Medicare has outpaced life insurance in China as the fastest-growing sector category, as affluent consumers seek to supplement the meager public coverage.
The rise of health insurance creates opportunities for a sector turned upside down by the scandal, symbolized by the conviction for corruption of the former head of insurance regulation and folding of his agency in the banking regulator.
While large domestic groups such as Ping An and China Life currently dominate foreign players, notably the French AXA groups and based in Hong Kong. AIA hope to take advantage of the new opening measures of the Chinese market.
From 2014 to 2017, a boom Investment-type universal life insurance sales that contained only nominal risk protection elements fueled China's rising debt.
Even for a simple illness, as soon as the patient comes back to the hospital, you start having a CT scan, an MRI, and so on. There is no way to estimate the cost, and the insurer ends up accepting losses.
The climb converted a handful of little known companies, including Anbang Insurance, in multi-billion dollar groups and prompted a repression by the authorities concerned by the financial risk. Regulators have since urged insurers to refocus on protection-based products under the slogan "insurance means protection".
Health care premiums increased 23 percent in the first 10 months of 2018 compared with the previous year, compared to 2 percent for all insurance premiums, according to China's insurance regulator . At this rate, health premiums will reach an unprecedented peak of 539 billion rand ($ 78 billion) for the entire year.
As the rising middle class increases spending on health care, health insurance is ready for growth. According to the Chinese Ministry of Health, total health expenditure amounted to 5.16 billion rubles in 2017, barely 6.2 percent of gross domestic product, compared with 7.6 percent in South Korea. 10.7% in Japan.
The composition of health expenditures also suggests a significant potential demand for insurance. Expenditures on health – those not reimbursed by the government, business and private insurance – account for almost a third of China's total health expenditure, compared with only 13% in Japan and 11% in the United States. States, according to data from the World Bank. .
While China's share of the burden fell by 60% in 2000 with the expansion of coverage by public health insurance, public benefits are often insufficient and advanced treatments are not covered.
"Social insurance will only provide the essential, and you need a product to fill that gap. There is no doubt that consumer demand exists; it's just about finding the right product design, "said Sam Radwan, director at Enhance International, a consulting firm that advises Chinese insurers.
The top four players in China by health bonuses – Ping An, China Life, New China Life, and China Pacific – Collected together for 42% of total health premiums in 2017, according to Minsheng Securities.
By contrast, last year, China's 28 life and health insurance companies abroad had collected only 6.3% of life and health insurance premiums, a category that includes life insurance policies. , illness and accidents, according to regulatory data. ICBC-AXA Life, AXA's joint venture with Industrial and Commercial Bank of China, is the largest group with foreign capital.
But foreign participants expect increased access to the insurance market after China engaged in November 2017, allow foreign companies to hold 51% of joint venture life insurance by 2020. This ceiling, which is currently 50%, should be fully abolished by 2022.
Despite strong growth in premiums, doubts remain as to the profitability of health insurers. The average payment of short-term health insurance plans in China accounted for 80% of premiums in 2016, according to data from the Insurance Society of China, a state-supported industry association. This figure suggests that once commissions on sales and other costs included, many fonts lose money.
The fastest-growing category of Chinese health insurance is that of critical illness insurance plans, which provide for lump sum payments in case of illness, but do not reimburse patients for medical expenses. specific.
Insurers favor these products because they guarantee cost control. The exceptional ones market power Chinese public hospitals makes it almost impossible for insurers to negotiate prices or treatment protocols.
"Our offer of medical care is too monopolistic. there is not enough competition, "said Xie Rushi, former chief executive of Best UnMed, a network of private hospitals based in Shenzhen. "Even for a simple illness, once the patient is hospitalized, you start having a CT scan, an MRI, etc. There is no way to estimate the cost, and the insurer ends up accepting losses. . "
Leaders and analysts say insurers are currently in a period of testing product designs and marketing strategies to see what works. They expect the health insurance market to benefit from an additional boost thanks to ongoing reforms to make these purchases tax-deductible by businesses and individuals, as in the United States. United.
Mr. Radwan is one of those optimists. "The government has the ability to wield a magic wand and make it a very lucrative business, and I think they will do it because they have no other option. They have to rely on the private sector, "he said.
Additional reports from Yizhen Jia and Xueqiao Wang
To follow @ gabewildau on Twitter