China pushes for cheaper health insurance products to battle virus

China pushes for cheaper health insurance products to battle virus

China is nudging insurers to work on cheaper medical cover linked to the coronavirus and is assuring them of fast-track approval for these new products, people with knowledge of the matter said.

The move will mark a shift in the Chinese insurance market where the bulk of existing products are essentially investment schemes and pure healthcare coverage accounts for only about a fifth of the total life insurance premium.

In the last one week, China Life, China Pacific Insurance, Ping An Insurance Group and Zhong An Online P&C Insurance Co, among others, have included coverage for the virus in their existing medical insurance products, according to their websites.

At least half a dozen more are in the process of requesting approval for products with coronavirus coverage in the coming weeks, said the people, declining to be named as they were not authorized to speak to the media.

The scramble comes as the Chinese province of Hubei, at the epicentre of the outbreak, reported a record surge in the death toll on Thursday and as global health experts warned the epidemic could get far worse before it is brought under control.

China’s Banking and Insurance Regulator (CBIRC) last week adjusted actuary rules for healthcare, accident and life insurance as well annuity insurance, which will help lower premiums for such insurance by 3% to 5%.

The sources said the lower premiums and push for cheaper, basic medical cover, were largely prompted by the need to deal with treatment for those who may get infected by the coronavirus.

CBIRC did not respond to Reuters request for comment.



Despite a weak government healthcare system, private health insurance has been slow to take off in China as insurers mainly catered to demand for high-margin investment-like insurance products.

The high cost of coverage for critical illness products, which typically exclude insurance for epidemics, has put them out of reach of many, industry officials said.

Beijing, however, has been pushing private insurance firms to expand their product coverage to ease pressure on the healthcare system, and as part of a broader crackdown on the sale of shadow banking-linked investment products by insurers.

As a result, health insurance in 2019 accounted for 23% of life premiums in China, up from just 8% in 2003, according to Fitch Ratings. In the United States, this figure is about 30% of the life premiums.

That share in China is expected to go up significantly in the near future as individuals rush to buy coverage for treatment of the new virus with a large number seeking admissions to private hospitals, the people said.

The regulator has assured insurers of approvals to launch those products within a few days, they said, compared to the usual timeline of two weeks or more for investment-linked insurance products.

The premium charges for low-severity medical insurance, which will typically include virus treatment coverage, could be 15%-30% cheaper than the critical illness products, industry officials said.

The demand for products with basic healthcare coverage, including for coronavirus, is already soaring.

“There is no doubt that awareness for insurance will significantly increase in the near future,” said Sam Radwan, president of consultant ENHANCE International, which advises China’s top insurers.

“Customers will be more understanding of the need to buy these products as opposed to in the past when my clients had a very difficult time convincing customers to buy these products and the net result was acquisition costs were very high.” (Reporting by Sumeet Chatterjee in Hong Kong and Cheng Leng and Zoey Zhang in Beijing Editing by Shri Navaratnam)

(By Sumeet Chatterjee, Cheng Leng and Zoey Zhang)

© Thomson Reuters 2020.