Public-Private Partnerships in China’s health insurance
A key part of China’s ability to control infectious diseases such as malaria and rotavirus within a shorter timeframe than developed countries was its ability to establish partnerships between public and private actors. Similarly, tackling chronic diseases will require close co-ordination between government entities and private enterprises. To this end, the recently merged Chinese Insurance Regulatory Commission and Chinese Banking Regulatory Commission has endorsed several initiatives that are bearing this out.
1. Blockchain based anti-fraud mechanism:
The practice of taking out duplicate policies from several insurers and then filing multiple claims has long plagued Chinese insurers. Previous attempts to establish a shared database on which policies could be traced were hampered by a reluctance to disclose customer data, but a renewed effort lead by Tsinghua University has established a blockchain-based platform with seven participating life insurers and Wanxiang Blockchain Lab. Under the program, insurers are providing partial customer information and policy details with Tsinghua University serving as the arbitrer to manage and authenticate the data whilst Wanxiang Blockchain Lab provides the underlying blockchain infrastructure to facilitate the anonymised exchange of data between insurers. Although the early stage nature of this effort has yet to deliver a measurable impact, it demonstrates the legitimacy of blockchain as an authentication mechanism, but also the ability of public and private stakeholders to jointly address systemic challenges in China.
2. Employee benefits regulations:
Regulatory encouragement for employee benefits in China has historically been overshadowed by universal public health insurance. However, the cost of financing public healthcare has prompted the introduction of China’s first tax deductible health insurance plan to ease the government care burden in addition to enabling local companies to compete with western competitors who offer more discerning employees benefit packages. Introduced in 2016, this initiative has recently been expedited by a regulator keen to expand the commercial health sector.
3. Government supported underwriting and claims processing services:
Currently, a lack of visibility into public hospitals has lead to unsustainable loss ratios for Chinese health insurers. The issue has become particularly severe in tier two and three cities (cities other than Shanghai, Beijing, Shenzhen and Guangzhou) whereby overcharging hospitals and doctors is routine and presents a pricing challenge for life & health insurers. This lack of visibility means actuarial departments will either devise under-priced products that impact profitability, or the product will be so over-priced that it’s uncompetitive. This has prompted the government to provide funding for startups such as Hejin Online and others who are addressing this dual challenge. Hejin provides additional data to life/health insurers to better inform pricing efforts in addition to an AI based TPA service that lowers the claims ratio by identifying consistently This is relevant as life insurers are now trying to tailor policies to specific segments.
4. AI based operation:
The promise of AI has not been overlooked by China’s Insurance Regulator and its establishment of a road map for the adoption of AI has spurred several life insurers to embrace AI based use cases including claims processing and user authentication. Of these, Taikang Life has been the most progressive and, by 2020, aims to settle a majority of claims submitted to its online unit by using AI. Taikang is also leveraging government support for the use of facial recognition technologies to authenticate and approve customer interactions. However, although AI based use cases are promising, the data sets upon which AI is based are not yet mature, and regulatory encouragement and even compulsion will be crucial in grasping the opportunities that AI holds.
In less than 10 years, approximately 900 million people have been enrolled in various health insurance schemes across China. However, none of it would have been possible without government support – and public-private partnerships will play a crucial role in China’s battle with chronic disease. With this model China now has the opportunity to lower the rate of chronic diseases exacting a toll on public health expenditures.