CARE EXPO 2015

• INSURANCE IN CHINA • INSURANCE EFFECT ON HEALTHCARE INDUSTRY• RISK ANALYSIS AND PROTECTING INVESTMENT

Healthcare Reform China Insurance Perspective

• The key driving force behind change is the Central Government and in the past 15 Months huge emphasis has been placed on Health Care and Insurance Industry. Lets start with the reform and statements being made:

•  • October 2013 Healthcare Reform Key Points •  • On Oct. 14, 2013, Some Opinion of the State Council on Promoting Health Service

Industry; specifically made Health Insurance one of its 8 arms.• http://www.gov.cn/jrzg/2013-10/14/content_2506400.htm•  • August 13, 2014, Some Opinion of the State Council on Accelerating the

Development of Modern Insurance Service Industry this is also called the Xin Guo Shi Tiao

• (“New 10 Guidance Points of the Country” for insurance) specifically made Medical and Pension Marketization as first one. Setting up the pace for the reform.

• http://www.gov.cn/zhengce/content/2014-08/13/content_8977.htm•  • On Oct. 27, 2014, Some Opinion of the State Council on Accelerating the

Development of Health Insurance; sets the complete and specific target and agenda.• http://www.gov.cn/zhengce/content/2014-11/17/content_9210.htm

Key Points from Reform• Better role of insurers for the public sector development

• Insurers to get more involved in all administration levels across the Country

• The Government believes there is a gap between the current level of the Insurance Industry and its needs in the near future.

• Currently the insurers do not have excess capacity to help develop the needs of the Chinese Society

• The Insurance industry has to be modernized by 2020 • The government wants the majority of the population to be insured at some levels by 2020

• Higher Service Capabilities must be built

• Policies and the Industry must be able to compete on coverage and pricing with International Policies

• 5% of GDP spent on personal insurances is a goal by 2020

• Average premium paid per person should be 3,500 RMB a year (would mean a total premium collected of 490,000,000,000 per year)

• Both Companies and Individuals should increase their purchasing allowing the Government to increase their investment into the Health Care Sector and Social Services

• Encourage foreign investment to improve products and services

• Use of Insurance to build better Social Security and Benefits

• Private Insurance to be the main carrier of risk rather than State benefits

• Most important area of concentration should be the Health Insurance and Income Protection • Diversify Health Insurance Products to cover Elderly, Disabled, Children, Long Term Care, Mental Illness, Disease Prevention, Chronic Diseases, and General Health

Management and Education

• Public Education of Insurance

• Develop Better communication between Government Sectors such as Ministry of Health, Tax Bureau, Chinese Insurance Regulatory Commission, and Education Ministry.

• To leverage public policies to develop health insurance such as taxation.

Healthcare Industry from 2000 Insurance Perspective

• Since 2000 – “All Changed but No Change” • 2000 – 1 high level medical product in Market

• 2015 – Still limited choice

• No investment into the education about insurance

• International PMI policies include lifetime coverage and cover hospice care, but no local insurances

• All investment costs are the huge licensing fees

• Obsession with Market Share and short term profitability

Healthcare Industry from 2000 Insurance Perspective

• Limited Cost Containment  • Un Qualified Distribution

• No Tax Incentives

• Poor Employee benefits

• Approx 100 Million people in China buy personal insurance / less than 50,000 have a Health policy to cover Hospice Care or Private Medical Facilities

Key Facts

• More than 2300 Health Related products are filed with CIRC but only 4 Specialized Health Insurance Companies are registered.

 • Of the 2300 it is estimated less than 300 are products that will cover costs of

treatment away from the General population areas at state hospitals.  • Also as many of the insurers are not specialized Health Insurers, there are

few whom are innovative on the new product development for the rest to follow.

http://www.39yst.com/xinwen/20141215/204985.shtml • The total premium figures for any Health related products, for Jan-Nov 2014,

is 147.5 billion RMB, an increase of 44.47% compared to 2013.

• less than 2.5% is for Stand Alone Medical Insurance products  • The aim by 2020 is to have 100 Billion + RMB spent on stand alone Medical

Insurance that can be used away from General Population area’s of State Hospitals.

http://www.circ.gov.cn/web/site0/tab5257/info3945103.htm

Health Related products at CIRC

87% not Health Related13% Health Related

Total premium figures for any Health related products

2014

2013

¥0 ¥50 ¥100 ¥150 ¥200

Total an-nual...

