care insurance and disability insurance. Within critical illness insurance, critical illness policies are a significant contributor to the new business value of insurance companies. However, in the short term, the transition in the definition of critical illnesses has exhausted part of the market demand. From a medium- to long-term perspective, although there is still some room for growth in critical illness insurance, after years of development, it has shown signs of growth fatigue.

Although medical insurance overlaps with critical illness insurance in terms of coverage scope, its development must be closely integrated with the healthcare ecosystem due to its unique characteristics. However, China’s healthcare ecosystem faces significant challenges in auditing medical expenses and managing healthcare service providers. With high barriers between domestic medical institutions and social security agencies, commercial insurers encounter substantial difficulties and high costs in penetrating the healthcare sector, resulting in limited effectiveness in actual cost containment. Consequently, medical insurance currently cannot serve as a strong driver for profit growth among insurance companies.

As for long-term care insurance and disability income insurance, commercial long-term care insurance in China remains in its early stages of development due to a lack of public awareness regarding long-term care risks. The number of disability income insurance products available on the market is also relatively limited.

Furthermore,Apart from the fact that there have been no significant changes in the main types of health insurance products, serious product homogenization is also a challenge across various insurance categories. Product innovation and iteration have become the central themes advocated by the health insurance industry in recent years.

Second, it is based on predictions of future trends. Opportunities often coexist with challenges.

In Zhang Qingfeng’s view, the future development of society faces three major challenges: first, the contradiction between government-issued pensions and the desire for a high-quality elderly life; second, the contradiction between medical insurance reimbursements and the improvement of medical care and drug quality; third, with the advent of an aging society, the contradiction between the growing population requiring long-term care and the limited payment capacity of medical insurance coupled with insufficient penetration of commercial insurance.

Based on the above statement, it is evident that Zhang Qingfeng views elderly care, geriatric healthcare, and medical care for individuals with pre-existing conditions as issues that must be addressed in the course of future societal development.

“Overall, on the one hand, we believe that as traditional health insurance products approach market saturation, expanding into new customer segments is essential for market growth. On the other hand, addressing elderly care and healthcare needs for individuals with pre-existing conditions holds significant importance in meeting the genuine demands of the state, society, and families,” stated Zhang Qingfeng. “Based on these two fundamental insights, we aim to leverage our core technological capabilities to enhance pricing models for health insurance products targeting the elderly and individuals with pre-existing conditions, thereby helping them enjoy standard coverage.”Insurance benefits available to groups. In summary, this means expanding the pool of insurable individuals and offering a broader range of covered benefits.”

“From a technical perspective, if the full score is 100, the pricing difficulty for conventional health insurance products is 60, while that for non-standard risk health insurance products exceeds 90.”Zhang Qingfeng stated.

Why Is Pricing Non-Standard Health Insurance Significantly More Challenging Than Pricing Conventional Health Insurance Products?

This is mainly due toNon-standard underwriting products consist entirely of clients with pre-existing conditions or health abnormalities, entailing high risk and complex health profiles. Unlike the conventional million-yuan medical insurance population, which exhibits minimal deviation from standard health indices, the non-standard group shows a vast disparity in disease incidence rates between low-risk and high-risk individuals.

Not only that,When conducting non-standard health insurance business, the feasibility of conventional manual underwriting is relatively low. This is primarily because, in theory, customers in the non-standard business model all require risk screening and differentiated underwriting treatments.

Therefore, the underwriting workload for non-standard risk business is substantial. Relying on traditional manual underwriting not only incurs significant costs but also poses challenges in ensuring operational consistency. Consequently, underwriting for non-standard health insurance must leverage underwriting rules and intelligent underwriting engines tailored to its specific characteristics, while guaranteeing timeliness, accuracy, and appropriate risk alignment.

How did AIXUAN Technology overcome the aforementioned challenges to achieve risk control for non-standard health insurance?

According to Zhang Qingfeng,For non-standard risk business, AIXuan Technology’s first step is to complete population stratification. In this phase, AIXuan Technology aims to clarify the distribution of health conditions within each stratum. The second step involves developing corresponding risk-based pricing rules tailored to the health characteristics of each population segment.

In simple terms, the logic behind AIXUAN Technology’s risk pricing for non-standardized business involves stratifying specific population groups and correlating health status indicators with risk indicators at each level (where each health indicator corresponds to a specific risk indicator), thereby automatically generating risk rules.

In this way, not only can individuals with urgent insurance needs obtain coverage, but insurers can also achieve a reasonable balance between risk and profit by leveraging more refined and scientifically grounded risk rules, thereby driving premium growth.

