Breaking Through the Insurance Industry Impasse: How Health Management Drives High-Quality Development for Insurers

Recently, the Department of Personal Insurance of the China Banking and Insurance Regulatory Commission (CBIRC) issued the "Notice on Printing and Distributing the Report on Issues and Recommendations for the Development of Commercial Health Insurance in China," pointing out that, commercial health insurance has played a positive role in serving the Healthy China initiative, facilitating the development of a multi-tiered medical security system, and supporting the growth of the health industry.

However, it should also be recognized that China’s commercial health insurance industry remains in its early stages of development, with significant shortcomings in product supply and claims services. Three key challenges facing the industry are summarized as follows: insufficient risk protection capabilities, low levels of specialized operational expertise, and non-negligible business risks. To address these issues, supply-side reforms are proposed, including encouraging the development of products with specific coverage to provide more options for individuals with pre-existing conditions and the elderly.

In recent years, with the rapid development of health insurance, “insurance + health management” has become one of the key strategic focuses for many insurance companies.In terms of approaches to entering the health management sector, one model involves insurance companies establishing their own health management subsidiaries, such as Taikang Insurance’s comprehensive health ecosystem and Ping An Health’s in-house medical team. The other model entails collaborating with professional third-party management firms by procuring high-quality health management services, thereby emphasizing the service-oriented nature of their products.

So, how can insurance companies transform by stepping up their health management services? What are the underlying challenges? How effective is collaboration with third-party providers? This article will provide an analysis.

The insurance industry is experiencing a period of "growing pains."

Since last year, the number of insurance agents, who constitute the main sales force in the insurance industry, has been continuously declining. Data from the China Banking and Insurance Regulatory Commission (CBIRC) shows that nearly 1 million insurance agents left the industry in the first half of 2021 alone. On the other hand, the overall performance of the industry has remained sluggish. In the first eight months of 2021, the combined premium income of the five major insurers listed on China’s A-share market was approximately RMB 1.8383 trillion, a 0.58% decrease from RMB 1.8490 trillion during the same period in 2020, indicating negative growth in premium income.

Behind the sluggish performance of the insurance industry lie factors such as heightened uncertainty caused by the pandemic and a rapid decline in the number of agents, butThe core issue lies in the fact that insurance products on the supply side fail to meet customers’ actual needs.

Take the increasingly popular health insurance in recent years as an example. Although numerous products have been launched in the market, they suffer from severe homogenization. Product structures are relatively concentrated and singular, primarily focusing on medical expense coverage and critical illness insurance. This creates a significant gap with the diversified and multi-layered protection needs of policyholders. For instance, the so-called “health management” in the traditional insurance industry still belongs to medical access facilitation services. After purchasing insurance, users can obtain services such as emergency aid, appointment registration, and green channel access. In essence, insurers attempt to carry out their own health management by enhancing service capabilities within hospitals and expanding service touchpoints. However, this approach does not effectively address the fundamental issue of disease prevention.

Therefore, addressing the disconnect between traditional business models and products and current market demands has become an urgent challenge for major insurance companies.

From the current perspective, the solution adopted by insurance companies isCustomer acquisition is enhanced through high-quality services, with health management services serving as a key lever; there are two core reasons for this.

First, on the policy front, regulatory authorities are progressively strengthening top-level design, accelerating digital transformation, and supporting the integrated development of health insurance products and health management services.As early as September 2020, the Circular on Regulating Health Management Services of Insurance Companies, issued by the China Banking and Insurance Regulatory Commission (CBIRC), explicitly stated that insurance companies shall establish health management service information systems to enable the recording and management of changes in customers’ health information and the provision of health management services. Information on health management services provided by insurance companies shall be shared with customer data related to policy underwriting and claims settlement.

Second, on the market side, health management is no longer merely positioned as a value-added or ancillary service for insurance. Amidst the industry’s digital transformation, while being integrated into insurance offerings, health management is also reshaping the value chain of insurance products.From the perspective of how digital technologies transform various stages, all aspects—including marketing and sales channels, product design, claims and services, as well as pricing and underwriting risk control—can be reshaped through end-to-end digitalization.

Thus, building health management capabilities and promoting the high-quality development of health insurance have gradually become an industry consensus.

It is not an easy task to anchor in health management while effectively integrating products and services.

Over the past few decades, the domestic insurance sales model has been predominantly relationship-driven. Recruiting insurance agents essentially meant expanding a relationship network centered on those agents, with a primary focus on agent recruitment and customer acquisition. Consequently, sales and service activities tailored to specific products and customer needs have remained relatively weak.

