Seizing the Opportunities in the Transforming Home-Based Elder Care Industry
China’s elderly care and health industry is ushering in a new phase of transformation.
At the end of last year, the “Proposal” for the 14th Five-Year Plan issued by the Central Committee of the Communist Party of China proposed to “implement a national strategy for actively responding to population aging.” The inclusion of the term “actively” and the designation of this as a “national strategy” have ushered in significant development opportunities for the elderly care industry.
From the perspective of policy support, as of February this year, the party committees of all 31 provinces, autonomous regions, and municipalities directly under the Central Government had successively reviewed and approved their local "Recommendations for the 14th Five-Year Plan." In these regional plans, elderly care has been given significant attention, with "age-friendly renovations of public spaces" and "development of the silver economy" emerging as key focus areas for development over the next five years in multiple provinces, autonomous regions, and municipalities.
From the perspective of market development, data from iiMedia Research shows that the scale of China's elderly care industry reached RMB 6.57 trillion in 2018 and is projected to reach RMB 10.29 trillion by 2022. This growth is driven by the rapid increase in China's elderly population. According to data released at a press conference by the Ministry of Civil Affairs in October 2020, the national elderly population is expected to exceed 300 million during the 14th Five-Year Plan period.
In line with this major trend, the broader health industry is being reshaped: the surge in the elderly population has expanded the demographic base for age-related diseases, and since this group’s essential demand for medical and healthcare services far exceeds that of any other age bracket, older adults are undoubtedly becoming one of the mainstream consumer segments in the broader health market. As a result, new business models and innovative technologies will continue to emerge and evolve, driven by both demand and policy support.
Amidst the changing landscape, a blueprint for the development of the health industry catering to the elderly is being drawn.
China's population is aging at an accelerating pace.
According to internationally accepted standards, a region is considered to have entered an aging society when the population aged 60 and above accounts for 10% of the total population. By this criterion, China entered an aging society around 1999. Over the past two decades, the proportion of elderly people in China’s total population has doubled.
In particular, starting next year, the cohort born during the 14-year peak from 1962 to 1975 will be entering old age. This means that China will experience a peak in population aging over the next decade or so, with an increase of more than 200 million elderly individuals.
On the other hand, China’s population is currently characterized by increasing life expectancy and declining fertility rates. According to the World Population Prospects 2012, approximately 150 million one-child families existed in China by 2015 as a result of the long-standing implementation of the family planning policy.
In summary, the convergence of a growing elderly population and the prevalence of only-child families has led to a most significant issue: the number of individuals requiring care is rising at an unprecedented rate, while the old-age dependency ratio continues to climb. According to the China Statistical Yearbook, China’s old-age dependency ratio reached 17.8% in 2020, compared to less than 9% in the 1990s. This means that whereas each elderly person was previously supported by an average of 11 individuals, this figure has now dropped to approximately six. Consequently, the societal burden of elderly care is steadily increasing, placing greater pressure on children to support their aging parents.
Experience from countries that have entered an aging society for many years shows that establishing a sound pension system is an effective measure to cope with the burden of elderly care. Since the 1990s, China has been actively innovating and reforming its old-age insurance system. After more than two decades of efforts and development, a new old-age insurance system has been preliminarily established in China, forming a multi-tiered and multi-pillar new-type old-age insurance system mainly consisting of basic old-age insurance, enterprise supplementary old-age insurance, and individual savings-based old-age insurance. This has largely alleviated the pressure of elderly care in China.
However, constrained by the rapid growth of the elderly population, the basic old-age insurance system currently faces two challenges. First, the benefit level of the basic old-age insurance for urban and rural residents is limited. According to the 2019 Statistical Bulletin on the Development of Human Resources and Social Security, there were 123.1 million recipients of basic old-age insurance benefits for urban employees nationwide, with total fund expenditures reaching RMB 492.28 billion and an average monthly benefit of RMB 3,332.5 per person, which is sufficient to meet basic living needs. During the same period, 160.32 million people across China received benefits under the basic old-age insurance scheme for urban and rural residents, with a monthly average of only RMB 162 per person, indicating a low replacement rate.
