As financial concerns continue to affect the Eurozone, many countries have been forced to make efforts in reducing state spending which is leading to the cutting back of benefits, such as national healthcare programs.
In the EU, countries ranging from the more powerful such as the UK and Germany, to countries such as Slovakia and Hungary are facing falling or stagnating budgets, in many cases as a result of the European debt crisis. Various countries have been impacted differently, with some managing to put of drastic changes to services with timely reforms and others seeing rising wait times for procedures.
Slovakia and other ex-communist eastern European countries have been hard hit, with the pressure to cut costs keeping salaries low for doctors and medical professionals in the countries. This has resulted in brain drain over the long term, but more recently has lead to around 1,600 medical personnel resigning in Slovakia. While some doctors have agreed to return to work after the government offered a 40 percent raise in salary, many have not, and other doctors in nearby countries with similar problems may follow suit. Many Slovakians have been left without treatment, prompting the Czech Republic to send 30 army doctors in to assist, while Austrian and Polish hospitals are preparing to accept Slovakian patients.
Countries like Germany or the UK face different problems to those faced in Slovakia, however budget cuts to established healthcare systems in these countries, coupled with shifting demographics are stretching these national healthcare systems thin. In 2010, Germany reformed its health insurance system, increasing the contributions for workers and their employers while also adding controls for the price of pharmaceuticals. This has worked to some degree, reducing the programs budget shortfalls, but as the population continues to age and the workforce shrinks as is being seen in many developed countries, the amount of money spent on drugs and outpatient care will continue to grow in the future.
The UK National Health Service (NHS) is seeing cracks in the system as the result of budget reductions alongside growing health outlays. Lines for surgeries are increasing in length in the UK, while a growing number of NHS hospitals are in dire enough financial condition that they could be required to merge with other hospitals which may result in loss of services or reduced access to quality healthcare in some localities.
Britain has previously experienced a rising uptake of private medical insurance plans when the NHS was not highly considered, due to people wanting to ensure they have access to quality medical care. However with unemployment in the UK reaching a 17 year high at 8.3 percent, people may have to consider whether paying for healthcare through private health insurance or out of pocket spending is more cost effective for them.
Citizens or even resident expatriates in countries with developed healthcare systems and high quality medical facilities may find it easier to pay for treatment as needed, in some cases. Although there are many places and people in the world for which paying for private care out-of-pocket may work, in many instances it simply would not be appropriate.
Paying your own way for hospitals treatments requires firstly that you have enough money saved up to pay for any treatments, and secondly that you are knowledgeable about the hospital and its capability in the required treatment. This is not always possibly, especially for expatriates or business people who travel frequently to numerous countries. Paying your own way also may not be a feasible option for expats located in places like Africa or elsewhere where the hospitals or medical facilities may not be of a high quality, necessitating a medical evacuation. This can be prohibitively expensive.
Thankfully many international insurance providers have been paying attention to developing trends and many have been reevaluating their products and services in response. Insurance companies such as Medicare International and Allianz Worldwide Care are developing cost effective international health insurance payment plans and services, offering customers plans with high benefits and variable premium structures that can appeal to a wide range of international customers on a broad spectrum of budgets.
Despite mixed stock movements in China recently, Chinese insurance companies have seen premium income grow over last year’s results, including China Life which recently begun trading in Hong Kong and Shanghai.
China Life Insurance, China Pacific Insurance Group and Ping An Insurance Group, which includes Ping An Life Insurance, Ping An Health Insurance, Ping An Annuity and Ping An Casualty Insurance, all saw positive growth on premium income over 2010.
China Pacific Insurance Group reported total premium income of CNY 143.8 billion (US$ 22.67 billion), demonstrating year-on-year growth of 12 percent. China Pacific’s life insurance business earned CNY 87.9 billion (US$ 13.86 billion) in the first 11 months of the year, while the property and casualty business reported CNY 55.9 billion (US$ 8.81 billion) for the first 11 months of 2011.
Ping An reported large gains for the first 11 months of the year, with each of its four main insurance businesses reporting over 20 percent year on year growth. Ping An Health Insurance saw the largest rate of growth in premium income of Ping An’s business segments, reporting 92.08 percent year-on-year growth to hit CNY112 million (US$ 17.66 million). Ping An Casualty Insurance grew 34.42 percent, earning CNY 74.68 billion (US$ 11.77 billion). Ping An Annuity earned premium income worth CNY 4.773 billion (US$ 752.48 million) showing a 21.62 year-on-year growth, while Ping An Life Insurance with the highest premium income of the group earned CNY 110.03 billion (US$ 17.35 billion) at 29.36 percent growth year-on-year. The Ping An Insurance Group saw overall premium income reach CNY 189.55 billion (US$ 29.89 billion) for the first 11 months of 2011, demonstrating year-on-year growth of 31.12 percent.
China Life Insurance earned premium income worth CNY 301.2 billion (US$ 47.49 billion) for the first 11 months of the year, showing more meager growth of 0.63 percent over last year’s CNY 299.3 billion (US$ 47.19 billion) for the same period. China Life Insurance has also recently had held their IPO for both the Hong Kong and Shanghai bourses in December, 2011.
So far, China Life has had mixed trading results, with stocks in China growing at 13.7 percent during its first day of trading on the back of a 2 percent rally of the Shanghai Index. China Life’s stock closed at CNY 26.44 (US$ 4.17) on Friday December 16th. China Life’s Hong Kong listed stocks started trading on Thursday, when they dropped 9.8 percent, although it rallied on Friday in light of Shanghai’s strong percent, rising 2.7 percent to close at HK$26.45 (US$ 3.40). Trading in the near future may be difficult to predict, as stock markets in Asia are already on edge due to the unexpected death of North Korea’s Kim Jong Il.
China Life Insurance
China Life Insurance Company Limited (China Life) is a People’s Republic of China-based life insurance company. The products and services include individual life insurance, group life insurance, accident and health insurance. The Company operates in four business segments: individual life insurance business, group life insurance business, short-term insurance business, and corporate and other business.
China Pacific Insurance (Group) Co., Ltd. (CPIC) is a insurance company providing, through its subsidiaries, a range of life and property and insurance services and pension products to individual and corporate customers throughout the country. CPIC was founded on May 13, 1991, and is headquartered in Shanghai. The company was listed in Shanghai Stock Exchange on Dec. 25, 2007, with the stock code of 601601 and the stock name of “China Pacific”. The Company was listed in the Stock Exchange of Hong Kong Limited on Dec. 23, 2009, with the stock code “02601” and the stock name of “CPIC”.
