By 2020, China's private health insurance market could be worth 1.1 trillion yuan (167 billion U.S.dollars), as upwardly mobile Chinese look for alternatives to public health care, according to a report Wednesday.
The figure would be fivefold the 2015 amount, which stood at 241 billion yuan.
The fastest growth is expected in reimbursement policies, which are expected to represent 36 percent of the future private insurance market, the lion's share of the market by that time, accounting for 64 percent, will be critical-illness policies, which are expected to grow at a slower rate, according to a report by the Boston Consulting Group and insurance giant Munich Re.
Reimbursement policies are more expensive but more flexible than their critical illness counterparts. Critical-illness insurance pays a lump sum if an insured person is diagnosed with one of the covered medical conditions, while reimbursement insurance pays-out on an ongoing basis should a health problem require longer-term consultations, treatments or hospital visits.
"Private reimbursement insurance makes tremendous sense in China. Currently, the market for it is not too big because of the cost. There is, however, a lot of interest and we expect to see many new products in the next few years," explains Luo Ying, a partner in BCG's Beijing office and a coauthor of the report.
The most likely people to hold a reimbursement insurance policy today are 35-55 years of age, married with children, and have a minimum annual household income of 200,000 yuan, according to a survey in the report.
This group is expected to grow to over 40 million by 2020. The wealthiest consumers in this group would be willing to pay between 30,000 and 60,000 yuan for a reimbursement policy covering a family of three.
The report expects increasing profitability in this sector, partly because of government policies that support the privatization of insurance and health care, like tax breaks for private health insurance.
Rising demand and encouraging government policies have already led to the quadrupling of private hospitals, to more than 12,500 today from about 3,200 in 2005, the report showed.
"Insurance companies need to understand the characteristics and preferences of different customer segments: the amount of money they are willing to spend on reimbursement insurance and what they expect to receive in return," according to Bill Bossany, deputy chief executive of the Beijing Health branch with Munich Re.
Expertise in analytics and strong data infrastructure are essential in gaining valuable insights and making customer interactions more straightforward, Bossany added.
