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Private Health Insurance in China Will Surge Fivefold to RMB 1.1 Trillion by 2020, Study Finds


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    Reimbursement insurance will be the fastest-growing area in Chinese health insurance, outpacing critical-illness policies, according to a study by The Boston Consulting Group (BCG) and Munich Re.

    Beijing. The market for private health insurance in China will surge fivefold to RMB 1.1 trillion by 2020 ($167 billion), from RMB 241 billion ($36.7 billion) in 2015, as middle-class and wealthy Chinese look for an alternative to the public insurance system. A new report by BCG and Munich Re “Opportunities Open Up in Chinese Private Health Insurance,” reviews the changing consumer expectations and government efforts to encourage more private health care options that are driving this substantial growth.

    The fastest growth is expected in reimbursement policies, which are more expensive (for high-end policies) but more flexible than the critical-illness policies that many Chinese have today. (Critical-illness insurance pays a lump sum if an insured person is diagnosed with a covered medical condition; reimbursement insurance pays on an ongoing basis if a health problem requires multiple medical consultations or hospital visits.) “Private reimbursement insurance makes tremendous sense in China. There isn’t yet a mass market for it because of the cost. But there is a lot of interest and we expect to see many new products in the next few years,” explains Ying Luo, a partner in BCG's Beijing office and a co-author of the report.

    The Customers
    A survey of Chinese consumers reveals the opportunity for carriers: the most likely purchaser of reimbursement insurance today is 35 to 55 years of age, married with children, with a minimum annual household income of RMB 200,000 ($30,333). This group is expected to grow to over 40 million Chinese by 2020. The wealthiest consumers in this group would be willing to pay between RMB 30,000 and 60,000 ($4,550 to $9,100) for a reimbursement policy covering a family of three.

    “Today, private reimbursement policies are generally sold through group insurance. Purchases by individuals are still rare, and pure reimbursement players in China simply haven’t been able to make money due to the small size of the market. This is set to change,” says John Wong, head of BCG’s Greater China Health Care practice.

    Government Policies
    The authors of the report expect increasing profitability, partly because of government policies that support the privatization of insurance and health care, like tax breaks for private health insurance. Rising demand and encouraging government policies have already led to a quadrupling of the number of private hospitals, to more than 12,500 today from about 3,200 in 2005.

    Six Key Requirements
    “Insurers have enormous opportunities if they start formulating the appropriate strategies now,” predicts Doris Hoepke, member of Munich Re’s board of management, responsible for Munich Health. “To participate in the reimbursement market, organizations need to have a clear understanding of target customers and their needs, which should be reflected in innovative products tailored for these segments. Other requirements are an efficient claims and operations management, which guarantees customer satisfaction while keeping internal costs low, attractive and user-friendly sales channels, and an approved network of hospitals and health service providers.”

    The report outlines the six key requirements for insurers looking to compete in reimbursement insurance in China. A pure increase in the size of the market will not guarantee profitability.

    The reimbursement market will represent 36% (RMB 400 billion) of the RMB 1.1 trillion private insurance market in 2020. The other 64% will consist of critical-illness policies (dominated by life insurers), which are expected to grow at a slower rate than reimbursement insurance.

     “Insurance companies need to understand the characteristics and preferences of different customer segments: the amount of money they are willing to spend on reimbursement insurance and what they expect to receive in return,” says Bill Bossany, deputy chief executive of Munich Re, Beijing (Health branch), and a report co-author. Expertise in analytics and strong data infrastructure are essential in gaining valuable insights and making customer interactions more straightforward.

    A copy of the report can be downloaded at

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