Global private medical insurance providers' attention has turned to China. With a burgeoning economy and the flood of expats now entering the country, the sector is ripe for growth
Recent figures show that more than 300,000 expatriates are now living and working in the fastest growing marketplace in the world - China.
As with any rapidly expanding economy, a new set of challenges are created within all sectors of industry. The sector of international private medical insurance (PMI) is no exception to this.
Whereas a major focus of attention in recent times has been the Middle East, more PMI providers are awakening to China's potential and the healthcare needs of its expatriate residents. In the past, employers have based their Far Eastern operations outside of mainland China, operating remotely with managers and key decision makers based in Hong Kong, Singapore and other major commercial centres.
Now that an increasingly sizeable and highly skilled workforce is migrating into China and developing the country's infrastructure to the demands of the modern capitalist world, management and control structures are being put in place locally. Operations are being controlled and decisions are being made in situ and an understanding of local issues and challenges is required.
The opportunity for the PMI industry is one that has its fair share of issues and challenges which need to be overcome.
There are four key areas which will dictate how insurers and plan providers must prepare to adapt and assimilate in order to achieve long-term success and growth. These are regulation, medical infrastructure, claims experience and costs, and language barriers.
Until there is a significant relaxation within the regulation of medical insurance in China, current government policies are potentially the greatest obstacle to success. Foreign companies are not permitted to advertise or sell their products and the Chinese authorities seem determined to control currency flows out of and into the country. A PMI provider needs to investigate its options to meet the demands and needs of its target market.
In addition to this, local Chinese medical insurance plans provide only for treatment in China itself, a situation that is unsatisfactory to the majority of expatriates. They want the best care at their fingertips whether it be in the select advanced Chinese medical facilities or in a more widely medically advanced area such as Hong Kong, Singapore or even further afield. Brokers in China are now also less willing to take the risk of selling 'non-admitted' policies and the potential repercussions of losing their licenses by doing so.
It is with these factors in mind that more insurers and providers are embarking on joint ventures with companies already established and licensed in China. This allows them to market and distribute international PMI plans within the current regulatory framework.
One of the first to do this was Goodhealth Worldwide, which in March 2006 announced an exclusive partnership agreement with China Life - the largest life and health operator in the country. Such co-operation will allow the expatriate population the best of both worlds. It will give access to the best healthcare facilities while at the same time providing a wider geographic scope of treatment, be it for elective care abroad or through medical evacuation. Having a prior long-term presence in Hong Kong has also been beneficial to Goodhealth - enabling them to build a closer view of the developing market and the needs associated with it.
Other companies are also exploring the opportunities with significant joint ventures taking place. An example is InterGlobal's recently signed Memorandum of Agreement with Royal and Sun Alliance Insurance in May 2006.
The current medical infrastructure in China is a further source of concern for the ever-expanding expatriate presence. There are estimates that less than one in 10 state hospitals are of a good standard, with the majority concentrated in the major cities. The new non-indigenous population require the peace of mind that, should anything happen to them, they will have access to first class facilities.
Even though China's social and medical infrastructure is developing, customers still require choice and flexibility in the standard of care required to meet their PMI needs. This needs to be done within China and also accessing treatment abroad and even back in their home countries.
There is a further challenge to the international PMI industry - that of cost containment. The new mainly privately funded and owned Chinese hospitals and medical facilities are working to financial targets and deadlines, and the instances of overcharging, prolonged and unnecessary hospital stays, and even falsifying treatment are becoming increasingly frequent.
This leads to costs being reflected back onto the customer, with many insurers and providers already rating their premium costs significantly higher for customers in China than elsewhere in the world. In some cases, premiums have become as high as the US.
As the market develops further, insurers and providers must look at ways to suppress such inflationary costs. Therefore, undertaking joint ventures with Chinese companies and contracting with medical providers at pre-agreed treatment costs will be beneficial for customer and provider alike. GoodHealth is a good example of this, as it already operates an expanding direct settlement network of outpatient facilities throughout China.
There still is one further hurdle to overcome in the region, - the language. Very few doctors speak English and medical reports/invoices are mainly in Chinese, necessitating costly translation services and associated costs as well as potentially delaying claims settlement. Establishing an operation in China through joint venture or other means, with Chinese speaking staff is a move that could greatly alleviate these problems.
With the emergence of China as the largest developing nation on the planet, opportunities have arisen not only for the international PMI providers but also for independent brokers. New markets lead to new products, and if this development is implemented with care and due diligence the main benefactor will be the customer.
An expatriate in China can look forward to a range of healthcare solutions not only to suit their needs, but hopefully also to suit their budgets - all within a framework that is compliant with local regulation.key points
A increasingly sizable workforce is migrating to China and the country's infrastructure needs to incorporate the growth and modernisation of its PMI industry to accommodate it
Through joint ventures and a relaxation of the regulation governing PMI, this is achievable
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