Tuesday, 4 December 2012

China's middle classes are not buying private health insurance

Wealthy Chinese are not taking up medical insurance plans marketed by western companies
Most health insurance analysts concur that China's high-income earning population are not likely to buy comprehensive health insurance in the short term. 
Many of the health insurance companies that have invested in developing on-shore solutions for health coverage continue to see varied results. While some insurers are re-figuring their China strategy, others continue to develop new products to further test the market.
Earlier this month and after little success, ICBC AXA eliminated its ‘China Executive Plan’ that was launched in December 2011 and targeted high-income Chinese nationals. The ‘China Executive Plan’ featured benefits that were below more typical expatriate policies but higher than domestic Chinese policies. One particular point of interest was that the plan had options for covering preexisting conditions, an option readily available with many health insurance policies.
As a way to control costs, the plan limited treatment to only inside China and excluded coverage at High Cost Providers (HCP). This move was thought to be a good option to control costs, especially since hospitals and clinics that are marketed to the expat market have been the main cause of rapid inflation in the international Private Health Insurance sector in China over the past decade.
The cost of treatment in many of these HCPs rival those of the most expensive hospitals in the world. ICBC AXAs reasoning to not include coverage at these facilities is that Chinese nationals do not face the same language barriers as expats in China, and there are many other hospitals and clinics that offer high levels of care for Chinese-speaking individuals that are of much lower cost than the HCPs. With these facts in mind, ICBC AXA were hopeful that the China Executive Plan would be well suited for the market, as the country’s growing upper- and middle-class families would look for better healthcare options for their families. Yet, the plan did not prove to be successful.
Another indicator that questions the current situation for private health insurance providers in China refers to Bupa International’s latest moves and some of the new restrictions placed upon their plans. In previous years, Bupa allowed for children to be insured under their plans independent of their parents. However, Bupa has now eliminated this option and while the plan still exists, it has undergone many changes so that premiums, benefits and underwriting are now much more selective. While the child-only plan was very popular, it did not have a very high success rate financially.
With these findings, analysts at Globalsurance believe that Chinese nationals are aware about the policies that are available, but have not fully grasped the idea and benefits of insurance. They see the purchase of health insurance solely as a financial transaction. In their view, if they will be able to claim more than they would pay in one year, why not buy? Yet at the same time, if they are not able to claim as much as they would pay in one year, why buy a policy? Analysts agree that the Chinese nationals may not have greatly considered the risk and financial implications of a serious accident or long-term illness and the benefits of purchasing a health insurance policy.
Analylsts also argue that there could be issues regarding how to educate and inform potential clients as to why they should invest and purchase health insurance policies. Many agree this is a prominent shortfall and will take a while to fix. With distributors often motivated by profit margins and returns, it can take a long time, even many years, to build up a medical portfolio. While already facing some challenges, adding the need to educate a new consumer base on the benefits of the product on offer creates greater hurdles for insurers looking to expand in China.
Despite the hurdles, many are optimistic about the future of the health insurance market in China, it is just a question of getting the timing right. Analysts agree that eventually there will be high consumption of health insurance products within China’s emerging upper- and middle-classes in the next 10 years.
Hoping to get their timing right, Cigna has established a partnership with CMC in China and is making the right moves so far to become one of the leading competitors in the country. They will soon be announcing a new plan that will launch in December, 2012. Details regarding the plan and how it will be marketed remain unknown, but if the plan is successful, Cigna could be an example for other companies looking to tackle the challenging and unique China health insurance market.
Source: Globalsurance

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