China's Health Insurance Payouts Surpass 100 Billion Yuan in 2018 with 34.72% Growth: Exploring the Opportunities in Internet + Insurance
For a long time, the protection function of commercial insurance has participated in social risk management and played an important role, playing a vital part in stabilizing people's economic lives, promoting financial intermediation, and building emergency systems for public affairs.
In 2018, the premium scale of commercial health insurance in China reached RMB 544.8 billion, a year-on-year increase of 24.1%, marking the highest growth rate among all major categories of insurance business. Claims and benefits paid for health insurance amounted to RMB 174.434 billion, representing a year-on-year increase of 34.72%.
What are the benefits of health insurance for users? And where do the opportunities lie in “Internet + Health Insurance”? To address these questions, on May 31, professionals from medical institutions, the financial sector, academia, and businesses gathered in Beijing to discuss the development and future of health insurance.
According to relevant statistical data, approximately 10,000 people are diagnosed with cancer every day in China, equivalent to about seven diagnoses per minute. “What I witness daily is not only the immense burden and suffering that disease inflicts on patients, but also the exorbitant treatment costs. Currently, the cost of treating a major illness often runs into hundreds of thousands of yuan, which is unbearable for an ordinary family. Although such treatments fall within the scope of medical insurance coverage, the level of reimbursement is relatively limited, leading many patients to forgo treatment,” said Ding Jie, a member of the National Committee of the Chinese People's Political Consultative Conference (CPPCC), Vice President of the Chinese Women Doctors Association, and former Vice President of Peking University First Hospital.
In Ding Jie’s view, commercial insurance plays a crucial role in both proactive health management and post-event claims administration. Although the government has made significant efforts to improve the social security system, relying solely on it is insufficient to address the challenges; commercial insurance offers an effective solution.
Preventive management is difficult to implement within social security systems. This is because commercial insurers and policyholders share aligned interests: both parties desire safety and good health. Driven by operational considerations, insurance companies also aim to reduce claim incidence rates. Consequently, insurers are fully motivated to engage in customers’ health management, collaborating with them to foster healthier lifestyles and mitigate disease risks. This process can leverage implanted medical devices, mobile health solutions, big data analytics, and incentives for physical activity to help customers maintain robust health, thereby combating disease threats in a more accessible and cost-effective manner.
Only by managing the entire user health journey can commercial insurance truly build an ecosystem for health management. Human health management is a systematic endeavor; maintaining a healthy body requires the combined effects of various factors, including diet, wellness, travel, medical care, and antioxidant support.
In reality, however, the various segments of healthcare remain fragmented. As a vital component of the national financial system, commercial insurance companies have the capacity to integrate all aspects of health management by collaborating with institutions across diverse sectors through mergers, acquisitions, and joint ventures, thereby establishing a comprehensive health management ecosystem. From an individual perspective, this will enhance access to bundled health management services and effectively reduce costs. From a societal standpoint, it will help advance the development of the healthcare sector and contribute to achieving the national strategic goal of “Healthy China.”
Among critical illness insurance products, she discovered that Xiaoyusan Insurance offers a product called “Super Mary Sue,” which covers 110 types of critical illnesses, encompassing all currently common serious conditions such as thyroid cancer. By purchasing commercial insurance to safeguard their rights and interests, patients can largely mitigate the financial losses associated with severe diseases, thereby avoiding the need to forgo treatment due to economic constraints. After all, the role of commercial insurance is to provide protection for the public, reduce medical expenses, and help people navigate through difficult times.
Regarding the insurance products launched by Xiao Yu San, Zhu Minglai, Director of the Center for Health Economics and Medical Security Research at Nankai University and Professor at the School of Finance, believes that these products are market-oriented and developed from the customer’s perspective to meet their genuine needs.
Nankai University established its insurance program in 1984, becoming one of the first institutions of higher education in China to offer such a major after the reform and opening-up policy, and has since supplied a large number of outstanding professionals to the insurance industry.
Zhu Minglai summarized the three major features of this product: First, it offers comprehensive coverage, including 110 critical illnesses, 35 minor conditions, and 20 severe diseases. Second, it provides practical benefits, doubling the sum insured in the event of a cancer diagnosis. Third, it is affordably priced, demonstrating utmost sincerity by offering customers the best possible protection and helping more people mitigate the financial risks associated with serious illnesses.
According to Xu Han, founder of Xiao Yu San, the product’s initial design phase also benefited from the support of Professor Zhu Minglai’s laboratory. At that time, members of the laboratory collaborated with Xiao Yu San on data analysis, distributing tens of thousands of questionnaire surveys to explore trend differences among the target population. Through statistical modeling and quantitative analysis, they assessed the existing users’ health insurance coverage and household financial vulnerability, ultimately delivering a comprehensive report to the actuarial team.
Xu Han stated, “As a third-party platform for internet insurance, we have consistently adhered to the philosophy of ‘customization + curation,’ developing truly high-quality products tailored for users in the field of personal health insurance. Our joint launch with Everbright Yongming Life Insurance of the Super Mary Critical Illness Insurance (Flagship Edition) aims to provide more comprehensive coverage at lower prices. We hope to create a critical illness insurance product accessible to the general public, thereby contributing our efforts to building a better life for the people.”
To better research internet user profiles and facilitate product upgrades, Xiaoyusan Insurance has partnered with the Department of Insurance at Nankai University to establish the “Internet Health Insurance Coverage Index” Laboratory. The laboratory aims to leverage big data and insurtech to provide customized insurance experiences and other extended services, thereby promoting the intelligent, technology-driven, and integrated development of risk management, insurance research, and talent cultivation through industry-academia-research collaboration. By empowering enterprises with big data, the initiative serves the vast community of insurance consumers, aligning insurance products more closely with social and livelihood development needs. It enables insurance companies to gain a deeper understanding of customers through big data services, reduce operational costs, improve service efficiency, and enhance core corporate value.