Ping An Insurance is the first integrated financial services conglomerate in China that blends its core insurance operations into services including securities brokerage, trust and investment, commercial banking, asset management and corporate pension business to create a highly efficient and diversified business profile. The group was established in 1988 and headquartered in Shenzhen, Guangdong Province, China.
As medical services grow more and more costly around the world, international private medical insurance providers are trying to ensure that their policies provide good value for money while maintaining high levels of benefits.
In many countries, including such places as the US and the UK, the cost of medical services has been rising throughout recent years. In the US, the S&P Healthcare Economic Composite index showed an annual growth rate of 5.11 percent for the fiscal year that ended in October, outstripping the 4.74 annual growth rate reported in September by a significant margin. S&P’s Healthcare Commercial Index, which takes into account only healthcare costs covered by commercial insurance, saw its fourth consecutive month of rising annual growth rates to arrive at 6.91 percent for the year ended October.
Across the pond in the UK, there are similar stories with healthcare company Bupa releasing a study that predicts the costs of cancer treatment will rise steadily in the future. The report Cancer Diagnosis and Treatment: A 2021 Perspective was aimed at trying to make predictions about the cost of treating cancer over the next 10 years. The results estimated that the cost of treating cancer will rise by approximately 62 percent, meaning that while cancer treatment for someone in 2010 may cost on average around £30,000 (US$46,487), it will cost £40,000 (US$62,007) on average by 2021.
With premium costs over the last decade being pushed up by almost 10 percent a year due to medical inflation, insurers globally are recognizing that while everyone may like policies with extraordinary benefits, cost is a point of consideration for many. As 2011 comes to an end, some international health insurance companies are beginning to introduce changes to services or flexibilities to payment structure and cost-sharing to ensure that customers get value for money while maintaining high levels of benefits.
International private medical insurance provider, MediCare International, has introduced new excess structures that clients may select if they so choose that give policy discounts of up to 50 percent. The new options allow for four levels of excesses, offering discounts that range from 10 percent, 20 percent, 35 percent and all the way to 50 percent depending on the selected size of co-payment.
Another company that is reevaluating their products is Allianz Worldwide Care, which has revealed that it is trailing a new system of medical evacuation. Typically, if a policyholder finds themselves in a situation which necessitates medical evacuation, they are put on an air ambulance and either transferred back to their home country, or to the nearest center of medical excellence, depending on the particulars of the policy. The new option for transport will transport medically stable policyholders on commercial flights while they are accompanied by one of Allianz’s own doctors.
Allianz Wordlwide Care’s Medical Director, Dr. Ulriche Sucher, explained that “Many of our corporate clients have employees working in remote regions within Eastern Europe, Asia, Africa and Latin America, where sparse medical facilities means a greater reliance on evacuation services following a medical emergency. Plus, advancements in medical treatments and medical specialism in specific countries means that sometimes patients need to be brought to another country to receive the care that they need. Added to this is the increase in natural disasters such as storms, earthquakes and floods which can result in people needing medical treatment at a time when the closest medical facilities may have been damaged,”
While air ambulances will still be used in cases where the policyholder is in an emergency situation which requires emergency evacuation to the nearest quality medical facility, the new medical escort service is expected to bring large cost savings with it, especially for large corporate clients. The service is expected to be introduced after a 12 month trial proves successful.
Allianz Group is one of the leading global services providers in insurance and asset management. With a worldwide network of 153,000 employees, the Allianz Group serves 75 million customers in over 70 countries. Allianz offers a wide variety of insurance products to both private and corporate customers, including motor, accident, general liability, fire and property, legal expenses, credit and travel insurance. Allianz provides life and health insurance products on individual and group basis. Allianz is the market leader in the German market and has a strong international presence in insurance.
With 25 years of providing expatriates top quality international health insurance, Medicare International has grown by ensuring quick and easy access to their services 24 hours a day. The company currently covers clients from 86 nationalities in 114 countries around the world.
Indian insurance regulator IRDA (Insurance Regulatory and Development Authority) is currently drafting guidelines which would allow Indian insurance and reinsurance companies to open branch offices, subsidiaries or joint-ventures overseas.
IRDA is currently circulating preliminary draft guidelines on what would be required of Indian insurance companies in order to allow them to open operations overseas. As the drafts circulate among domestic insurance companies, IRDA is asking for feedback from insurance companies before the end of 2012.
Many of the preliminary guidelines appear to be aimed at ensuring that domestic Indian insurance companies seeking to commence overseas operations are on solid financial footing to do so, and that doing so would not pose risks to local business and policyholders. As it stands now, domestic Indian insurance companies are not permitted to expand overseas, either through branch offices or investment in foreign firms, while foreign companies can currently own stakes in domestic insurers of up to 26 percent.
The draft allows for insurance companies of any category to apply to the regulator for permission to open foreign businesses after the insurers have been in operation domestically for 10 years. The proposed regulation would allow domestic insurers to start a foreign operation in a number of ways, either by opening branch offices, the formation of foreign subsidiaries by controlling the board or owning 50 percent of the paid-up equity capital, or by starting a foreign joint venture.
While many insurance companies in India have joined with foreign insurers to make joint ventures, any company that a domestic Indian insurer engaged with overseas to create a joint venture outside of India would not be allowed to enter into the domestic Indian insurance market.
Although there is a drive to make certain that Indian companies wishing to start operations abroad will have the financial wherewithal to do so without putting domestic business at risk, there are no concrete financial guidelines at the moment, whether with regards to the minimum net worth necessary to apply to the regulator for authorization or the capital requirements for establishing joint-venture’s overseas. However, the guidelines do mandate any losses incurred or capital requirements that must be met by foreign branches must be paid for by shareholder funds only, so as not to interfere with the policyholders’ funds in the domestic Indian business.
This could open a doorway to many opportunities for Indian insurance companies to globalize their business. In many places such as countries in the Middle East, there is a sizable Indian Diaspora which some insurers may already be considering tapping in to, however the opening of an office would also allow them to underwrite local business as well as expatriate Indians.
The Maldivian government will move forward on plans to engage in a public private partnership with Allied Insurance to provide universal health insurance in the island nation.
