What can insurers do?

Some insurers have looked at their own experience in health insurance in China, considered the challenges discussed, and decided to exit the health insurance market.

Insurers who are interested in long-term profits and more stable market conditions should consider the following strategies:

• 1.
  Allocate resources. Because health insurance is such a complex and service-intensive business, insurers must plan on spending significant time and money managing it. This may mean subcontracting a variety of functions to outside resources, strengthening internal staff, and building an IT administration system that will support the complicated management requirements.
• 2.
  Avoid adverse selection. In order to get a manageable spread of risk over a reasonable period of time, an insurance programme must have consistent and effective measures in place to either attract healthy people or exclude sick people. Since many impairments are of more importance to health insurance than to life insurance, expert underwriting guidelines specially designed for health insurance can help to achieve this to a certain extent.
• 3.
  Assure tight administration. Because of the dynamic nature of health business, insurers cannot afford to take a "high-level" approach to monitor medical insurance business. Hands-on involvement and monitoring is required in the distribution, underwriting, premium collection, claims management, and experience reporting functions of the underlying products.
• 4.
  Use reinsurance. Reinsurance is one of the most important risk-sharing mechanisms in the financial world. Expertise and know-how transfer take place in a reinsurance programme with a reinsurer specialised in health insurance. Therefore, a direct insurer is recommended to cooperate with a reinsurer that understands health business and the risks involved within it.