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How one of the largest insurers in the world, with more than 200 million customers, is transforming its business model to enter the healthcare market.
This is the story of how one of the largest insurance companies in the world is transforming itself into an HMO of China to meet rising social demand.
Health care is a key challenge facing society in China. Deloitte reports that something like 95% of the Chinese population has some basic medical coverage. But the ageing population, coupled with urbanization and rising affluence in China, has given rise to greater demand for health care.
To meet this demand, Ping An has reshaped its business model to combine financial and health care services.
The rise of health services
With health increasingly being prioritized, Chinese consumers are not merely insuring themselves against disease, but also securing their health. As commercial insurance embraces services, the Chinese insurance industry is exploring a business model that deeply integrates them to offer innovative products and services being developed in response to evolving market demand.
National policies are also driving the insurance industry toward health services. China Banking and Insurance Regulatory Commission (CBIRC) encourages insurance companies to combine health insurance with health management services, providing services such as health-risk assessment and intervention, disease prevention, health examination, health consultation, health maintenance, chronic disease management and health management.
Last year, Ping An released an upgraded health plan called Ping An Zhenxiang RUN for customers of critical illness insurance. In addition to family doctor services and health records, the plan provides customers with health management plans covering four major areas: health, sub-health, chronic disease and disease. By the end of 2021, the plan covered more than 20 million critical illness policyholders.
Driven both by policies and market demands, China’s commercial health insurance market has seen rapid growth. According to data from CBIRC, China’s health insurance market increased from 69.2 billion renminbi ($10.88 billion) in 2011 to 844.7 billion renminbi ($132.75 billion) in 2021, which amounts to an elevenfold increase within a span of 10 years, with a compound annual growth rate of 28.4%.
As China’s regulatory authorities aim to develop the commercial health insurance market to over 2 trillion renminbi (314.3 billion) by 2025, the sector is seeing unprecedented growth opportunities.
Building an ecosystem
Since the effectiveness of the “insurance + health services” model depends on the medical resources the insurance companies have access to and control over, the health ecosystem structure is a definitive factor.
By integrating insurance, hospitals, health checks, rehabilitation, elderly care and medicine, insurance companies can establish a one-stop health ecosystem of “insurance + health services + health management.”
In this ecosystem, policyholders insure themselves not only against disease, but also with the intention of securing their health; thus, insurers move from passive compensation to active ex-ante management. Insurance companies can thus not only effectively improve customer stickiness, but also promptly intervene in customer health while controlling incurred medical expenses.
Ping An has invested significantly over the past decade to build a health ecosystem in China. Through technologies like artificial intelligence and big data, more than 10 entities in the ecosystem are joining up to connect government, users, service providers and payment providers and to integrate hospitals, doctors and core medical resources, providing consumers with cost-effective health care that covers their entire life cycle.
Committed to developing its health ecosystem, Ping An aims to build an HMO-managed care model in China. Managed care, the mainstream business model of commercial health insurance in the United States, accounts for more than 90% of the American market, with UnitedHealth leading the sector. Its performance and investment value are highly recognized by the capital market.
In managed care, insurance agencies and health service providers establish a mechanism of shared benefits and risks. Under joint management of health services, they optimize cost-effectiveness by controlling expenses through the rational use of medical resources.
HMO, a form of managed care, provides policyholders with comprehensive health services by building health networks consisting of doctors, hospitals and clinics.
The HMO model connects insurance companies, hospitals, doctors and health service institutions to create a closed-loop business of “insurance + health services.” The insured are entitled to medical resources like treatments within the network.
Drawing on years of operation and management in “insurance + health services,” Ping An has introduced a managed-care model featuring “HMO + family doctor + O2O.” The Ping An Good Doctor health platform connects online doctors and offline medical institutions through its “family doctor membership” to provide daily health management and services before, during and after diagnosis.
A broad customer base meets deep resources
The keys to the success of HMO-managed care are a huge customer base combined with the ability to leverage abundant medical resources to effectively control service quality and costs. Ping An’s confidence in implementing its health ecosystem strategy stems from its large customer base and leading medical resources.
Ping An has been working toward two major goals in the health industry: first, to provide one-stop health services, mobilizing the 227 million customers in the main financial business and the 423 million users of Ping An Good Doctor to build the largest online health platform; and second, to access medical resources by closely cooperating with hospitals and medical institutions across the country to integrate resources through Ping An’s health technology.
By linking offline high-quality medical resources, Ping An has created a competitive edge of integrated online and offline health services. It has over 40,000 in-house doctors and contracted external doctors, and partnered with over 10,000 hospitals (including 99% of Tier 1 hospitals and all the top 100 hospitals), about 96,000 healthcare management institutions and 202,000 pharmacies (about 34% of all pharmacies) in China by end of 2021. Moreover, Ping An partners with over 1,000 overseas medical institutions in 16 countries across the world.
In 2021, Ping An invested approximately 48.2 billion renminbi ($7.58 billion) in the New Founder Group to strengthen its offline health ecosystem. The medical sector of Peking University under the New Founder Group is leading the industry in terms of offline industry scale (including the world-class Peking University International Hospital), medical technology R&D and application, and the accumulation of health big data.
Technology supports the efficient integration and control of medical resources. Ping An is a long-time investor in the medical field, with 1% of its revenues being used for innovative technology R&D each year (Ping An’s revenues in 2021 amounted to 1.28 trillion renminbi, or $201.1 billion). A large part of this investment pertains to the health ecosystem.
At present, Ping An owns one of the largest health databases in the world and the second-largest number of medical technology patent applications globally, covering over 30,000 diseases and over one billion medical treatment data elements, with more than 300 million uses of medical technology.
Comprehensive finance + health services
Ma Mingzhe, chairman of Ping An, once asserted that while finance decides the present of Ping An, health services hold the future. Focusing on evolving needs in health services, Ping An has positioned “integrated finance + health services” at the center of its long-term strategy.
The health ecosystem strategy is closely integrated with Ping An’s main financial business, achieving synergistic effects. In 2021, nearly 63% of Ping An’s over 227 million individual customers chose the services provided by the health ecosystem, with 3.3 contracts per customer and 40,000 renminbi in assets under management per customer, which are, respectively, 1.6 times and 3.0 times higher than those of the customers who did not use health ecosystem services.
Capturing strong consumer demand in finance and health care, Ping An is actively building an “integrated finance + health services” business model in China. As its HMO model of providing health services takes shape, this strategic implementation is gradually being transformed into greater investment value.