Grow­ing de­mand

Pri­vate health in­sur­ance mar­ket set to grow five­fold by 2020

China Daily (USA) - - FRONT PAGE - By HUYUAN YUAN huyuanyuan@chi­nadaily.com.cn

China’s pri­vate health in­sur­ance mar­ket will grow five­fold to 1.1 tril­lion yuan ($167 bil­lion) by 2020, fu­eled by fast­grow­ing de­mand from the emerg­ing mid­dle class, a re­port showed on Wed­nes­day.

As wealthy Chi­nese look for al­ter­na­tives to the pub­lic in­sur­ance sys­tem, pri­vate health in­sur­ance has been grow­ing at a com­pound an­nual growth rate of 36 per­cent since 2010 and hit 241 bil­lion yuan as of 2015, ac­cord­ing to the re­port, which was jointly com­piled by The Bos­ton Con­sult­ing Group and Munich Re.

The fastest growth in the pri­vate health in­sur­ance sec­tor is ex­pected to be in re­im­burse­ment poli­cies, which are more ex­pen­sive 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, while 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,” said Luo Ying, a part­ner at BCG’s Bei­jing of­fice and a co-au­thor of the re­port.

For Doris Hoepke, a mem­ber of Munich Re’s board of man­age­ment and re­spon­si­ble for Munich Health, in­sur­ers have enor­mous op­por­tu­ni­ties if they start for­mu­lat­ing the ap­pro­pri­ate strate­gies now.

“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.”

The joint study by BCG and Munich Re re­vealed that the most likely pur­chaser of re­im­burse­ment in­sur­ance to­day is aged 35 to 55, mar­ried with chil­dren, with a min­i­mum an­nual house­hold in­come of 200,000 yuan. This group is ex­pected to grow in China to more than 40 mil­lion peo­ple by 2020.

Cur­rently, pri­vate re­im­burse­ment poli­cies are gen­er­ally sold through group in­sur­ance.

“Pur­chases by in­di­vid­u­als re­main rare, and pure re­im­burse­ment play­ers in China sim­ply haven’t been able to make money due to the small size of the­mar­ket. This is set to change,” said John Wong, head of BCG’s health­care prac­tice in China.

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