Million

Figures for stand alone medical insurances

97.5%

2.5%

others

Stand alone medical insurance

Challenges

• So far foreign invested facilities too costly except for very wealthy

• Insurers charging too much for premiums   • No stable pricing across the Medical Providers • Limited Growth with current pricing of insurance and poor

policies • Chinese buying low cost insurance and thinking they will be

fully covered  • Limited understanding of Healthcare and Insurance

Education

• Very little money is being investing in educating the population of China on how “Private Medical Insurance” works and how the “Private Medical Sector” will benefit all if utilized correctly.

• Lack of referral of patients to other facilities which best suit the needs.

 • The Sales Personnel of the larger Insurance Companies /

major distribution channels etc. are poorly trained.

What for the Future?

• Well a lot depends on the implementation of the Health Care Reform and primarily on the Investment into the industry.

 • Investment has to be long term by Medical providers and

Insurance companies

• Chinese Insurers have always looked at immediate profitability

• Within the next 10 years the demographics of the population will change dramatically, and over 50% of the population will be retired and a life expectancy of 85+.

• Medical facilities will be at breaking point

A Winning Formula?

• New Products

• Insurers and the Health Care Providers engage the Ministry of Health • Insurers and the Regulators have to find better and more efficient payment methods for insurance.

• If all the requirements are to be met, Insurers should really concentrate on insuring the risk and allowing Third Party Administration of the policies and also the claims.

• Tax Incentives

• Qualified Distribution Channels

• Education of “How does Insurance Protect and its Values”

• Key Services and Client Servicing with 24hr Assistance and Advice

• Working relationships with the Ministry of Health and the best practice hospitals and Senior Care Living Facilities.

• Improving the Administration efficiencies

• Lower their risk index for Medical Insurance

 

What Role Will Insurance Play in Healthcare Development?

• Private healthcare is driven by affordability of population

• Private Medical Insurance can limit cost impact of treatment for insured

• As number insured grow investment follows

• Insurance in conjunction with State Benefits will help relieve cost burden of State and allow more to enjoy better healthcare

Should be State Responsibility

*Would buy Insurance to cover

If available

Would pay for parents if available

Felt home care family responsibility No opinion

Survey on needs for Senior Care Living Facilities

Sources: McKinsey Global Institute report on “Addressing China’s looming aging population” and confirmed by Shanghai foreign investment association .. 1000 interviewed

Opinion on Senior Care Living

Investment Regulation Changes

• The regulation for WOFE healthcare organization is issued on August 27, 2014, by the Ministry of Health and Ministry of Commerce.

• The main issue is releasing the limit of share of 70% for foreign entity to 100%. Of course there are requirements for the foreign entity, i.e., qualified with experience in healthcare or invest in similar organization.

• 6 provinces, Beijing, Shanghai, Tianjin, Guangdong, Jiangsu, Hainan, are the pilot for setting up WOFE. Provincial government is authorized to approve such projects. 

http://www.nhfpc.gov.cn/yzygj/s3577/201408/73f1ec5b56304347aa3436a08e39ddfa.shtml • There are talks lately to expand the area to all 2nd tier cities or even wider.

Main Risk Concerns for Healthcare Investors

• Patient Safety• Employee Safety• Allegations of Abuse• Staff Medical Costs• Ability to attract and retain staff• Corporate Governance• Social Media• Increasing Competitiveness• Attracting Patients• Brand Reputation and Damage Limitation• Staff Competencies and Skills• Theft or Fraud• Protecting IP• Increasing Litigation• Property Damage or Loss from Flood or Fire

MANAGING RISK

 • Employer Liability Insurance  • Patient Accident Insurance • Public Liability Insurance

• Professional Indemnity

• Medical Malpractice

CONSULTATION ON RISK

It is important to employ the professional services of a specialised broker that can ascertain the risks for a project or facility. Each facility in differing parts of China will encounter different aspects of doing business.

Who is Health Well Limited?

Who is Unistar Insurance Brokerage Ltd

Suite 1002A ,10/F ZhongDa Plaza, 989 DongFang Road, PuDong,Shanghai, PRC 200122中国上海市浦东新区东方路 989号中达广场 1002A室Tel: 86 (0)21-6876 3600 Fax: 86 (0)21-6876 7730

Chris Hughes (86-139 1818 1458) Jay Li (86-139 1815 5092)chrishughes@healthwellhk.com Jay.li@unistar-ins.com www.healthwellhk.com www.unistar-ins.com