Ensuring a healthy life as an expatriate

Medical insurance poised to boom for both Chinese and foreign staff

Margaret Ferte spends hours every day on her ever-expanding website, expatmedicare.com, which she registered in Shanghai three years ago to serve the expatriate community's increasing need for medical insurance.

It is a sign of the rising significance of the sector.

The website gives a comprehensive introduction to international medical insurance, including benefits, premiums and healthcare tips. It has two hotline numbers to attract potential clients from the Chinese mainland and Hong Kong.

"We work closely with clients to review their individual needs and, from there, we research the market for the best solutions to fit the demands. Our service also includes claim management. That is helping customers with their medical claims," she said.

Ferte links insurance providers with buyers but the brokerage is paid by insurance firms rather than individual clients. "Our service is free so our advice is independent and non-biased," she said.

Built from scratch, the startup has grown quickly with 10 staff servicing about 500 expat clients in China and working with 10 medical insurance providers across the country.

Over the past decade, the growing number of expatriates in China has created an emerging high-end private healthcare business market for insurers at the same time as medical and health insurance are being promoted through government reforms.

However, it is only relatively recently that overseas companies have entered China's private health and medical insurance market, either by acquiring equity stakes or in forming partnerships with leading Chinese insurers.

Such deals include South Africa-based Discovery Holdings acquiring a stake in Ping An Health Insurance Co of China, a subsidiary of Ping An Insurance (Group) Co of China in 2009. Also, Germany-based DKV Group, part of Munich Re, jointly set up PICC Health Insurance Co with the largest Chinese nonlife insurer, People's Insurance Company of China in 2005.

In August, Allianz China General Insurance Co, a wholly owned subsidiary of global insurance and asset management provider Allianz Group, entered China's health insurance market by forming a joint venture with Allianz Worldwide Care, the medical insurance arm of the corporation.

Based in Dublin, Allianz Worldwide Care specializes in providing international health insurance for employees and their dependents worldwide. The company structure, product design and support services have evolved specifically to anticipate and meet the health insurance needs of corporate clients.

According to Ron Buchan, chief executive officer of Allianz Worldwide Care, the firm aims to offer a range of international healthcare plans designed to appeal to both international and local corporate groups in China.

The point is there is a strong and increasing demand for quality international health products, Buchan said.

"Traditionally in the Asia-Pacific region, Singapore and Hong Kong were the two chosen hubs for multinational corporations' headquarters but the past five years have seen people moving their headquarters to Beijing and Shanghai," he added.

He said the Chinese business landscape will entertain more joint venture companies and many Chinese companies will be sending their people abroad, increasing demand in the sector.

Clients are offered a flexible selection of comprehensive plans that cover a wide range of in-patient and day-care treatments, as well as other benefits such as medical evacuation, local ambulance and nursing at home.

"We have adjusted our plans to include, for example, the use of traditional Chinese medicine to reflect the market needs of Chinese people," Buchan said.

Burgeoning business

Allianz's timely decision to offer their very first Chinese-compliant plan allows people in China to buy locally and pay with yuan.

But influential as Allianz is, its health insurance business is very much a latecomer to China.

While many insurance firms recognize the increasing allure of the vast Chinese market, it has only been in the past four years that they began jousting with each other for a share of it, said Zhou Xiye, regional vice-president of global health benefits for Cigna and CMC Life Insurance Co.

Zhou's company is a joint venture established by United States-headquartered insurance provider Cigna Corp, an industry heavyweight specializing in health insurance. It established itself in China in 2003.

"Generally we had two concerns. At first we were not sure whether the market had that much potential but, as expats kept flocking to the country, and companies started using comprehensive healthcare plans as a benefit tool to attract key local talent, we decided to take the first move targeting high-level corporate clients," Zhou said.

The business soon saw a meteoric rise: It enjoyed a compounded growth rate of more than 100 percent in terms of the number of new orders and revenue generated from premiums jumped to second place in China from 2009 to 2011.

Currently it works with more than 200 companies, a majority of which are Fortune 500 firms.

The second concern, Zhou said, was the so-called "return-conscious" mindset that was unique to the Chinese market and that has everything to do with the current social health insurance system.

While the country is now pouring record amounts of its wealth into health services, it does not run a fully State-funded cradle-to-grave system. Its basic medical insurance covers about half the costs of healthcare, leaving the remainder paid either by patients or their health insurer.

This product is known as "group supplementary health insurance" and is the most widely sold health insurance in China.

But Zhou said a "high-end medical insurance" differentiates itself from the group supplementary insurance by reimbursing all medically necessary expenses that fall out of the limited social health insurance plans.

"In general, there is inadequate access to top-tier hospitals and healthcare facilities because patients generally end up paying 60 percent out of their own pockets and often struggle to gain access to high-end care," he said.

While the market gap and the increasing demand do provide growing space for Western insurers, Chinese people usually buy savings-type or high-return products rather than health insurance.

"If one pays extra in addition to the basic social insurance, he or she would like to get a decent return. Chinese clients tend to think of it as pure investment instead of the leverage of risk. That kind of culture has dented its growth," Zhou added.

According to a McKinsey & Co study, China's healthcare market in 2010 was valued at $293 billion, ranking it fifth worldwide. In sharp contrast, the commercial health insurance premium in 2011 amounted to just $11 billion, accounting for less than 4 percent.

China's health insurance premiums claimed a mere 7.1 percent of overall life insurance premiums, McKinsey data showed. In developed economies, the figure usually amounts to 30 percent, Zhou noted.

International medical insurance is "hugely lacking" in the Chinese mainland, where local general medical policies do not cover treatment outside the mainland, making them unappealing to both Chinese customers who travel overseas and expatriates stationed in the mainland.

The majority of the market is still competing with products covering major diseases and those that are subsidized by hospitals, Zhou said, whereas high-end health insurance is genuinely a network-type medical product offering seamless services.