The government had previously invited insurance companies to draw up plans for providing universal health insurance for the island and submit them to be considered for the partner position. The Maldivian Finance Ministry made the announcement that it was looking for private sector insurers to partner with in late October, prompting Sri Lanka Insurance, Amana Takaful and Allied Insurance to apply.
More recently, the Finance Ministry has announced that it will be partnering with Allied Insurance to provide universal health insurance to the populace, as it was the only company to finish the letter of expression.
The proposed system for the universal health insurance program is designed to be split 40/60, with the government holding 40 percent ownership in the scheme and the private insurance company, in this case Allied Insurance, holding the remaining 60 percent. The system is supposed to provide a wide array of benefits, including emergency treatments, both inpatient and outpatient treatment, prescribed medicines, therapeutic treatments and emergency evacuations within the Maldives. Also to be included will be overseas cover for any treatments that are not available locally.
In fulfilling its roll as the private sector partner, Allied Insurance will be handling billing from healthcare providers, processing claims and raising public awareness. The Maldivian government will pay the premium. The ministry’s Director General Saami Ageel said that they were still negotiating the costs of the insurance plan with Allied.
There is still much debate surrounding the implementation of the universal health insurance plan, and many things may change before the scheme gets underway. MPs are debating the 100 or so amendments that have been proposed, many of which could have a fundamental impact on how the scheme operates.
As the bill currently stands, workers are required to contribute 3.5 percent of their salaries towards the universal health insurance scheme, however, some MPs have already called for the scheme to be compulsory for both locals and expatriates in the Maldives. Other MPs have submitted amendments that would alter the amount of money contributed by the worker and others that would require the employer to contribute as well. Another proposed amendment would see the government pay all costs to cover the entire country under the scheme and do so through money raised by a tax on tobacco products.
There are reports that the universal health insurance scheme is supposed to begin being implemented in January of 2012, however this may depend largely on the content and number of amendments that have been proposed to the universal health insurance bill as more material changes to the proposed system may delay the start date.
Allied Insurance Company
The Allied Insurance Company was founded as a joint-venture between the Maldives’ State Trading Organization and the Commercial Union Assurance Company of the UK in 1985. In 1987 the STO bought back all shares from Commercial union Assurance and Allied Insurance now offers a wide range of general insurance products and life insurance in the Maldives.
UK-based Aviva is moving to build a network in the United Arab Emirates to provide international health insurance products to expatriates situated on the Arabian Peninsula.
Many countries in the Gulf Cooperation Council (GCC) are facing rising costs of healthcare, often due to a rising number of instances of lifestyle related diseases such as diabetes and heart disease. Abu-Dhabi alone spends approximately AED1 billion (US$272 million) every year on healthcare costs associated with treating young diabetics at risk of suffering heart disease in the future.
Read the rest of the Abu Dhabi Health Insurance article
With the flooding in Thailand beginning to abate after it first started in July, the cost of covering all the P&C (property & casualty) insurance claims and other flood-related claims may come to upwards of US$10 billion for the insurance industry.
With the rains during Thailand’s monsoon season causing flooding across many parts of the country over the last few months, the loss of life and property has been devastating and will continue to have long lasting effects. The World Bank estimated in early December that the total damage from the floods was about US$45 billion.
Read the rest of the Thailand Flooding to Hit Reinsurance Industry article
A recent forecast report by Swiss Re predicts that both life and non-life insurance lines in India, and indeed in many emerging economies, will see larger growth coming into 2012.
With the global economy poised to grow at only 2.9 percent, Clarence Wong, the Chief Economist Asia for Swiss Re sees three hurdles that insurers globally will have to overcome, namely the Euro debt crisis, emerging markets experiencing slower growth and greater inflation, and low government yields due to the prevailing economic climate.
However, Wong also sees India and other emerging markets in Asia outperforming developed markets. Wong says that “Emerging Asia is not decoupled from the developed economies and its growth is expected to slow while inflation is elevated. But policymakers have leeway to leverage monetary and fiscal policies to counter economic slowdown.”
While non-life insurance business in India seems to have performed well in 2011, growing 8.6 percent, the life insurance industry saw new business only grow by 2.5 percent for the year. This is largely seen as attributable to regulations from India’s Insurance Regulatory and Development Authority (IRDA), which were promulgated in September, 2010.
The regulations mandated that life insurance companies had to offer a capital guarantee on pension products as well as reducing the commission on unit-linked insurance products (Ulips), causing the Indian life insurance market to decline significantly. However, many see this as a good sign insofar as that it has pushed insurers and agents to reevaluate their business and products, leading to more cost-effective operations and investments.
Despite the steep decline in life insurance sales over the past year or two, Wong sees economic indicators pushing towards higher growth for life insurers in 2012. In expectation of slower economies and higher unemployment, life insurance premiums are forecast to rise by 4.5 percent across the Asia-Pacific region, while rising economic risks will whet appetites for more routine protection products. This could lead to an increase in life insurance premiums in India by 7.5 percent next year.
While non-life remained strong in 2011, the Swiss Re forecast expects the industry to slow slightly in 2012, coming down to 7.9 percent from 8.6 percent this year. This is somewhat expected, given the slowing economies in many countries around the world. However, many observers believe India’s non-life insurance sector will continue to outperform many developed economies based on continued desire for motor and health insurance products. Motor sales in India have been booming recently and the IRDA’s ruling that allowed health insurance portability between insurers makes the landscape more customer friendly.
According to Swiss Re, the rest of emerging economies in Asia are largely predicted to see strong growth in both life and general insurance industries over the next few years. Life insurance across emerging Asia is estimated to grow by a cumulative 9.5 percent in 2012, with China, Vietnam and Indonesia leading the way with 11 percent, 8.6 percent and 8.2 percent respectively.
Non-life insurance industries across emerging Asian economies are forecast to grow by a cumulative 10.6 percent in 2012, mostly due growing demand for personal accident and health insurance as well as an increasing number of car owners across the region. China Vietnam and India are expected to grow the most next year at 12 percent, 9.2 percent and 7.9 percent respectively.
The long term conclusions of the Swiss Re forecast largely mirror a Bricdata report earlier this month, with both having confidence that as economies start to normalize globally in 2012 and 2013, it will provide a solid macroeconomic background for further insurance growth and improved performance from investments.
