A new report from Swiss Re has identified short-term health insurance as a growth driver for non-life re/insurers operating in China.
According to data from Swiss Re, short-term health insurance premiums rose by 35% in China during the first 11 months of 2020, boosted by digital sales and risk-conscious consumers with increasing medical expenses.
And strong government support, a broader product mix and new online sales channels is expected to further support growth in the coming years.
Swiss Re believes that focus on this line of insurance could help to offset the non-life business hit from motor detarification in 2020 and 2021.
Short-term health insurance fills the gap between basic (but low-coverage) public health insurance and traditional long-term health insurance, primarily by reimbursing medical expenses.
Insurers wrote more than CNY 84 billion (USD 13 billion) of policies in 2019, 12% of the CNY 707 billion total health insurance premiums (2015: 9.5%), and annual premium growth has averaged about 40% for the past decade.
This trend continued in 2020 despite the impact of COVID-19, due to risk-aware consumers, increasing medical expenses and digitalisation of health insurance, Swiss Re noted.
Non-life insurers are the major players in this market with short-term health representing 8.5% of total non-life premiums in the first 11 months of 2020, up from 2.7% in 2015.
Swiss Re also sees the growth outlook in this market as positive due to its strong policy support from the government, which is looking to expand access to healthcare while reducing the fiscal burden.
The China Banking and Insurance Regulatory Commission (CBIRC) currently forecasts health insurance premiums to reach CNY 2 trillion annually by 2025, an implied 20% annual growth rate.
Health insurance density and penetration in China are low relative to advanced markets, with life and health insurance density in China standing at USD 185 in 2018, versus USD 2670 in the US.
But while Swiss Re sees clear avenues for growth in the short-term health market, the firm acknowledged that many insurers still face pain points such as reliance on third-party online platforms for product distribution.
“These bring a broad customer base but push up commissions, which drag on insurers’ combined ratios and performance,” Swiss Re explained.
“Non-life insurers, especially the top players, can develop their own online sales channels to improve performance. They could also partner with third party administrators in health services to leverage their knowledge in order to build competitive advantage.”