Meanwhile, a protection index for internet-based health insurance can be established. The indicator system serves as the core of this index. Once constructed, it will play a role in standardizing and guiding the industry by reflecting the current development status of commercial internet health insurance and the level of health insurance coverage among the population. It covers metrics such as enrollment rates, the demographic structure and geographic distribution of insured individuals, the proportion of short-term versus long-term policies, the share of various insurance types, coverage gaps, and claim settlement statuses. This index provides positive guidance for the development of internet health insurance products, market forecasting, and industry growth.
Zhu Minglai stated, “The development of health insurance must adhere to the overarching principle of high-quality development. It is essential to establish comprehensive health big data for customers and build all-encompassing risk management services. By deeply integrating emerging scientific and technological advancements, and leveraging innovation-driven strategies and technological empowerment, China’s insurance industry should comprehensively advance toward intelligence and high-quality growth, thereby better serving the development of various sectors related to the national economy, society, and public welfare.”
According to the "Industry Research Report on the Development of Critical Illness Insurance Products" published by the Insurance Association of China, over the past decade (2008–2017), critical illness insurance products provided a cumulative sum insured of RMB 22.16 trillion, with 1.46 million claims reported and total claim payments amounting to RMB 50.94 billion.
Meanwhile, data from the China Insurance Industry Association’s “Report on the Development Index of Commercial Health Insurance in China (2018, Large and Medium-Sized Cities)” shows that 61.4% of respondents were aware that commercial health insurance includes coverage for critical illnesses, yet 18.8% of respondents remained completely unaware of the scope of coverage provided by commercial health insurance.
With the advent of the internet and social media, potential customers have gained greater insight into various insurance products. Bridging the health protection gap requires collaborative efforts among multiple stakeholders. Insurance companies, governments, and healthcare providers will explore new partnerships. It is essential for the insurance industry to develop innovative insurance products that better meet the coverage needs of consumers across different markets.
Zhang Chensong, Chief Actuary, Head of Finance, and Chief Risk Officer at Everbright Sun Life Insurance, believes that the internet has enabled more precise insurance product design and represents an innovation in the insurance business model. It features three main characteristics:
(1) Implementing differential pricing to mitigate moral hazard to a certain extent.
(2) Product design is centered on user experience, enabling personalized customization.
(3) Product design respects the effective integration of channel feedback and big data.
According to the 2018 Large-Scale Survey of Insurance Users conducted by WeSure and Tencent IDC, over 40% of internet users who had purchased one-year critical illness or medical insurance policies did so through online channels. Information regarding insurance-related incidents spreads rapidly via the internet, social media feeds (such as WeChat Moments), and television programs, garnering widespread public attention. The release of the film "Dying to Survive" in 2018 further sparked a surge in the purchase of critical illness insurance products.
According to statistics, in 2018, while the life insurance industry maintained steady growth in premium income, health insurance premiums continued to grow at a rate of 20%, with the year-on-year increase reaching 39% in the first quarter of this year. In 2018, online sales of critical illness insurance accounted for 69% of total premiums, and it is expected to double this year. It can be seen that consumer demand for health insurance products is very strong, indicating huge market potential.
Looking ahead, China’s health insurance market is still in its early stages, with broad prospects for development. Zhu Minglai elaborates on this from the following four perspectives:
First, from the customer’s perspective, as living standards improve, residents will increasingly prioritize health protection. In the future, everyone will need at least one health insurance policy: million-yuan medical coverage is the standard configuration, critical illness insurance is the optimized configuration, and high-end overseas medical care is the premium configuration.
Second, from a product perspective, current health insurance offerings remain relatively homogeneous, predominantly consisting of reimbursement-based, medical, and basic coverage types. Future products will become more diverse to meet consumers’ differentiated needs. For instance, dental and vision insurance will emerge. Merely providing insurance and financial products is far from sufficient; it is essential to deliver more comprehensive health and medical insurance services from the standpoint of holistic health management.
Third, with integrated management of claims, governance, and care, the future health insurance market is poised to become even more vibrant and dynamic.
Fourth, in terms of market positioning, commercial health insurance should be differentiated from basic medical insurance by targeting populations with higher demand for medical services and providing higher-level, more diversified coverage and services (such as high-end pharmaceuticals and integrated medical-elderly care).
The future major development of the health insurance business model will not rely solely on the development and sales of insurance products, but rather on building a health service chain and a benefit-sharing chain composed of multiple industries, including medical services, pharmaceutical supply, and health management (e.g., intelligent audit systems, PBM collaborations, etc.).
At the same time, it is essential to actively explore and establish an integrated healthcare and pharmaceutical service system. The specialized operation of health insurance should evolve into a highly integrated system of medical care and insurance providers. By building comprehensive health big data for customers, insurers can address issues such as homogeneous competition, low customer stickiness, and information asymmetry, while also achieving effective risk control.
During the 13th Five-Year Plan period, projected premium income for health insurance (assuming a 15% growth rate in total health expenditure) is based on estimates that China’s economic growth will remain at approximately 6.5% over the next five years. By 2020, per capita GDP is expected to reach USD 12,000, approaching the high-income threshold as defined by the World Bank. This period will witness a rapid release of healthcare demand and a relatively fast increase in total health expenditure. Coupled with accelerating population aging and urbanization, China’s potential demand for health insurance is substantial. Therefore, a reasonable range for commercial health insurance premium income by 2020 is estimated to be between RMB 800 billion and RMB 1.1 trillion.