Many commercial health insurance products primarily cover healthy individuals, as underwriting is based on the insured’s health status at the time of policy issuance; when policyholders face disease risks, these plans merely provide expedited services. However, there is a growing demand among policyholders for comprehensive, lifecycle-oriented services, including health protection and diagnosis and treatment for pre-existing conditions.

On the other hand, public understanding of diseases remains in a developmental stage. The etiology of chronic diseases is highly complex, making chronic disease management a systematic endeavor that requires multi-dimensional, long-term tracking and feedback. Consequently, the integration of insurance into chronic disease management has encountered numerous challenges in its initial stages.

The emergence of emerging technologies and approaches, such as mobile internet, big data, cloud computing, 5G, and wearable devices, has provided new perspectives for chronic disease management: By leveraging technological tools, it is possible to better avoid the need for patients to frequently visit hospitals for prescription refills, and to facilitate the collection of health metrics such as blood pressure and blood glucose levels, thereby guiding physicians in adjusting treatment plans.

In terms of health management approaches, typical representatives of self-established health management companies include the grand health industry ecosystem built by Taikang Insurance., its advantage lies in the integration of Taikang’s industrial chain and service chain, thereby enabling efficient coordination of internal resources. However, this approach is capital-intensive, requiring substantial investment and featuring a long payback period. It places significant demands on insurers’ capital pools and necessitates that insurance companies possess a thorough understanding of the medical and broader health sectors.

Another is the procurement of health management and follow-up services, primarily involving collaboration between insurance companies and third-party administrators that link insurance with healthcare services. However,The key to this service model lies in how insurers can align the services they procure with their own products and the needs of policyholders.

For instance, Miao Health, a digital precision health management company, leverages digital tools to implement complex health management solutions and integrates them into every stage of insurance products. Building on digital health management for insurers’ customers, it provides end-to-end services covering the entire health insurance business process—including innovative product development, agent empowerment, policy issuance and renewal, health management, underwriting and claims adjudication, and operations—thereby addressing insurers’ needs for transformation and upgrading.

Miao Health has launched a combined solution featuring “H (Health Risk Stratification Management Platform) + M (AI-Based Health Intervention Platform) + Digital Therapeutics.” Its product offerings include online mobile apps and mini-programs, an internet hospital, and offline smart health management stores, providing users with full-lifecycle health management services.

Digital technology has enabled the implementation of health management services, thereby improving policyholders’ health outcomes and reducing the incidence and mortality rates of chronic diseases, which in turn lowers healthcare costs and insurance claims.In this process, the richness and quality of health management service resources are particularly important. Taking “Blood Pressure Control Guardian – Hypertension” insurance, launched by Miao Bao under Miao Health in collaboration with insurance industry partners, as an example, personalized health plan management has enabled compliant users to reduce the incidence of complications by more than 50%.

This insurance product model, built on health big data models and continuous monitoring of behavioral and medical data, enables insurers to effectively identify changes in policyholders’ risk profiles, provide early warnings for high-risk populations, and implement subsequent health interventions. This makes intelligent underwriting more feasible, facilitating differentiated product pricing and controlling premium expenditures.

Despite the numerous challenges currently facing the insurance industry, such as issues related to costs, management, and products, its development remains relatively extensive. The aforementioned notice issued by the China Banking Regulatory Commission (CBRC) also highlighted that: first, due to the short operational history of health insurance, there is an insufficient accumulation of empirical data; even the data that has been accumulated lacks in-depth mining and organization, indicating that the scientific rigor and precision of health insurance product design need improvement; second, integration with health management is inadequate, with a lack of proactive and ongoing health management for customers. Most efforts focus on post-event claims settlement, failing to establish a “insurance + health management” business model, resulting in low efficiency in controlling medical expense expenditures.

However, the present moment also represents a rare opportunity for industry transformation.The opportunity lies in the fact that, empowered by digital technologies, the supply side of future services will become increasingly diverse.For instance, the application of IoT (Internet of Things) technology in claims processing can not only reduce the probability of insured incidents but also serve as an optimal lever for risk management and services. According to the "iAnalyst · China Insurance Industry Technology Report,"Over the next five years, the digital ecosystem will serve as the insurance industry’s moat, poised to create a market worth trillions of yuan, thereby offering greater potential for high-quality development among insurance enterprises.

After all, relying solely on homogenized products and price wars to capture market share is destined to be a “red ocean struggle,” whereas continuously expanding into diversified businesses such as health management to provide high-quality services and generate greater premium may open up a “new blue ocean” in the market.

It is important to recognize that, in this process, short-term premium growth and population coverage are not the key dimensions for assessing the success of an insurance company; time is the only effective benchmark for evaluating a company’s long-term value:Only by earning users’ enduring trust and confidence can one emerge as true gold amid the industry’s rigorous trials.