Second, there is significant fiscal pressure. As a major contributor to the basic old-age insurance for urban and rural residents, the government provides basic pensions to the elderly population and subsidizes resident contributions. According to the "China Pension Actuarial Report 2019–2050" released by the Chinese Academy of Social Sciences in April 2019, the cumulative surplus of China’s basic old-age insurance may be exhausted by 2035, and the pension security gap during the 14th Five-Year Plan period could reach 8 to 10 trillion yuan.
It is against this backdrop that the market is calling for new solutions.
Facing the trillion-yuan market opportunity in elderly care, real estate developers, tech giants, and innovative startups are all actively exploring and strategically positioning themselves.
For example, Vanke, a representative of China’s real estate developers, has successively explored various elderly care business models, including launching residential projects focused on nursing needs and creating one-stop senior living communities that provide “independent living, assisted living, and skilled nursing” services. Tencent, in its financial-related businesses, has also launched multiple target-date funds for retirement.
It is evident that competition in the elderly care market is exceptionally fierce. However, this also indicates that the market is sufficiently large, and coupled with its high growth rate, the industry’s ceiling will continue to rise.
One trend deserves attention in this development process: From the perspective of birth cohorts, with 2021 as the reference point, individuals born in the 1990s are reaching their thirties, while those born in the 1980s are entering their forties. The parents of these groups are approaching or have already surpassed the age of 60, entering an advanced stage of aging. Meanwhile, their children are in the early stages of child-rearing and K–12 education. Consequently, the “sandwich generation” of the 1980s and 1990s cohorts, burdened with caring for both elderly parents and young children, currently faces the greatest pressure in family-based elder care.
“Under current circumstances, a typical couple is responsible for supporting four elderly parents. This represents a significant shift from the past, when multiple children would share the burden of caring for one set of parents,” Wu Hongxing, founder and CEO of Shanzhen, told VCBeat. “Due to the expansion of university enrollment, the post-80s and post-90s generations have undergone an irreversible population flow from third- and fourth-tier cities and below to first- and second-tier cities. As a result, providing companionship and managing the healthcare needs of their aging parents has become increasingly challenging.”
Addressing this pain point, Wu Hongxing and his team founded Shanzhen in 2015. By focusing on the silver economy and general health sector, the company helps young people address their parents’ health concerns. With over 10 million users served to date, it has become China’s largest health service platform for parents.
Shanzhen’s strategy is to create a product loop through “customized health checkups – health management – insurance payment,” providing users with full-lifecycle health management services. “Our goal is to help children transition from personally caring for their parents’ health to supporting their elderly care by purchasing professional services.” According to Wu Hongxing, the underlying logic of this business model is that aging is not a local variable but a global one; in other words, market growth is driven not only by the needs of the elderly population itself but also by the demands of the entire demographic group comprising both parents and their children.
In response to this, Shanzhen’s specific business layout primarily focuses on three areas.
In terms of health checkup services, children can book appointments for their parents who live in different locations through the Shanzhen platform (WeChat Official Account, Mini Program, APP, etc.). To make the checkups more personalized, Shanzhen’s medical team has designed customized health checkup packages specifically for middle-aged and elderly individuals based on user needs, ensuring greater pertinence. Additionally, after the checkup is completed, Shanzhen continues to provide the service of “expert voice interpretation of health checkup reports from Grade A tertiary hospitals,” helping both children and their parents understand the significance behind the various indicators in the report.
In terms of family health advisory services, Shan Zhen provides users with an integrated family health management service that includes one-on-one exclusive health consultations, personalized health management plans, and customized family health records. This service is designed to help users’ parents effectively manage disease prevention, dietary adjustments, and exercise-related health. To date, it has covered over 100,000 families.
In terms of insurance payments, Shanzhen has pioneered the industry’s first “Senior Medical Insurance” in collaboration with partners, leveraging its long-term research on health data of the silver-haired population and a nationwide health service network through a “risk control + health services” model. Currently, based on its self-developed Alpha precision risk control engine, Shanzhen provides innovative health insurance solutions for the silver-haired and non-standard body populations, offering an integrated solution that covers product design, pricing support, underwriting and risk control, reinsurance arrangements, marketing support, and health management.
