China In-Depth: Digital life solutions (tech enabled solutions for mortality)

Life insurance has been in global decline for some years. The protracted recession post-2008 in many economies has made it a luxury that some have decided they can do without.

This decline has been compounded among generations y (millennials) and z by a different attitude that places greater emphasis on current experience rather than protecting against future risk.

Despite these generations being the first to be digital natives, life insurance has not been greatly troubled by the march of digitalisation. Wearables, the big data analytics they generate and even a new approach to assessing mortality, have all had a limited effect on life and health insurers’ operations.

Arrested development

But the decline of life insurance cannot be blamed upon a gradual adoption of wearable monitoring technology alone. The search for new health and mortality factors has been affected by a number of themes.

After all, life insurance has a low penetration rate of 2.7% in China. This is not assisted by a shortfall in China’s state pension, which in 2014 (and discounted to 2010) was estimated at as much as 57.5 trillion yuan, or the equivalent of 143% of GDP in 2010.

Knowing they may have to save more for their life after work does not encourage the average citizen to spend money on insurance products.

There has also been a blurring of the lines between life and health insurance. What used to be discrete product lines are converging and consumers need to understand what that means for them.

Big data

Wearable technology and mobile health and wellness apps are essential for the secure future of both life and health insurance.

The vast amounts of information collected in real time about an individual’s health and fitness-related activities will provide an insight into individual risk, but also provide a fuller picture of group and population risk.

It’s a potential win/win situation for each party involved. The insurer can price risk more accurately and derive better value from reinsurance underwriting. Individuals are rewarded with gifts or reduced premiums for displaying the type of behaviour that improves their health – and mitigates their own risk.

Employers will also find they can get good value, accurately priced protection for their workforces, but also benefit from encouraging their employees to be healthier (see the spotlight on medical machines/virtual doctors and hospitals.

The difficulty is that for big data to be of any use, it needs to be processed and analysed, which requires powerful systems that few entities possess in the Chinese market.

Walk your way to better health and lower premiums

As if big data wasn’t disruptive enough, several startups have emerged that offer a new approach to assessing risk and delivering life and medical insurance.

Suho (“Step Step Insured”) was launched by Zhong An insurance in 2015 and partners with a number of exercise apps.

It is China’s first intelligent health insurance based on big data where the pricing is dependent upon the actual amount of exercise and the number of steps taken by the insured.

The more you exercise, the better your premium, with a maximum insured amount of RMB200,000. This places control of premium in the hands of the insured and breaks the high pricing/high claim cycle of traditional health insurance.

By 2017, the number of authorised users had reached 10 million, with 1.3 million of those being insured users. And this isn’t among that generation of digital natives, but mainly those in their 80s and 90s, with two-thirds of users being male.

Once in force, the user has daily step targets. If these are achieved, the next month’s premium is reduced. This has encouraged many users to maintain activity in order to benefit from these discounts.

Bonuses are also available. For instance, a policyholder that walks 10,000 steps a day cold receive free critical illness cover worth RMB150,000. More steps attract more cover, up to a limit of RMB200,000.

A more balanced approach

Tang Xiao Bei’s offering has achieved in-depth integration between social networks, insurance and medical services based on intelligent healthcare.

It offers insured amounts that are directly linked to the policyholder’s blood glucose monitoring results.

China currently has more than 120 million diabetic patients, and almost three quarters will present complications.

Treating complications costs almost four times the amount for maintaining diabetic patients, providing insurers and the health system with ample encouragement to reduce the number with chronic diabetes.

Users receive professional medical advice and are given guidance on how to manage their health in order to influence the size of their insured amount through monitoring glucose levels and following a healthy lifestyle.

A base premium of 996 yuan attracts an insured amount of 50,000 yuan. The policyholder receives a 200 yuan bonus to this amount every time they achieve a good glucose result. Failure will result in a deduction.

The bonus in a single week can be up to 3000 yuan, with a ceiling for the insured amount of 100,000 yuan.

Making it work

These innovative products appear to be winning friends among the insurance-buying public in China.

By offering new products in the life sector, New China Life bucked the trend in 2018 by delivering 21% growth in a sector that experienced a 3.5% decline.

In the first half of the year, more than half (55.5%) New China Life’s first-year premium came from health insurance.

Health insurance riders sales were worth 800 million yuan in 2017, growing to three billion in 2018. That figure is expected to double by the end of 2019.

Meanwhile, Ping An is addressing the changing market to overhaul its distribution channel. It has developed several digital features to train its one million agents to move away from traditional product sales to a more advisory approach (see Ping An spotlight.

The future is bright

Some of these businesses are reaching beyond preventative medicine to try to predict the potential for future disease at the genetic level.

Gifted scientist and founder of the Beijing Genomics Institute, Wang Jun, left Hua Da Genomics in 2015 to found iCarbonX.

He is seeking to harness the power of artificial intelligence within genetic research assist people to be in better control of their own health, while defeat disease through advanced data analytics and AI.

GenBox is already delivering insights into critical illnesses, by using oral mucosa samples to detect genes highly correlated to breast and other cancers.

The test focuses on eight genes that are highly correlated to breast cancer and makes use of the data gathered by China’s national genebank.

This is early days and risk assessment still relies on the traditional offline experts for the short to medium term.

The final analysis

Despite low levels of insurance penetration, China has demonstrated how insurtech can revolutionise the delivery of life and medical cover.

Here, the tech is not all back-office black box mysticism, but is often attached to the insured individual and is having the effect of promoting and improving behaviours that reduce risk.

China is a major centre for genomics research because its huge population offers access to a large and diverse set of genetic data.

Combined with the capacity to process genomic sequences, China may well lead the commercial application of these technologies in agriculture as well as medicine.

The sums being invested into genetic research will be rewarded and provide individuals greater assurance about their future health – provided they lead a healthy lifestyle – while providing insurers better visibility of risk and thereby greater certainty overpricing.

Levels of participation in these innovative product ranges may be relatively small now, but this market is developing rapidly and preparing itself for a new digital age.