Commercial medical insurance, the once "small potato" of Chinese insurance companies' product line, has now become the apple of their eye as the deepening social medical insurance reform creates great market demand for supplementary insurance products.
Major life insurers in China are injecting huge amounts of money and energy into the development of such products and improvement of their services, say insurance officials.
"Medical insurance products should become one of the pillar businesses for life insurers, and we are working toward this goal," said Xu Zhiwei, deputy chief of the group health insurance division under China Life Insurance Company, the country's largest life insurer.
Xu's view was echoed by Zhang Jianmin, general manager with the health insurance department of another major life insurer, Ping'an Insurance Company of China.
"We are dedicated to providing new and high-level products to the market and are working toward becoming a leader in health insurance in the domestic market," he said.
Commercial medical insurance products emerged in China only several years ago and have been long neglected because of their high risks and lack of popularity.
Lucrative business opportunities began to emerge as the social medical insurance reform for urban and township employees, which was initiated in 1998, left huge gaps that can only be filled by commercial insurance.
Instead of the old system which reimburses all medical expenses for employees, the new social insurance system sets up a ceiling for medical expense reimbursement. That means employees have to shoulder expenses for many serious diseases, which are beyond their financial capabilities.
Statistics from the Ministry of Health indicate that a total 230 billion yuan (US$27.7 billion) of medical fees were paid by employees themselves last year, Xu told Business Weekly.
Moreover, medical expenses have soared in the past several years at an annual rate of 20 percent, said Zhang.
And more serious and money-consuming diseases have become common in recent years than in the 1970s and 80s, he added.
"Those are the reasons for the burgeoning demand for medical insurance in recent years," he said.
A recent survey by Ping An shows that 42 percent of China's citizens have put medical insurance on top of their lists when buying insurance products.
China Life also saw its health insurance premium income double last year, said Xu.
The State has vowed to install the new system in more than 90 percent of all cities by the end of this year, according to the Ministry of Labor and Social Security. That will create more opportunities for life insurers.
"Health insurance is an attractive market with hundreds of billions of yuan in value, but we have only tapped less than 10 percent of it so far," Xu said.
To dig deeper into the bountiful market, companies are developing more products that match international practices.
Furthermore, firms have realized the importance of improving service.
However, both officials admitted that it was difficult to develop health insurance products due to lack of information and China's harsh operational environment.
"There is no credit system and it was difficult to obtain verified information from hospitals," said Zhang, adding that cheating happened from time to time.
The State has realized the problems and is working on more laws and regulations to perfect the legal framework, said officials.
"In the long run, health insurance will become a core business of China's life insurance industry just like that of many developed countries," said Xu.
Many foreign insurance giants also showed interest in China's health insurance market and are cooperating with their Chinese counterparts to provide technologies and management know-how.
(Business Weekly 04/16/2001)