The Swiss Reinsurance Company Ltd was established in 1863 and is present in more than 20 countries. Swiss Re provides reinsurance products and financial service solutions. It offers various reinsurance products covering property, casualty, life and health insurance as well as special lines such as agricultural, aviation, space, engineering, HMO reinsurance, marine, nuclear energy, and special risks.
A new report released this week by global market research firm Business Monitor International (BMI) has provided some insight into recent developments involving the Kuwait insurance industry.
While the insurance industry in Kuwait has grown considerably over the past decade, with gross premiums written expanding by about 11.9 percent annually since 1999, there is still much work to be done. Premiums currently amount to less than 1 percent of GDP in Kuwait, among the lowest in the region. This development has attracted multiple new players to the market and improved the overall competitive landscape of the industry. The total number of insurance companies in Kuwait now stands at 31, with 20 local Kuwaiti companies, 7 Arabian companies and 4 foreign insurers. Similar to other Gulf Cooperation Council (GCC) countries, the insurance market in Kuwait has been dominated by the general insurance sector, which has been driven by the increase in oil prices and government infrastructure development plans. In addition, a law that mandates that local drivers acquire motor insurance has led to the growth of non-life insurance premiums in personal lines.
The Kuwait Insurance Report asserts that while country’s insurance sector will continue to grow overall, this will be due the continued expansion of the economy and population, and not from any particular developments, innovation, or upswing of demand in the local insurance market. By most measurements, the study found that the Kuwait insurance sector will remain stagnant, in comparison to neighboring markets, through the next decade and serves as an example of a country where the prospects for sustained premium growth appear brighter than the reality at present. “There are no obvious catalysts for development of non-life penetration or life density,” BMI explains, adding that several industry insiders are beginning to reduce their exposure to the local insurance sector. Widespread social unrest has also brought about a decline in investor confidence throughout much of the region. This decline in foreign investment has however been somewhat offset in oil producing nations like Kuwait by the continued rise in oil prices.
According to the most recent data published by listed Kuwait insurance companies, the industry’s overall growth rate in gross written premiums has slowed down quite significantly during the second half of 2011, especially in relation to last year’s performance. In 2010, Kuwait insurers reported that gross premiums rose by around 22 percent over 2009’s figures, while net premiums during this period increased by a less significant rate of 14 percent. Through the first half of 2011, by contrast, gross premiums have only appeared to grow by around 3 percent. According to BMI’s prospectus, only one listed insurance company, Al-Ahleia, has been able to post double-digit growth in gross written premiums so far this year. Despite this slowdown in business however, Kuwaiti insurers have generally remained well capitalized in 2011, and have been able to maintain sound investment earnings despite persistent global financial market volatility. BMI notes that in Kuwait, as in much of the Middle East and North Africa, local insurers are highly dependent on reinsurance companies to absorb their risks. Because of this, net premiums usually report to be a lot lower than gross premiums.
Looking at corporate transactions though 2010, BMI observed how the country’s business community have reacted to the market downturn. Gulf Insurance, Kuwait’s largest insurance company with over half of all local premiums written, has spent the last few years steadily increasing its investments in insurance subsidiaries in other Middle East and North African countries. KIPCO Group, Gulf Insurance’s largest investor, meanwhile sold almost half of its holding to a Canadian firm, Fairfax Financial Holdings, in September 2010 for KWD60 million (US$209million). “Neither the leading insurance company nor its dominant shareholder appear to see the opportunities in the local insurance sector as being more attractive than the opportunities that are available elsewhere,” BMI surmised.
Kuwait’s insurance sector performance reflects the generally muted perception and demand for protection products in the country. For many Kuwaiti nationals, the country’s pre-existing social security system appears generous enough to meet their needs and see no need to take out further insurance coverage. BMI notes that in the country’s general insurance market, overall penetration rates have remained stagnant for years, with life insurance only posting moderate gains during the same period. While these low insurance density and penetration rates are certainly an issue throughout the region, unlike other Gulf Cooperation Council (GCC) countries, there appears to be no impending governmental or societal reforms in Kuwait which could push the insurance industry forward. The country’s parliament, now dissolved, had yet to pass updated laws designed to lift the insurance sector closer to international standards, including much needed solvency requirements. This inaction has held the industry back and left potentially important sectors like bancassurance under the control of the Central Bank of Kuwait. Moves like this are a stark contrast to what is occuring in neighboring countries like Qatar and the UAE, which have both been actively promoting and liberalizing the development of their respective financial services sector. Going forward, comprehensive legislative reform will be needed to bring about the more robust regulation and oversight required to make insurance a much more prominent part of the country’s overall financial services landscape.
One insurance line that has been able to deliver consistent growth in Kuwait over the past few lean years has been takaful, which is a form of insurance that is designed to act within the tenets of sharia Islamic law. As is the case in many other GCC countries, takaful services now account for about a fifth of all Kuwait’s insurance premiums. BMI notes however that while Kuwait is home to several substantial sharia compliant financial institutions, the country’s takaful operators are not yet developed sufficiently to truly capitalize on this market. There are, according to government data, 12 active takaful companies that account for about 18-20 percent of total premiums written in Kuwait. Despite an increase in awareness and popularity of Islamic financial products, it is not evident that Kuwait’s takaful operators are in fact growing any faster than the rest of the country’s insurance sector as a whole. “Most of the takaful operators are tiny by any standard,” BMI noted.
The Gulf’s insurance industry overall is entering an important transitional period. Recent economic developments, combined with the growth of a large young population that are more conscious about the concept of insurance, have helped create sizeable business opportunities for the region’s insurance companies. Despite their small and relatively affluent population base, the insurance penetration and density level in the region has remained lower than that of their global peers from both emerging and mature market economies. With the help of the international insurance industry this could soon change as more Emirati citizens see the value of greater insurance protection.
A new study out of the United States shows that action taken by the Chinese government over the past two decades to improve access to medical facilities may have in turn allowed overall health insurance coverage to increase throughout the country between 1997 and 2006, with particularly strident gains found in rural areas during this time.
The research was done by Brown University sociologist Susan Short and fellow alumnus Hongwei Xu, now at the University of Michigan, with the findings presented in the December issue of Health Affairs, a prominent medical policy journal. The study used data from the China Health and Nutrition Survey to analyze medical insurance coverage patterns in China over the past decade, with a particular focus on the diverging health behavior occurring among the country’s rural and urban inhabitants. China’s Health and Nutrition Survey tracks households across nine Chinese provinces that cumulatively represent over 40 percent of the country’s population, so the findings should be widely applicable to the country at large.
