China Aims to Establish a High-Quality All-Inclusive Commercial Health Insurance System in Five Years
Executive Summary
City Commercial Health Insurance ("Huiminbao") has been rapidly advancing, focusing on protecting the entire population against major illnesses, including those with pre-existing conditions. This initiative has garnered significant attention and government support.
Building on this momentum, on June 6, the National Financial Regulatory Administration (NFRA) issued the "Guiding Opinions on Promoting the High-Quality Development of All-Inclusive Commercial Insurance" (referred to as the "Guiding Opinions"). These guidelines aim to establish a high-quality, all-inclusive commercial insurance development system within the next five years, along with providing the necessary policy and resource support to further the development of all-inclusive insurance in China.
The "Guiding Opinions" outline the fundamental principles of all-inclusive commercial insurance as "broad coverage, fair accessibility, reasonable premiums, and effective protection." They require insurance companies to integrate the development of all-inclusive insurance into their performance evaluations, with a minimum weight of 5% for large insurers.
Regarding health insurance, the "Guiding Opinions" emphasize optimizing the development of commercial health insurance in key areas and for specific groups. They particularly stress the importance of developing health insurance products that cater to the protection needs and payment capabilities of the elderly and expanding coverage for individuals with pre-existing conditions and chronic diseases. Additionally, they call for increased insurance coverage for women's "two cancers" (breast cancer and cervical cancer), congenital diseases in children, and rare diseases.
Improving the Management Mechanism for All-Inclusive Commercial Insurance
Under the "Guiding Opinions," insurance companies, as key stakeholders, are entrusted with the task of establishing a leadership framework for the development of all-inclusive insurance. The board of directors and management should regularly review the progress of all-inclusive insurance and enhance strategic planning and top-level design.
Specifically, insurance companies are required to designate a leading department for all-inclusive insurance business and set up a working mechanism to ensure the high-quality development of all-inclusive insurance. Companies must integrate the development of all-inclusive insurance and the fulfillment of social responsibilities into their performance evaluations, with the assessment weight for all-inclusive insurance in large insurance companies being no less than 5% in principle.
However, further clarification is needed to determine whether the 5% refers to the premium volume or the number of people covered by the insurance.
Advancing Specialized All-Inclusive Commercial Health Insurance
The "Guiding Principles" encourage insurance companies to actively develop commercial health insurance tailored to diverse risk groups.
- Promote the expansion of health insurance for rural residents to enhance coverage.
- Develop health insurance products tailored to the needs and financial capabilities of the elderly.
- Systematically increase coverage for individuals with pre-existing conditions and chronic diseases.
- Enhance insurance protection for women's "two cancers" (breast and cervical cancer), congenital disorders in children, and rare diseases.
- Facilitate the involvement of insurance companies in the development of the elderly care service system, focusing on the seamless integration of long-term care, risk protection, and both institutional and community-based services.
Enabling Profit and Loss Sharing with Dynamic Rate Adjustment
The "Guiding Principles" specify that the rates for specialized all-inclusive commercial insurance should be lower than those for comparable insurance products under similar conditions. Additionally, insurance companies are encouraged to collaborate with relevant departments to establish mechanisms for sharing profits and losses and to dynamically adjust rates to ensure sustainable business operations.
However, it is important to recognize that factors such as the payout ratio and cost ratio are crucial to the long-term sustainability of commercial insurance. Therefore, these aspects need to be further clarified by the regulator.
Policy and Resource Support
Specialized all-inclusive commercial insurance will receive priority support from the government. These include:
a. Data Sharing
A major challenge in developing all-inclusive insurance arises because existing products have not encompassed certain populations or events. Questions arise: Where is the data? How do we conduct actuarial calculations? How should pricing be established?
Under the "Guiding Principles," using the financial infrastructure of banking and insurance, secure data sharing within the industry will be supported. There will be a lawful and compliant exchange of information between industry data and departments such as the National Health Commission, human resources and social security, civil affairs, and other related entities. This initiative will broaden the data sources available for all-inclusive insurance, enhance the scientific accuracy of insurance product pricing, and strengthen the risk management capabilities of all-inclusive commercial insurance.
b. Coordinate and Seek Support from Various Stakeholders
The "Guiding Principles" urge regulators and insurance companies to actively collaborate with local governments and industry authorities to integrate the development of all-inclusive commercial insurance into local livelihood protection projects and secure essential policy and resource support.
Encourage insurance companies to collaborate with industry associations, social organizations, enterprises, and other entities to develop specialized all-inclusive insurance products. Promote charitable donations from all sectors of society through all-inclusive insurance initiatives.
c. Raise Public Awareness
In China's commercial insurance market, health insurance is relatively new compared to the life and property insurance sectors. Consequently, the general population's awareness and trust in commercial health insurance are low, contributing to high distribution costs for these products.
The "Guiding Principles" encourage all sectors of society to engage in educational activities about all-inclusive insurance, disseminate accurate insurance knowledge, enhance public awareness, and foster scientific and rational insurance concepts. It can serve as a valuable experiment in leveraging government endorsement to increase awareness and reduce sales costs for commercial health insurance.
References:
- 国家金融监督管理总局关于推进普惠保险高质量发展的指导意见, 国家金融监督管理总局 (National Financial Regulatory Administration), 2024-5-29, https://www.cbirc.gov.cn/cn/view/pages/governmentDetail.html?docId=1164873&itemId=861&generaltype=1
- 普惠保险顶层设计出炉！大型机构纳入考核权重不低于5%，专属普惠保险可盈亏分担、费率动态调整, 慧保天下 2024-06-06, https://mp.weixin.qq.com/s/luE4E3orba8yAZ2K_NYmBA
- 普惠保险首个顶层设计落地：确保买得到、买得起、赔得满意, 第一财经 6-6-24, https://www.yicai.com/news/102141087.html
