Chinese Health Insurance: Rapid Growth, But a Seemingly Unprofitable Business

The Wall Street Journal discusses growing pains for China's health insurance industry. It used to be Beijing footed the bill, providing basic, but near-universal coverage. However, the system is in shambles and despite rapid growth (from a low base) in private health insurance, only 6% of urban Chinese and 8% of rural citizens have coverage, according to a Swiss Re study. American International Group's [AIG] local life insurance division, which also sells health insurance, is the largest foreign provider with 3% market share as of 2005, compared to 45% for Ping An and 31% for China Life. While AIG refused to comment whether its health insurance operations are profitable, a Swiss Re consultant said generally speaking, health insurance "is not a profitable business." An AIG spokeswoman in Hong Kong mentioned the firm's priorities remain on life insurance and retirement products. Two problems plaguing the industry are affordability and overprescription, which the Journal says are both "slowing the development of private medical insurance in China" and "limiting Beijing's options as it strives to rebuild the system."

Sources: The Wall Street Journal
Commentary: China Shares Regain All Losses • First-Ever Full Coverage Health Insurance for China • China Life to List on Shanghai Exchange
Stocks/ETFs to watch: American International Group Inc. (AIG), Swiss Re (SWCEY.PK), Allianz SE (AZ), China Life Insurance Company Ltd. (LFC), Chindex International Inc. (CHDX). ETFs: iShares Dow Jones US Insurance (IAK), KBW Insurance (KIE)
Related: Swiss Re report on Chinese healthcare

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Comments

[King:]

Another large insurance company is Royal Sun Alliance. Insurance is nearly always a profitable business, when ran correctly. Expat insurance in China is growing very quickly

2008 Mar 31 11:42 PM

[ICISTREET:]

Expats should all subscibe to health insurance!
Why? Because it's FREE!!! No kidding.

Visit my blog and learn what makes chinese insurances so different from western plans.

There, I'll discuss the PICC (#1 in China) model.

2008 Jun 01 09:15 PM

[Universal H...:]

China is going to be switching to a new Universal Health Care Insurance plan by the year 2110. It will be a great deal different than the Chinese health insurance plans that are currently available. For the average Chinese person the out-of-pocket expense for medical treatment is astronomical. The new China healthcare plan will allow for a better quality of life for mostin that country.

2008 Oct 23 01:46 PM

[Nadav:]

The Chinese prove that an insurance company doesn't many people, it needs many healthy people.

Mar 27 04:06 PM