The rise of private health insurance in China

Consumer demand presents huge opportunities and risks

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The Chinese market for private health insurance is growing dramatically. Despite an economic slowdown, premium revenue jumped from RMB1.5 trillion in 2014 to RMB2.4 trillion in 2015 and is projected to reach RMB5 trillion in 2020.

To better define the private health insurance landscape in China, EY surveyed 2,000 consumers in cities across the country. The results reveal significant possibilities and risks for private health insurance providers in a sector primed for disruption.

Turning to private coverage

Over 90% of people in China rate their public health insurance coverage as “not satisfactory” or only “somewhat satisfactory.”

EY - Turning to private coverage

Multiple forces are driving demand for private health insurance in China

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.

Demand for private health insurance

Almost 90% of people in China believe pollution leads to long-term health care complications.

EY - Demand for private health insurance

Our survey reveals several forces driving consumer demand for private health insurance.

Demographic shifts
An aging and wealthier Chinese population is placing increased demand and pressure on the country’s health care.
Increased spending
A rapid increase in health care expenditure has led to an overburdened, underfunded public health care environment.
Relaxed regulation
The Chinese government is promoting private health insurance by relaxing regulatory barriers and offering tax incentives.
Employee incentives
Employers now use insurance to attract and retain talent and group health is now the most cost-effective way to provide health insurance.
Technology trends
Mobile apps and increased internet connectivity are overcoming traditional obstacles to receiving both health care and insurance coverage.
A focus on wellbeing
The long-term health effects of pollution are a serious concern for the growing urban middle classes increasingly focused on health.

For success in China, private health insurers must navigate four key obstacles

  • Fluctuating costs
    Rates for public health insurance plans vary significantly between cities and provinces, and drugs account for a significant amount of patients’ out-of-pocket expenses
  • Lack of standardization
    Currently, there is no standardized system of patient data collection or cost assessment.
  • Lack of incentives
    Health care providers have no incentives to collaborate with private insurance providers.
  • Foreign restrictions
    Regulatory obstacles will prevent all but the biggest foreign players from succeeding and it is unlikely that there will be an even playing field for foreign insurers.

Our full report further explores the expanding Chinese private health insurance market as well as the range of insurance products and approaches companies will need to develop to succeed.

EY Omni-channel report 2015

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