It is evident that Shanzhen has entered the market through health checkups, providing a clear behavioral pathway for children to help their parents address health issues. First, health checkups for the elderly are a rigid demand, requiring at least an annual examination, which results in high repurchase rates and compliance. Furthermore, when health issues are identified during these checkups, or when daily health services are needed, users can leverage Shanzhen’s Family Health Advisors to access integrated health management services. Finally, from a payment perspective, “elderly medical insurance” offers users diverse payment options.
“The most significant change here is shifting the payer from ‘parents’ to ‘children.’ Why did parents rarely undergo health checkups in the past? This stems from a collective psychology among the elderly who are afraid of spending money. Now that their children have purchased this service for them, parents feel reluctant to let it go unused due to fear of ‘wasting money,’” said Wu Hongxing. “While the elderly population is highly concerned about their health, they are often unwilling to burden their children. Meanwhile, although young people are eager to care for their parents, geographical distance has become a major pain point for them.”
It is precisely the separation between payers and beneficiaries that enables Shan Zhen’s solution to address both the psychological concerns of children regarding their parents’ well-being and the actual medical and health needs of the elderly.
From a higher-dimensional perspective, improving the quality of life for the elderly requires not only high-quality medical services but also changes in lifestyle habits. In other words, there needs to be a shift from passive medical treatment to proactive disease prevention and health management. However, health management often goes against human nature, resulting in low adherence among the elderly population. “We have found that once their children pay for these services, the adherence of the elderly improves significantly,” said Wu Hongxing. He believes this insight may offer valuable lessons for the elderly care and health industry, thereby helping to enhance the quality of life for China’s elderly population.
In terms of operational strategy, Shanzhen has introduced service channels via WeChat Official Accounts and WeChat groups, catering to the current habit of the elderly population who have begun to access mobile internet but have not yet fully immersed themselves in it. This approach lowers the barrier to entry for middle-aged and older users. Furthermore, to foster scientific health concepts among the elderly, Shanzhen is actively providing users with authoritative health education and popular science content.
In summary, by addressing the pain points faced by the post-80s and post-90s generations in caring for their parents’ health and by decoupling the “payer” from the “demand side,” Shanzhen has identified a new model pathway for the elderly care industry. Practice has demonstrated that this model resolves the difficulties children encounter in managing their parents’ health and improves parental adherence to health management protocols.
In the healthcare sector, identifying the appropriate payer has always been a critical component in building a business model.
In the field of elderly care and health, apart from the basic old-age insurance mentioned above, there has been a significant gap in commercial "elderly health insurance" specifically targeted at the senior population. The underlying reason is the high prevalence of diseases among the elderly and the associated high treatment costs. For instance, relevant data show that the incidence rate of malignant tumors in the elderly is six times higher than that in younger people.
As a result, mainstream “senior health insurance” products on the market are rarely tailored to the specific health conditions of older adults in their design. Additionally, to mitigate risk, the premiums for these senior health insurance products are typically several times higher than those of other health insurance offerings.
How can this issue be resolved? The key lies in health risk control capabilities. “By leveraging our health service network, family health advisors, and extensive user communities, we have accumulated a vast amount of authorized health big data from middle-aged and elderly users,” said Wu Hongxing. He added that, driven by data, Shanzhen is committed to closing the loop between health services and insurance payments.
Based on data, ShanZhen has developed an Alpha insurance precision risk control engine tailored for the silver-haired population. The highlight of this engine lies in replacing traditional offline manual underwriting with automated underwriting, thereby addressing the “quality and scalability” challenges associated with medical insurance products for the elderly.
Notably, by leveraging the Alpha model, insurance companies can implement precise risk control management for individual policyholders based on their health status, thereby enabling personalized underwriting for older age groups.
