Angie Man, head of product, pricing and network management at AIA, examines what growth opportunities exist in China’s employee welfare market for medical insurers and how AIA is aspiring to transform healthcare delivery across Asia

China’s population of 1.4 billion includes an estimated 10 million post-00s graduates who are now entering the workplace.

While the Chinese insurance market is, from an all-segment view, already the second largest in the world (behind the United States), the group insurance segment tells another story.

Over the past few decades, the development of group insurance in China, especially group medical insurance, has not been as rapid as expected.

The overall premium income for all segments combined represents 4.5% of GDP only, as compared to developed markets such as the United States (12%), Canada (8.7%) and non-developed markets such as India (4.2%).

Group insurance penetration is even lower, with premium per capita nowhere near the level of developed markets.

Comparatively, the China group medical insurance market is still in a premature stage.

Given the Chinese government’s ambition to achieve Health China 2030 and China’s huge workforce, significant growth opportunities still exist in the employee welfare market and for group medical insurance players such as insurers, reinsurers or captives, as well as medical service providers.

Technology is changing medical insurance

Insurers in China are investing extensively in technology, with tech giants such as Tencent and Ant Group tapping into the insurance market – directly or indirectly – through their online platforms and payment gateways.

Their presence in the market is partly in response to the Chinese government’s direction in applying artificial intelligence (AI) technologies and digitalising China’s business environments, and the insurance industry is benefiting from their technology advancements.

Tech innovation and AI/machine learning applications are among the fastest growing areas in the insurance industry in China.

Here we refer to the application of tech itself, not just the concept.

Not only are insurers deploying technologies to transform and streamline their internal operational processes, but they are also appointing startups and insurtech companies to provide enhanced online services to their customers. Examples include:

• AI underwriting, one of the most mature adoptions of artificial intelligence in insurance, leverages both structured and unstructured data points for customer risk profiling and underwriting assessment.
• AI claim assessment through technologies such as optical character recognition (OCR) and data mining is proven to have accelerated claim processes and reduced fraud and excess usage.
• AI-empowered symptom and diagnosis checking assist medical customers with accurate identification of hundreds of conventional diseases, and formulate the most suitable treatment plan.
• Telemedicine, which utilises virtual platforms for video appointments and makes use of China’s highly effi cient delivery and courier services.
• Digital intelligent customer portals for end-to-end patient journey management with their doctors.
• Health and welfare management, that with the help of artificial intelligence and big data, assists the government with modelling and healthcare resource planning for communities.

These initiatives are transforming the insurance industry and directly impacting the customer experience, forcing players who want to tap into the Chinese market to adapt and innovate faster than expected.

Collaboration between healthcare service providers and insurers

The stakeholders in China’s healthcare supply chain include regulators, doctors, healthcare providers, pharmaceutical companies, patients and payors.

By payors we mean patients themselves, and the insurers that often engage third-party administrators.

As it stands, lacking a tactical and strategic health provider management model can be a disadvantage to the payors.

Insurers in China are building a sustainable and manageable healthcare ecosystem with various parties.

Some are making progress with active participation of healthcare services, including exclusive partnerships via merger and acquisitions of hospitals, clinical networks, elderly care institutions, health management providers and online medical facilities.

AIA Group Limited has recently completed the acquisition of Blue Care JV (BVI) Holdings Limited (Blue Care), a provider that operates medical centres with a large medical network in the Greater Bay Area (a Chinese government project to connect 11 cities in the south of China) to enhance AIA’s healthcare plan to better manage health outcomes for their customers.

The Greater Bay Area is a strategic focus for insurers, with Chinese authorities announcing their support to the growth of cross-border insurance in their 14th Five-Year Plan.

Different proposals for the cross-border model were made. One is called Insurance Connect, which would allow direct settlement of cross-border medical bills at public hospitals in Shenzhen by Hong Kong and Macau insurers.

Collaboration between healthcare providers and insurers will be key, as will the implementation of data processing and data exchanges empowered by digitalisation and automation.

Key risks in health insurance

• Technology risk: With the technological advancements and new solutions deployed by insurers, additional cybersecurity and tech risks must be considered. An IT risk governance model must be in place to mitigate these risks.
• Operational risk: The rapid development of online clinics and telemedicine is significantly changing the behaviour of medical insurance customers, creating financial risk and potentially affecting utilisation (eg abuse), claim cost increment and the overall sustainability of medical insurance schemes.
• Product risk: Competition in China’s medical insurance market has always been fierce, creating pricing pressure for insurers and reinsurers as well as captives. Many insurers entered the medical insurance market with the primary goal of seizing market share. Competition from foreign and local players, including non-life companies, forced significant premium reductions, creating pressure to maintain the right balance between profitability and business growth.
• Economic risk: A survey conducted by the SOA Research Institute in early 2022 shows that 32% of the respondents (insurance professionals) fear hyperinflation as a major risk across the region. This directly impacts the insurance sector as the cost of medical services and drugs escalates, impacting the entire value chain.

The economic outlook for 2023 is not optimistic as many businesses are facing financial challenges. For captives, this will be a year to set their strategic partnerships straight as corporates are lowering their employee benefits budgets, making it more difficult to manage their captive programmes sustainably.

AIA’s ambition and role in Asia Pacific

One of AIA’s primary focuses is to play a leading role in transforming healthcare delivery across Asia.

Accelerated digital adoption and new advancements in health technologies underpin the region’s tremendous strategic potential.

Our vision is to transform from payor to partner and manage health insurance and healthcare delivery in a proactive manner with claims improvement and lower costs to customers.

This is achieved by our effective vendor sourcing, price negotiation, dynamic performance monitoring and scaling, all of which result in reduced operational costs.

AIA will continue to invest in technology and innovation, including data analytics, to provide actionable insights for better understanding of claims trends, timely recommendations on corrective actions, benefit design and optimisation of corporate customers’ spending.

Corporates that wish to control medical costs and run sustainable programmes in Asia can count on AIA as their expert partner.