21CBR Interview with Celine Zhang

Back to list 2015-01-30 15:42:18

21st Century Business Review(21CBR): MSH CHINA’s products are positioned as high-end health insurance, and a large portion of your current customers are high-earning people. Within China’s healthcare system, basic healthcare insurance is provided. Is health insurance more of a luxury or a necessity for us?

Celine Zhang: The high-end health insurance that everyone is currently talking about should be called international health insurance. It is because the insured can go to hospitals when abroad, as well as being able to enjoy a better environment in a private hospital that the term "high-end" health insurance was coined in China. I actually don’t want to claim to be high-end health insurance, making people think that it is an expensive service that only rich people can enjoy. What we do is to wholeheartedly maintain human dignity, allowing people to get good treatment.

As I see it, health insurance is a necessity, and will become more significant as economic conditions change. Our earliest customers were foreigners living and working in China; they had no social security, language and communication barriers, but they needed medical care while abroad. With the local increase of multinational companies wherein the proportion of Chinese managers is gradually increasing, along with the rapidly growing number of affluent Chinese, many people are no longer satisfied with the crowded and time-consuming environment for basic medical care. They are eager to have a better living environment along with better medical conditions.

In the past, in order to obtain better medical resources, people would seek out personal connections, research the hospital, get to know the doctor, and spend time and effort to maintain a good relationship with their doctor. From a sociological point of view, this is a hidden social cost. After the emergence of health insurance, people were able to have a fixed cost to cover the enormous social costs; this is progress for society. In addition, due to medical information not matching up, doctor-patient conflict is prone to arise, as a health insurance service provider, we can provide customers with a good selection of medical resources and provide all necessary information. Through insurance claims, we can help people solve the problem of medical expenses, making it easier to visit a doctor, and building a relationship of trust with both the doctor and hospital.

Currently the domestic high-end health insurance market is generally positioned as a "luxury item”. When selling products to customers, companies often give the customer unrealistic expectations, but the essence of high-end health insurance are still the same: protection. A lot of people are now even asking us if they buy this insurance, can they go to the Mayo Clinic in the US to see a doctor. I get surprised by this question. Sure, you are able to go there for treatment, but not every disease needs treatment there; this is definitely not the purpose of the product. Good service is the right service; the top hospital may not be right for you. For us, the patient's medical safety is the most important thing. About 80 percent of major diseases in life won’t require transport via flying. Local treatment maybe better for the patient and getting treatment abroad will create complications when returning to China and facing conflicts of medical resources. It is just hype and also reflects the ultimate anxiety and fickleness of market and people in China.

21CBR: Looking at the scale of premiums, the domestic health insurance market seems to always be mediocre. Is this a question of product design or sales channels?

Celine Zhang: On the one hand, it could be because Chinese people avoid illness, the way they think about death; thinking they will never get sick, so there is no need to pay an annual premium. As we all know, health insurance cannot prevent the risk of an "adverse selection". A lot of people will think of purchasing insurance only after they get sick, for example, people may only think health insurance is worth it once they’ve had a child, or they send their children to an international clinic for vaccination. This is a mindset problem; in foreign countries, people will invest a third of their income in paying for insurance, as insurance will help them prevent life and property risk for both themselves and their families. Through ten or twenty years of long-term health insurance investment, they are allowing the insurance to help them manage their long-term health risks.

Secondly, we need to form a good health insurance ecosystem, from product design to marketing, to the operation underwriting process, claims, medical resource configuration, customer service and an overall cycle that works well together. When it comes to product pricing, most large insurance companies won’t have much of a variance in pricing; oftentimes it is not a matter of calculation, but rather market competition. Many insurance companies offer quotes much lower than their profit points, causing maligned market development. Unsustainable prices will limit the use of benefits, lower the quality of service, causing a reaction of skyrocketed renewal premiums for consumers. Healthy market development requires each party to benefit: insurance companies making profit, medical institutions have customers, and customers’ premiums do not increase.

When compared to other well-known "luxury products", the current high-end health insurance market share is small. It has a lot of potential, and people are willing to invest capital into it, but I feel that right now there is a lack of talent when it comes to selling high-end health insurance. One reason is that the Chinese society lacks knowledge of health insurance, there is a high degree of market segmentation. And low commission is a key problem, as everyone knows, compared to auto insurance, aviation insurance, most of the health insurance premiums are used to pay for claims payments. The sales revenue is relatively lower than many other types of insurance; in most country, health insurance companies are hard to obtain high profits and rapid growth in a short time. I do not idealize it’s a “blue ocean” market; from the beginning, the competition has been intense.

21CBR: Because of the high claims payment ratio, health insurance companies have low profit in the long term, even a loss. As published in the 2014 “State Council’s No. 10 National Notice as well as Opinions on Accelerating the Development of Commercial Health Insurance, will the business health insurance situation improve?

Celine Zhang: Although the problems within the industry cannot be completed solved within a short time, I believe things will gradually improve. The health insurance industry requires great patience; we have been working hard at it.

Firstly, the high-end health insurance does have great potential. However, because the market is still not mature enough, whether it’s the general public’s acceptance of health insurance, market positioning, or requires a change in consumer attitudes, these things will all need to be slowly cultivated.

Second, China has a large population, and the huge market potential also brings with it the problem of unbalanced medical resources between the different regions. Health insurance companies are the bridge between patients and medical resources. Not only does health insurance push public hospitals to improve their service levels, it can also help patients make more rational decisions when getting medical treatment as well as improving the doctor-patient relationship.

Finally, I hope that with raised community awareness to health risks, coupled with a series of national tax incentives and favorable policies that have been put forward, the entire health insurance industry will be more dynamic and attract more high-quality sales, operations personnel talent, and establish good health insurance ecosystem.

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