China’s rapid economic development over the past few decades has worked to lift millions of people out of poverty and improve the country’s overall health standards. This has manifested itself in an improved life expectancy at birth rate, which has risen from 69 years in 1990 to nearly 75 years by 2010 and a decrease in infant mortality, which declined from 37 per 1,000 live births in 1990 to 17 in 2009, amongst other favorable indicators. Despite this noted progress, however, many health issues in China remain unresolved. Chief amongst them are the large disparities that persist between the country’s more affluent urban dwellers and poor urban and rural inhabitants in terms of access to medical services and quality of care. Many among the poor have limited their use of medical services for purely financial reasons, since the costs of treating a serious illness could wipe out a family’s life savings. To address this problem, new insurance mechanisms are being implemented by the government to cover a significant portion of medical costs and to help lower the impact of high out-of-pocket payments.
Xu and Short’s report found that, overall, the number of Chinese citizens with some form of insurance policy increased moderately at the turn of the century, moving from 24 percent of the survey sample size in 1997 up to 28 percent by 2004. Over the past few years however the changes have been more dramatic, with insured individuals already representing 49 percent of all survey respondents by 2006. Moreover, since then, the gap between the rates of insured Chinese people between rural and urban areas has narrowed greatly. In the report, Xu and Short, both credit this as perhaps the most profound development occurring in Chinese healthcare over the past ten years, referring to the rise in rural health insurance coverage as “nothing short of dramatic.” While the predicted probability of having health insurance improved in China between 2004 and 2006 for all locations in the nine provinces studied, rural areas had the most to gain. Susan Short wrote that millions of rural Chinese residents have likely benefited from increased coverage options so far. “There’s been great concern about increasing inequality in China, and particularly urban-rural inequalities. This work shows that at least in one sphere, health insurance coverage, urban-rural inequality may be decreasing,” Short added.
Historically, location has been one of the defining factors over access to healthcare and cover in China. Xu and Short’s analysis confirmed that the levels and trends regarding health insurance cover have been markedly different depending on whether the survey respondents were living in urban or rural areas in China at the time of the poll. The report found that coverage rates in rural villages fell from 1997 to 2000, while at the same time, the country’s suburbs, cities and towns observed no such change. It was during this period, the report notes, that the Beijing government’s new rural insurance system was still in undergoing its pilot phase and had not yet begun providing financial subsidies outside of a few select rural communities. After 2000 however, the level of health insurance coverage in rural areas rose sharply, from 17.9 percent in 2004 to 51 percent of all survey respondents by 2006, almost tripling the insurance penetration rate in the process. Survey data showed that coverage rates also rose quite significantly in smaller towns and suburbs at the same time, but changed little in China’s now burgeoning cities.
This remarkable rise in rural coverage rates has, according to the study, coincided with improved efforts by the Chinese government to develop more robust insurance initiatives and greater subsidies for the country’s rural inhabitants. “It is especially impressive to see this pattern in data such as these, that follow the same individuals over time,” Short said, adding that the changes now apparent in rural village coverage rates are surprising. “We are witnessing real change in many people’s lives in the way that urban, and especially rural, individuals experience health insurance coverage.”
Despite the considerable increase in individual coverage that has occurred throughout China, the report notes that many disparities between rural and urban consumers still persist, particularly as it concerns reimbursement rates and overall quality of care. Xu and Short’s analysis determined that urban residents in China continue to receive greater compensation on both their inpatient and outpatient claims, than their insured contemporaries from rural areas. However, the authors noted that these results should be interpreted with some caution due to a considerable number of incomplete self-reported reimbursement rates in the dataset. In his conclusion, Hongwei Xu, remarked that considerable progress has been made in the Chinese insurance industry. “The findings from this research highlight the recovery in health insurance coverage in general, and more importantly the significant reduction in the rural-urban inequality in the coverage in particular, largely due to the great efforts by the Chinese government, in a quite short time period,” Xu said, adding that the advantage insured urban residents continue to hold over insured rural residents, shows that more work needs to done. “On the other hand, the suggestive finding of continued rural disadvantage in terms of health insurance benefits suggests we should not overestimate the success of the policy interventions.”
China’s healthcare system going forward must tackle these challenges and more to continue to improve the quality of health care for the population at large. If insurers, both local and international, can work to effectively match the insurance demands of the Chinese people, cover against holes in the social safety net, and further encourage people to invest their considerable savings back into the market, they can share in this potential prosperity as well.
China’s share of the world insurance market has quadrupled over the past decade, owing to a strong economy, surging demand and evolving industry regulations. A new report published on Monday by Aon Benfield, the global reinsurance intermediary of Aon Corp, acknowledges the opportunities the Chinese market now presents to the international insurance industry as well as the challenges now apparent after years of rapid growth.
The Chinese insurance industry has experienced phenomenal growth over the past decade and still has much to look forward to due to favorable economic conditions and an under-penetrated market. China now represents close to 4 percent of all life and property insurance premiums worldwide at CNY1.45 trillion (US$226 billion), moving up from just a 1 percent share decade ago. Industry analysts in the world’s second largest economy are now targeting a 15 percent compound annual growth rate over the next five years.
Aon’s report, titled ‘The China Property & Casualty Insurance and Reinsurance Market Report,’ is chiefly concerned with the slow development of the Chinese catastrophe insurance and reinsurance sector, which has become particularly glaring given the country’s increased exposure to widespread catastrophic risk. Indeed, given recent events in Thailand and Japan, the potential for supply chain disruptions in China due to natural disasters has become a growing concern for executives at large multinational corporations. According to the report, China’s property and casualty (p&c) insurance market is now growing only at the same rate as GDP, whereas the insurance sector overall is still growing much faster. Over the last ten years, the Chinese p&c market had grown by over 20 percent annually, outpacing the country’s GDP growth in that period and reaching CNY402 billion (US$63.4 billion) by 2010. While this has occurred, Chinese government subsidies have also been working to support the growth of agriculture premiums and have doubled in size since 2005, now amounting to CNY13.6 billion (US$2.15 billion)). Aon observed a similar growth pattern in aggregate reinsurance premiums acquired by China’s p&c insurers, which have seen a 67 percent compound annual growth rate since 2005, now totaling CNY44 billion (US$6.9 billion).
