A thriving ¥1 trillion Chinese market? Private health insurance tipped to flourish as middle class grows

Priscilla Zhao, an office worker in Beijing, did not consider getting private health insurance until she gave birth to her son last year and he needed hospital treatment for a congenital gastric obstruction.

She admitted him to a public hospital and after enduring crowded group wards and a visiting schedule that only let her see him twice a week, she decided to buy private health insurance. She pays 16,000 yuan (HK$18,670) a year but the policy gives her the option of avoiding a repeat of her son’s hospital experience in the future.

“It is very expensive, but I am very glad I don’t need to wait for a long time to take my son to a doctor [for treatment],” Zhao said.

As incomes rise, many mainland residents are seeking out better quality care than that provided by public hospitals. They want easier ways to book appointments, shorter waits and greater individual attention from doctors.

The demand is expected to drive the market to 1.1 trillion yuan in 2020 from 241 billion yuan last year, according to a report by the Boston Consulting Group and reinsurer Munich RE, released yesterday.

Investors pour into China’s thriving health care business

“The penetration of the market is increasing. If you look at other markets in the world, such as Australia, it’s one in two who have private health insurance, but it’s one in 20 in China,” said Tjun Tang, senior partner and a managing director of BCG.

“The middle class is growing from 100 million households to 200 million.”

The report estimates the health insurance market will grow at an annual average rate of 35 to 40 per cent by 2020, with two-thirds coming from policies covering critical illnesses, which usually pay out a lump sum if the holder is diagnosed with a predefined medical condition.

Such policies are often offered as riders to life insurance products and are popular on the mainland as its society greys and cases of non-communicable diseases such as cancer rise. Many mainlanders go to Hong Kong to buy such products because there is a better selection than what is offered at home.

Investors pour into China’s thriving health care business

But the report said the fastest growth segment would be in private reimbursement insurance. A survey carried out for the research found wealthy consumers were willing to pay between 30,000 yuan and 60,000 yuan for a reimbursement policy covering a family of three.

The expanding market presented an opportunity for foreign insurers who had more experience providing high-end products than their domestic counterparts, said BCG partner and managing directorLuo Ying.

So far insurance companies are not making a profit because of high payouts, but that could change in the coming years.

Wang Xujin, who specialises in insurance at Beijing Technology and Business University, said the growing demand would encourage more companies to enter the market.

“As awareness of private insurance and demand grows, the market grows and so will the profitability of the insurance companies,” Wang said.


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