For example, after children purchase "senior health insurance" for their parents, they can arrange a medical examination through the Shanzhen platform. The resulting health data are then processed by Shanzhen Alpha’s risk-control model, which generates a “Shanzhen Score” analogous to a credit score. Insurance companies use this score to determine whether to underwrite the policy, as well as to define the coverage scope and premium rates.
“Since its launch in 2019, senior health insurance has validated the effectiveness of front-end risk control models through actual claims experience,” said Wu Hongxing. The first senior medical insurance product in China was jointly launched by Shanzhen, RGA (Reinsurance Group of America), and Anxin Insurance in March 2019. According to the introduction, this medical insurance product, designed for individuals aged 60 and above, offers coverage up to millions of yuan, filling a gap in health insurance for this age group. The product accepts applicants up to the age of 80 and can be renewed until the insured reaches 100 years old.
As of now, Shanzhen has launched multiple products, significantly meeting the insurance purchasing needs of the middle-aged and elderly population.
Despite the influx of countless players, the elderly care and health industry remains in its early stages of development.
In the Outline of the 14th Five-Year Plan, “Improving the Elderly Care Service System” is featured as a standalone chapter, which emphasizes promoting the coordinated development of elderly care undertakings and the elderly care industry, improving the basic elderly care service system, vigorously developing inclusive elderly care services, supporting families in assuming elderly care functions, and building an elderly care service system that coordinates home-based, community-based, and institutional care while integrating medical and health services.
It is not difficult to see that the challenges in elderly care and health are numerous and complex, with each pain point resolved presenting a broad market opportunity. However, despite the myriad changes, the core remains unchanged. Broadly speaking, the future development trends of the elderly care and health industry will primarily focus on two areas: first, the age-friendly upgrading of existing supply; and second, innovative services within incremental supply.
In terms of existing supply, age-friendly upgrades lead to an improvement in the quality of elderly care. For instance, they help alleviate the difficulties older adults face in daily life due to age-related physiological changes, prevent personal injuries, and enhance the safety and convenience of home living for the elderly. In this field, companies specializing in architectural design, medical device research and development, and healthcare informatics will all find opportunities.
For instance, Fukangtong, incubated by the Internet of Things Research and Development Center of the Chinese Academy of Sciences, is a high-tech enterprise focused on smart health and elderly care. The company has independently developed a range of modern information technology platforms for elderly care, including an all-in-one health information system, vital signs monitoring system, age-friendly renovation information service system, home-based elderly care service software, elderly capability assessment software, sensory rehabilitation training system, Fukangtong health data collection workstation system, and the Fukangtong Smart Elderly Care Information Cloud Platform. Public bidding data shows that since January 2019, Fukangtong has undertaken more than 40 local age-friendly renovation projects, making it the leading provider of such solutions in China.
Regarding incremental supply, innovative services optimize the matching of elderly care and health resources or reshape the supply and demand dynamics of the entire health ecosystem. For instance, the integration of insurance capital with real estate enterprises has transformed senior living communities into an integral component of insurance services, moving away from the traditional model where property developers primarily focused on single-mode property sales or operations. Insurance companies such as Taikang, Pacific Insurance, New China Life Insurance, and China Life Insurance have launched “insurance policy + elderly care” programs, under which consumers gain eligibility for admission to senior living communities by purchasing specified types and amounts of insurance products, and subsequently pay monthly service fees that are relatively high compared to market averages.
For another example, the concept proposed by Shanzhen Clinic, “Turn to Shanzhen for Your Parents’ Health,” has restructured the entire transaction model of elderly healthcare by separating the payer from the service recipient, thereby improving user adherence to health management. Additionally, Shanzhen obtained an “Internet Hospital License” last year, which undoubtedly paves the way for its future provision of internet-based medical services. This means that Shanzhen is poised to introduce more innovative services in terms of incremental supply in the future.
As is well known, aging is not a challenge for parents or their children to face alone, but a societal issue that requires the participation of every individual. This is a substantial problem that cannot be resolved overnight. Fortunately, a group of pioneers has already embarked on the journey to explore and seek optimal solutions.
In this process, time may be the best answer and the strongest barrier.