Aon’s findings indicate that insurance will continue to be a necessity in the country. The China Insurance Regulatory Commission (CIRC), the Mainland’s chief industry oversight body, recognizes that the insurance sector will keep on facing structural challenges due to the tremendous scale of the market combined with the recent speed of its development, and is planning considerable action over the next five years to address this. Aon notes that China has been hit by 5 of the top 10 most deadly natural catastrophe events in history, with recent disasters (earthquakes, mudslides, blizzards) affecting more than 70 percent of the country’s total land area and over half the population in some way as well. The CIRC is aware of this persistent catastrophe protection risk shortfall and is thus establishing a national natural disaster risk transfer program (similar somewhat to Japan’s in design) as part of its upcoming 5-year plan. According to Aon’s report, this new risk pooling program could lead to a spike in the uptake of catastrophe insurance and reinsurance policies and work to better address overall protection issues in the country for years to come.
Commenting on their new report, Malcolm Steingold, Aon Benfield CEO for the Asia Pacific region, explained that while China’s insurance industry would no doubt continue to expand, being able to solve explicit coverage gaps in the market quickly would enable the country to realize its sizeable commercial potential. “Over the past 10 years, China has emerged as an insurance and reinsurance market that cannot be overlooked. However, when we look beyond the macroeconomic growth, underlying opportunities and challenges are not necessarily what they first appear to be. For example, a detailed analysis of the property market shows that growth has been more in line with gross domestic product than with the faster overall market growth, which is largely driven by motor business,” Steingold said. Indeed, China’s motor vehicle insurance market could be subject to its own revision efforts, with the introduction of foreign insurance players potentially on the horizon.
Ralph Butterworth, Partner at an Aon Benfield consulting division, added that the Mainland’s transition to more refined and comprehensive risk management strategies would work to the benefit of their overall marketplace. “The evolution of Chinese insurance regulation is bringing the market closer to international best practice. Over time this should support increased transparency and improved profitability, potentially hand in hand with the entrance of more foreign insurers into the Chinese market and the global expansion of Chinese reinsurers,” Butterworth said, adding that “expertise and experience accumulated and tested in the global market are still of much relevance to China as it targets further growth over the next five years.”
In conclusion, Henry To, CEO of Aon Benfield’s China division, expressed confidence in the Chinese insurance industry’s ability to overcome recent hurdles. The CIRC’s latest 5-year plan, which introduces the national natural disaster risk transfer system and improves loss models and underlying data, should encourage sound risk strategy and ensure more protection options are available before disaster strikes. “Over the years from 2001 to 2010, the Chinese insurance market (P&C and life) was the second fastest growing national market in the world behind Malta and now represents close to 4 percent of the world’s total insurance premiums – up from about 1 percent in 2001. Given the still low insurance penetration rate and China’s comparative economic outlook, this share can only be expected to grow,” To concluded.
Aon is a provider of risk management services, insurance and reinsurance brokerage, human capital and management consulting, and specialty insurance underwriting. It is based in the Aon Center in the Chicago Loop area of Chicago, Illinois, United States. Aon bought Benfield in 2008. Aon Benfield Analytics is the industry leader in actuarial, enterprise risk management, catastrophe management, and rating agency advisory. Their track record of innovation and world-class position in analytics, modeling and client-facing technology helps companies to optimize their portfolios. Proprietary tools include ReMetrica, CatPortal, and ExposureView. Also, their Impact Forecasting team develops tools and models that help companies understand financial implications of natural and man-made catastrophes around the world.
Provisional statistics released this month by Hong Kong’s chief insurance regulatory body, The Office of the Commissioner of Insurance (OCI), show that despite recent financial market volatility, Asia’s premier insurance center has managed to keep pace with the double-digit growth rates experienced in several neighboring markets during the first three quarters of 2011.
According to the latest OCI figures, Hong Kong’s insurance industry recorded HK$172.8 billion (US$22.24 billion) in gross written premiums from January to September 2011, which represented a substantial 12.6 percent increase over the corresponding period last year. In the country’s general insurance business, gross and net premiums, rose by 12.5 percent to HK$27.4 billion (US$3.5 billion) and 10.1 percent to HK$19 billion (US$2.4 billion) during this 9 month period compared with same period in 2010 respectively. The OCI noted that while the number of claims in general has continued to rise in 2011, most insurance lines have been able to maintain an underwriting profit. Indeed, over the past year overall underwriting profit for HK insurers has increased from HK$1.7 billion (US$220 million) to HK$2.1 billion (US$270 million).
The report further shows that the gross and net premiums on direct business have grown by 7.9 percent and 7.3 percent annually to HK$20.5 billion (US$2.6 billion) and HK$15.1 billion (US$1.9 billion) through the first three quarters of the year respectively. The OCI has largely attributed this rise in general insurance premium levels to the strong performance of property damage business lines in Hong Kong, which have grown by 20.4 percent in the past year, from HK$5.1 billion (US$660 million) in gross premiums in 2010 up to HK$6.2 billion (US$800 million) by the third quarter of 2011. As the largest segment of the non-life insurance market, accident and health insurance businesses have also been key contributors to non-life sales, with gross and net premiums of HK$7.3 billion (US$940 million) and HK$6.1 billion (US$780 million) so far this year. Health and accident insurance sales are expected to continue by the OCI, due to rising care costs, the expansion of medical businesses, and growing public awareness about upcoming changes to the state’s healthcare system.
Hong Kong’s general liability and motor vehicle insurance lines have also contributed to the industry’s premium growth over the past year. In the report, general liability business, which includes the employee compensation market, recorded a double digit rise in gross and net premiums, now worth HK$5.3 billion (US$680 million) and HK$3.8 billion (US$490 million) for the year in that order. The country’s automobile insurance industry meanwhile recorded HK$2.5 billion (US$320 million) in gross and HK$2 billion (US$260 million) in net premiums for the nine month period. The OCI has attributed the motor insurance industry’s growth to premium rate increases levied on commercial vehicles over the past year.
The only line in Hong Kong that has experienced a significant loss in the past year, according to the OCI report, is pecuniary loss liability insurance, which experienced a 20.6 drop in gross premium levels as a result of the slowdown in property transactions occurring in the SAR.
