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

by: Steven Towns

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 LossesFirst-Ever Full Coverage Health Insurance for ChinaChina Life to List on Shanghai Exchange
Stocks/ETFs to watch: American International Group Inc. (NYSE:AIG), Swiss Re (OTC:SWCEY), Allianz SE (AZ), China Life Insurance Company Ltd. (NYSE:LFC), Chindex International Inc. (NASDAQ:CHDX). ETFs: iShares Dow Jones US Insurance (NYSEARCA:IAK), KBW Insurance (NYSEARCA:KIE)
Related: Swiss Re report on Chinese healthcare

Seeking Alpha's news briefs are combined into a pre-market summary called Wall Street Breakfast. Get Wall Street Breakfast by email -- it's free and takes only seconds to sign up.