Taking 30-year-old males as an example, under conventional models, only the top 30% of this demographic may qualify for standard health insurance benefits, meaning coverage is limited to the healthiest 30% and premium income may amount to merely RMB 300. However, by leveraging Aixuan Technology’s risk assessment rules, the insured population could expand to cover 50%–80% of this group, potentially increasing premium income by two to five times.

Furthermore,It is worth noting that Zhang Qingfeng explicitly stated that Aixuan Technology will not engage in non-standard underwriting business for single diseases unless absolutely necessary.

“Respecting market dynamics is a core tenet of Aixuan Technology’s development philosophy. We believe that non-standard risk health insurance for single diseases imposes stringent requirements on the sales side,” said Zhang Qingfeng. “Our approach to developing non-standard risk business is based on a different rationale.”

This approach is also related to the risk rules of AiXuan Technology.

For example, if an applicant is in perfect health during the underwriting process, they may proceed directly to Underwriting Process A to purchase insurance. If there are minor abnormalities in their health indicators, they will be automatically routed to Underwriting Process B, where a determination will be generated based on their actual health status. If coverage is approved, the system will recommend underwriting with adjustments such as premium loading or exclusions; however, the insurance benefits under both Process A and Process B remain identical.

“Currently, AIXuan Technology can support over 300 medical conditions in this area. Customers who are completely healthy can directly proceed with Insurance Underwriting Process A, while those with abnormal health findings will automatically trigger Insurance Underwriting Process B. This means that, under this approach, there is no longer a need to differentiate by individual diseases. Consequently, many challenges associated with product sales and marketing are avoided,” summarized Zhang Qingfeng.

In the non-standard risk health insurance business, data and services are regarded as two critical pillars.

In terms of data, Zhang Qingfeng believes that data at three levels are crucial:

First, the claims data and experience accumulated by insurance companies themselves;

Second, the experience and models accumulated by the insurtech industry itself;

Third, medical data and health examination data.

Medical data targeting specific patient populations represents the highest-quality health insurance data. Once such data achieves a certain scale of coverage and remains within a closed ecosystem for a sustained period, it acquires clear pricing significance.

The primary reason why health checkup data is equally important lies in its ability to identify not only healthy individuals but also those with abnormal health indicators who do not yet meet the criteria for hospitalization, as well as those who require pre-hospitalization intervention. Furthermore, to some extent, health checkup data is relatively granular, enabling the derivation of health status distributions across different regions, occupational profiles, and age groups.

The integration of these two types of data studies enables a more comprehensive mapping of mortality and disease risks across the entire population.

“If we look at it purely from a technical perspective, services such as chronic disease management and convenient medical access are indeed crucial in the development of non-standard health insurance. However, for ordinary users, especially those with chronic conditions and the elderly, their purpose in purchasing insurance is not to obtain chronic disease management or other medical services. Their core demand lies in securing eligibility for insurance coverage,” said Zhang Qingfeng.

Guided by this understanding, the logic underpinning Aishuan Technology’s health insurance business for individuals with non-standard health profiles follows a three-step framework: risk identification, risk progression forecasting, and risk management.

It is evident that the services provided by Aixuan Technology in its non-standard risk business are reflected in the areas of risk development forecasting and risk management.

AndAixuan Technology’s risk prediction services are primarily powered by a computational system called “Aixuan Age.” This system conducts digital health assessments and predicts mortality and disease incidence risks based on clients’ physical conditions, including medical examination results, disease status, exercise habits, lifestyle behaviors, and occupational environmental factors. The system then transmits each client’s key risk factors to partnered health management service providers, which deliver targeted health management interventions to mitigate these risks and improve the clients’ overall health risk profiles.

That is to say,Within the business landscape formulated by Aixuan Technology, the core is an individual risk assessment system centered on “Aixuan Age.” Risk management is an outsourced function, requiring collaboration with third-party service providers in relevant industries.

If addressing the issue of health insurance eligibility for the elderly and individuals with pre-existing conditions, and providing them with targeted health insurance products and services, constitutes Aishuan Technology’s short-term goal, then seeking collaborations with third-party industry players to build a closed-loop ecosystem for the “pharmaceutical, healthcare, and insurance” sector will be Aishuan Technology’s strategic plan for the foreseeable future.

Regarding the types of corporate partners AIXUAN Technology will prioritize, Zhang Qingfeng revealed: first, enterprises with large-scale health management service capabilities; second, pharmaceutical companies, medical device manufacturers, and firms specializing in innovative drugs and therapies; third, companies in the diagnostic testing sector. This is because diagnostic methods significantly impact health insurance claims processing and product pricing, while the introduction of new testing modalities enables earlier risk management for clients.