Despite general insurance premiums levels increasing, the OCI noted that poor claims experiences this year had caught up with several non-life lines and had lead to a fall in underwriting profit for these sectors. Overall the underwriting profit of direct business in Hong Kong declined to HK$1.3 billion (US$170 million) in the first three quarters of 2011 from HK$1.4 billion (US$180 million) in the corresponding period of 2010. Motor insurance has so far been the most affected by a claims-heavy season, with underwriting profits falling from HK$125 million (US$16 million) down to HK$2 million (US$260,000) through the first 3 quarters of 2011. Accident and Health insurance and General Liability businesses have experienced a more limited shortfall, with underwriting profit falling from HK$388 million (US$49 million) to HK$292 million (US$37.5 million) and from HK$137 million (US$17.6 million) to HK$63 million (US$8.1 million) for the year respectively. The OCI report explained however that these losses could continue to be offset by the performance of the property damage business, where underwriting profits have risen from HK$211 million (US$27.1 million) to HK$370 million (US$47.6 million) so far this year.
Premium increases in the property damage business have also helped the country’s reinsurance industry, where gross premiums grew from HK$5.4 billion (US$690 million) to HK$6.9 billion (US$890 million) and net premiums grew from $3.1 billion (US$400 million) to $3.8 billion (US$490 million) in the first three quarters of 2011 over 2010’s results. This strong premium growth has also driven the reinsurance market’s underwriting profit to increase from HK$288 million (US$37 million) to HK$752 million (US$96.7 million). Property damage insurance and reinsurance companies in Hong Kong have benefited from a relatively uneventful year in comparison to their neighbors in Japan and Thailand.
While direct insurance lines have certainly grown this year, the OCI stats show that the long-term insurance market has been able to more than hold its own, with life insurance products continuing to be a major growth driver in Hong Kong. Office premiums for new individual life policies (excluding retirement scheme business) have increased by a considerable 33.4 percent to HK$56.6 billion (US$7.28 billlion) over the past nine months. Traditional life insurance and annuity policies, where insurers collect premiums from policyholders annually to invest with and pay dividends, increased by 21 percent to HK$96.2 billion (US$12.3 billion) in 2011. Sales of investment-linked life policies, in which buyers move their premiums into a number of investment funds at varying levels of risk and return, have risen by 33.3 percent over the same period last year, for a total of HK$16.9 billion (US$2.17 billion) in terms of new office premiums. The total revenues associated with long-term in-force business were HK$145.4 billion (US$18.7 billion) in the first three quarters of 2011, a 12.6 percent increase over the same period of 2010.
While there are no guarantees double-digit premium growth will persist in 2012, Hong Kong’s insurance market should continue to benefit from the tremendous business opportunities in the Asia Pacific region, particularly on the Mainland. According to the Hong Kong Federation of Insurers (HKFI), clients from Mainland China are expected to drive between 20 to 30 percent growth in new insurance sales over the coming years. Mainland activity has already been particularly apparent in new office premiums. According to the OCI report, new policies issued to Mainland visitors have totaled HK$4.6 billion in premiums (US$590 million) so far this year, which represents over 8 percent of all new office premiums for individual business in Hong Kong.
China is now the second largest economy in the world, with a growing middle class population ready to spend on insurance and investment-linked products. This emerging investor class presents significant opportunities to financial markets like those in Hong Kong that are both close geographically and particularly convenient to them culturally as well. While this close relationship between Hong Kong and China has presented some infamous pitfalls in the past, such as rampant maternity tourism, overall it will provide HK businesses with bountiful business opportunities going forward. Hong Kong-based insurance companies that can present innovative, stable and cost-effective insurance products and services not yet available on the mainland could attract a tremendous new client base.
The Hong Kong Office of the Commissioner of Insurance is a government body that works to represent the interests of policy holders and to ensure the continued stability of the insurance industry in Hong Kong.
The Hong Kong Federation of Insurers
The Hong Kong Federation of Insurers (HKFI) was established on 8 August 1988 as a self-regulatory body of insurers, designed to further the development of the insurance business in Hong Kong. The HKFI is recognized by the Government of the Hong Kong Special Administrative Region as the principal representative body of their industry.
Cigna Inc, a leading global expatriate benefits provider, is expanding its healthcare network in Brazil with the launch of a new CignaLinks program designed to provide simple, locally-compliant healthcare solutions to employers and their globally mobile employees in the populous Latin American country. Through an alliance partnership with Gama Saude, one of Brazil’s largest private medical operators, Cigna will provide customers with comfortable access to more than 20,000 doctors, hospitals and other quality healthcare services, all at competitive prices.
CignaLinks is a specialized health admin program designed by Cigna to simplify the varied and often complex claims and payment procedures that can occur for globally mobile clients, their employees, and their families, when receiving medical treatment in a foreign country. The program works to address local compliance issues unique to the market a policyholder is filing a claim in, which is particularly useful in a country like Brazil where government regulations can affect benefit offerings as well as access to care for expatriates.
By increasing their footprint in Brazil, Cigna reaffirms their commitment to developing its expatriate healthcare business in promising international markets. Tim Blevins, Senior Director for Cigna International Expatriate Benefits, explained in a press briefing today that the expansion of the Philadelphia-based health insurance company’s network in Brazil meant that Cigna’s customers would now have access to more than one million medical specialists and a comprehensive range of hospital and medical facilities worldwide. “The key advantage of using the CignaLinks network is that it provides our globally mobile customers with an easy, administration-friendly process to accessing high quality local health care systems around the world.” Blevins said, adding that “Our CignaLinks customers receive locally-compliant solutions and always have access to our 24/7 International Service Center.”
Cigna’s chief partner in Brazil is Gama Saude, one of the country’s largest hospital networks. Over the next few years, Cigna will look to build upon this relationship, gradually integrating it international expatriate benefit coverage network with a greater proportion of administrative services and medical facilities in Brazil. According to the insurer, policyholders should look to benefit from this extended partnership directly, “by receiving substantial discounts when accessing the local network for care and by reducing their out-of-pocket costs at the time care is delivered.”
Entrance into the Brazilian insurance market has been a priority for Cigna for some time and will enable the company to respond more effectively to the local market as well as internationally. Brazil is by far the largest insurance market in South America, encompassing more than 40 percent of the gross written premiums in the region. Recent economic stability, positive credit trends, and regulatory reforms that have stabilized the currency and promoted domestic savings, are producing sound growth and a demand for coverage across the insurance industry in Brazil. Despite protracted regulatory hurdles, large multinational insurance companies cannot ignore the market’s size and growth potential and will be looking to invest themselves further in the country, as well as other emerging economies, to offset the stagnant business forecasts in their mature North American and Western European home markets. In 2010 the Brazilian insurance industry outpaced the country’s gross domestic products, growing 16.6 percent, with gross written premiums amounting to R$ 99.4 billion (US$ 62.7 billion). The country’s burgeoning export-led economy also presents further avenues for growth in the expatriate medical insurance field. Brazil now hosts many prominent multinational companies that need coverage options for their employees, many of whom are globally mobile. Cigna recognize this business opportunity.
