Commercial insurance turns invest-worthy

Gaming firms, real-estate companies and drug makers in China are chasing what they believe to be the country’s next hot commodity: private health insurance.

At least 29 publicly traded Chinese companies have announced plans to invest in commercial insurance businesses since 2015, according to a report from researcher VC Beat and corporate statements. The new ventures are focused partly, or entirely, on health insurance, an area where affluent Chinese families are ramping up spending, states a Bloomberg report.

The China Insurance Regulatory Commission, the insurance watchdog, estimates that premium income for private health insurers jumped by 94 percent in the first seven months this year. That topped the last year’s already substantial 52 percent surge, fueled by policy incentives and China’s rising prevalence of chronic conditions like heart disease.

“The growth is sustainable because all the drivers will continue to be there, especially the demand for healthcare services,” said Luo Ying, partner and managing director at consultancy Boston Consulting Group. In an August report, BCG and insurer Munich Re estimated that the market measured by premium income will more than quadruple from CNY240 billion (USD36 billion) last year to CNY1.1 trillion by 2020.

Burdened by the rising cost of its vast public health system, China has for years sought to encourage private company entrants. Those efforts gained a substantial boost recently from a 31-city trial program, which provided an income tax exemption on insurance premium payments, albeit for only up to CNY2,400 a year.

The emergence of private health insurance is a new trend and most people in China still rely on a government-backed scheme, which doesn’t cover many costly drugs for diseases like cancer.