The untapped market for private health insurance in China is huge – and growing, as Chinese consumers despair of the country’s increasingly inadequate public health insurance system – but it’s fraught with great risks as well as opportunities for insurers, a new report from EY reveals.
The London-based professional services firm, still better known to many as Ernst & Young, found that more than 90% of the 2,000 Chinese consumers it surveyed, in cities across China, regarded the Chinese government-provided public health insurance service as either “not satisfactory” or only “somewhat satisfactory”.
This, it noted, is driving a “dramatic” growth in demand for private health insurance, as suggested by the fact that in spite of the country’s recent economic slowdown, private health insurers in China pocketed premium revenues last year of RMB2.4trn, up from just RMB1.5trn the year before, and it’s projected to reach RMB5trn in 2020.
“Premium growth, which exceeded 41% from 2013 to 2014, is expected to reach 50% in the coming years, as more consumers seek to supplement their public health insurance plans, and protect themselves from rising out-of-pocket costs, especially drug costs, and the shortcomings of the public system,” EY said, in a statement accompanying its 32-page report.
In a forward to the report itself, EY’s Jonathan Zhao and Andy Ng note that a driver of China’s private health insurance boom has been the rapid growth of the country’s private health care system, “as more Chinese and foreign health insurance companies enter [the] market”, encouraged by the government, which is relaxing regulatory restrictions and offering incentives to Chinese consumers.
Among the other key forces EY found to be fueling the demand for private health insurance in China:
* Demographic shifts, as “an aging and wealthier Chinese population is placing increased demand and pressure on the country’s health care” infrastructure;
* Increased spending on health care, resulting from an “overburdened, underfunded public health care environment” that drives those who can afford to towards private solutions, where they exist;
* Relaxed regulation, as the Chinese government relaxes regulatory barriers and offers tax incentives to private companies that enter the market;
* Employer use of private health insurance as a carrot aimed at attracting and retaining talent;
* Technological developments, particularly in the area of mobile telephone apps and increased availability of internet connectivity, which are helping Chinese consumers to “overcom[e] traditional obstacles to receiving both health care and insurance coverage”;
* A growing focus on health and well-being among China’s growing ranks of upper middle class consumers, who are particularly conscious of the health risks of environmental pollution, a widespread concern in and around many Chinese cities.
Four main obstacles
According to EY, private health insurers must overcome four main obstacles if they are to succeed in gaining a foothold in the Chinese market. These are the market’s extremely varied typical rates for insurance between cities and provinces, as is evident in the public health insurance network; the lack of a standardised system of patient data collection and cost assessments; the lack of incentives for Chinese health care providers to collaborate with private insurers; and regulatory obstacles that, as they currently exist, will prevent the creation of “an even playing field for foreign insurers”, and “will prevent all but the biggest foreign players from succeeding” in entering the market.
To read and download the EY report, click here.