Latin America is far from the only region offering pronounced investment opportunities for multinational insurance companies during these volatile macroeconomic times. Indeed, several insurers, most notably Nordic and ING, have decided to leave the continent to focus on the Asia-Pacific region, which offers even more robust prospects. In the past year Cigna has made similar moves into Singapore, Turkey and most recently India. Cigna has consistently been one of the most proactive American insurers looking to develop its presence in emerging economies, along with Aetna and MetLife. These firms have all been seeking to increase their footprint in global insurance markets in order to offset the relatively low premium growth forecast in the USA, in addition to the continued unrest surrounding the 2010 US Health Reform Law, which could have a far-reaching impact on the industry and comes into effect in 2014. Furthermore, many insurers are looking to diversify and potentially become larger insurance conglomerates to better absorb upcoming changes in the once lucrative US market. This was demonstrated in Cigna’s US$3.8 billion purchase of Medicare carrier HealthSpring Inc in October.
International insurance markets offer enticing post-reform growth opportunities for US based insurers. As BRIC economies further develop, Cigna plans to be at the forefront with an aggressive strategy to take advantage of the projected increasing demand for insurance policies that will provide better coverage than the government provided coverage plans in the region. Industry analysts predict Cigna’s international operations could grow to become a third of the company’s total business within the next three to five years.
Insurance Companies Mentioned
CIGNA Health Insurance is a global health service company dedicated to helping people improve their health, well being and sense of security. CIGNA Corporation’s operating subsidiaries provide an integrated suite of medical, dental, behavioral health, pharmacy and vision care benefits, as well as group life, accident and disability insurance, to approximately 46 million people throughout the United States and around the world.
India’s insurance market will continue to deliver sound growth opportunities across both general and life insurance business lines for the forecast period of 2011-2015, according to two new dossiers from international research firm Bricdata.
In ‘Non-Life Insurance in India, Key Trends and Opportunities to 2015,’ Bricdata explains that despite ongoing global macroeconomic challenges, the Indian general insurance market will continue to grow at a healthy rate. Over the past few years, the level of competition within India’s non-life insurance industry has risen considerably due to the greater presence now of both private and public companies. The report acknowledges that while the large state-backed insurers will continue to dominate the market, private non-life insurers are expected to gradually increase their market share over the next 5 years through improved channel penetration and product innovation, which will be to the overall benefit of the domestic industry and customers.
According to Bricdata, there will be a number of key opportunities for private and foreign insurers in the Indian general insurance market going forward, particularly in motor insurance which is already the most popular business line and is set to grow further as Indian automobile sales continue to flourish. The report also cites the upcoming IRDA regulatory proposal, which will increase the country’s foreign direct investment (FDI) cap from 26 to 49 percent ownership, as a favorable development that will foster a larger and more diverse business and investor environment for product and service innovation if passed. “Private non-life insurance companies are, therefore, expected to substantially expand their market shares in the next five years,” Bricdata surmised.
However, while India’s general insurance industry has indeed experienced considerable growth over the past decade, Bricdata notes that it has so far failed to effectively penetrate into India’s large rural areas, where most of the population lives, due to a general lack of insurance awareness and distribution model deficiencies. To begin solving this dilemma, insurance companies need to better understand the demand-side dynamics, key market trends and growth opportunities within India’s non-life insurance industry, and to assess where competitive advantage dynamics can be sought in the market.
In a separate report, ‘Life Insurance in India, Key Trends and Opportunities to 2015,’ Bricdata analyzed the Indian life market, which is expected to continue outpacing the country’s overall economic growth, with forecasts reaching US$111.9 billion in premium income by 2015, up from US$66.5 billion in 2011 at around a 14 percent annual growth rate. Bricdata cites India’s overall population growth, robust economic expansion, lucrative tax benefits, the rising disposable income of a new middle-class population, and increased awareness of the need for insurance, especially amongst the younger generation, as the primary growth drivers pushing the life industry so far.
The number of life policies sold overall is expected to increase to 85.21 million in 2015 from 53.23 million in 2010, and this will open up new business avenues across the entire insurance industry. The individual life insurance segment, which comprised almost 75 percent of the total Indian life insurance industry last year, is expected to expand to 79.3 percent in 2015 on increased investment in individual life insurance products such as term and pension policies. Unit-linked insurance plans (ULIP) meanwhile are expected to become the fastest growing product category, growing by 21.2 percent annually by 2015, with Bricdata noting that Indian customers were increasingly demanding insurance products that offer some assured income through annuities. Bricdata predict that India will become the third-largest life insurance market in the world by 2015, only behind other fellow Asia-Pacific rivals China and Japan. At present, India is the 12th largest life insurance market in world, 4th in Asia.
According to Bricdata, India’s low life insurance penetration rate combined with the rising overall awareness of the need for adequate protection and savings services will be the key growth factors for the domestic insurance industry going forward. Improved foreign investment practices with more varied capital-raising options will also help create an environment for greater collaborations and joint ventures. With a relatively large number of insurance companies already active in the country, the Indian life insurance industry has shown early signs of entering a consolidation phase. Combined this with improving distribution infrastructure and the widespread adoption of new channels with differentiated product offerings, India competitive landscape will continue to change significantly. The research dossier notes as well that the country’s reinsurance market is also expected to continue growing, driven primarily by growth in non-life, accident and health insurance business lines.
Overall, India looks set to continue being one of the fastest growing insurance markets over the next decade, with rising income levels and awareness of risk management expected to drive a considerable demand for coverage solutions nationwide. Furthermore, Indian insurers could look to make a significant mark and compete on the global stage if they are able to refine their business models and capitalize on the tremendous potential available in their home market.
BRICdata publish in-depth strategic intelligence on emerging markets designed to help clients better understand better identify, understand and pursue growth opportunities in these regions. The company is headquartered in London and covers a broad range of industry sectors, including consumer, financial services, insurance, telecoms, construction and more.