InsurTech of the year: Bihubao

中英文版都有

Bihubao is a Beijing based startup and this year’s InsurTech of the year. Bihubao has succeeded by tackling an issue that lies at the heart of China’s health system; although public health insurance covers 95% of China’s population, many patients in tier 2 or tier 3 cities (those outside the developed east coast) are unable to pay for operations, prescription drugs or medical devices that exceed the coverage limit.

Amidst this coverage gap, startups such as Bihubao and others have emerged with a new approach to user acquisition on WeChat that relies on three phases: i) a crowdfunding platform ii) an online medical community, and iii) a traditional insurance aggregator.

Although each of these plays is a separate and distinct use case, together they complement each other and are worth considering in turn.

Phase 1: Contribution Phase

A core part of Bihubao is a feature developed for WeChat that allows users to contribute to a friend’s medical expenses. This is especially practical in small Chinese cities where the penetration rate of individual health insurance is 1-2% and the ability to remedy otherwise debilitating diseases can be crucial. Unlike other community insurance startups, Bihubao provides it’s contribution service for free to facilitate charitable giving to those in need, this has enabled Bihubao to amass 100m users in a two year period.

Once Bihubao is used to contribute to a friends medical expenses, participants are then offered low limit critical illness coverage that is structured as a community-based reimbursement cover whereby premiums are pooled and the limit is capped according to the relevant disease.

 Phase 2: Community Reimbursement Phase

This phase involves offering those who have contributed to a friends medical expense charging a low limit / low priced critical illness insurance that is structured as a reimbursement product (i.e payout upon diagnosis and without access to a second opinion, hospital network, or specialists). This offering has the advantage of a low barrier to entry and a simple proposition to those previously unaccustomed to pay for individual coverage, whilst engaging users. Additionally though, with a low price also comes a low limit.

Although Bihubao’s community program is popular with consumers in China’s less developed cities, the reimbursement scheme is not enough to cover cancer treatments, a fact often lost on its 32 million subscribers, and it is not underwritten by an insurer, so Bihubao is not allowed to advertise the product as insurance.

Phase 3: Broker Up-selling Phase

Finally, Bihubao has acquired a broker to upsell traditional life and health insurance to its members. This is especially important both in terms of offering members access to comprehensive health insurance in addition to delivering a recurring revenue stream for Bihubao.

Since its launch in 2016, Bihubao has acquired some 110m registered users through phase one  (medical contribution feature), 32 million of these converted to phase 2 (community-based reimbursement products), and 6 million of these converted to phase 3 (traditional broker model).

Although these phases involve separate and distinct use cases, together they represent a triumvirate of customer acquisition, community reimbursement pool before finally up selling tradition life/health insurance.

Ultimately, Bihubao is a new breed of social media based broker that is circumventing the burden of cost per click marketing that previously restrained online marketing whilst simultaneously addressing a shortfall in China’s public health insurance system. However, despite the current success of this model, the challenge will be whether it can convert enough of its 100 million users to comprehensive health insurance, a feat already accomplished by legacy insurers such as Ping An, albeit with a million offline agents to manage and remunerate.