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Posted on Nov 05, 2015 by Rob McBroom
China is the most populated planet on earth. In recent years, however, the population has seen some interesting demographic shifts largely due to the one-child policy which was introduced by the government between 1979 and 1980 in order to stem what was seen as massive, unstainable population growth. While growth did indeed slow (according to the World Bank China's population growth has remained at a steady 0.5% since 2007), there have been some unintended consequences - including skewed male/female demographics and an impending workforce shortage.
In late October the Chinese government announced that, after high level policy tasks, the one-child policy will be fully phased out. The first major step taken was the immediate relaxation of the policy to two children - all families may now have two children - which was announced on October 29, 2015. News sources and experts from all around the globe have been quick to speculate on what exactly this means for China, with many coming to the same conclusion as the CBC which stated, "Repealing the one-child policy may not spur a huge baby boom, however, in part because fertility rates are believed to be declining even without the policy's enforcement. Previous easings of the one-child policy have spurred fewer births than expected, and many people among China's younger generations see smaller family sizes as ideal."
Regardless of whether or not we see a baby boom in China in the next few years, the abolishment of the one-child policy will have an impact on the country and people living there. One industry to possibly see a big impact is the health insurance industry. Here is an overview of what Pacific Prime predicts will happen.
1. Plans will change family benefits including discounts
On a global scale, many local and international health insurance plans offer some form of family oriented benefits including a discount on premiums for children who are included with the plan. When it comes to local plans in China, the one-child policy has largely hindered the type of discount available, but with the recent relaxation of this plan Pacific Prime predicts that local providers will change the way any discounts are applied. For example some plans may add further discounts for the second child added to a plan, while others may include coverage for the second child for free.
International health insurance plans are a bit different, however, as many already offer discounts for extra children or members on a family plan. It is with these plans that Pacific Prime is most intrigued. The reason for this is because we predict that discounts and family-centric benefits could go one of two ways in China.
First, you could actually see some plans offer further discounts on first, second, third, and even fourth children. Insurers could also introduce a slightly different benefit structure. For example, the first child the plan covers requires a full payment of premiums, but other children added after are included for free. Beyond just premium discounts, it could be possible to see limits for family-based medical care increase or different coverage options (e.g., orthodontics/dentistry, etc.) that families often find necessary.
Generally speaking, we could see many international insurers in China offer better discounts and increased coverage options on family plans.
The second outcome will hinge on whether or not there is a so-called 'boom' in the number of families securing health insurance. If this happens, you will see more claims for medical care, which will force premiums up. In order to alleviate this, some insurers may reduce discounts or trim coverage levels for some costly procedures. While this might seem like a negative outcome, this could actually lead to lower premiums for families, or at the very least provide them with the ability to better balance risk vs premiums.
2. There will be increased maternity coverage competition among insurers
It is widely known that the Chinese government hopes that by relaxing the one-child policy there will be a baby boom of sorts. If this pans out, this means that the demand for maternity coverage will increase, especially among the increasingly wealthy middle and upper class in China. According to Index Mundi 47.2% of the population in China, as of 2014, is between the ages of 25 and 54, with around 313 million of those being female.
In theory, these numbers, if mothers decide to have another child, could lead to a baby boom with many mothers demanding maternity coverage from insurers. This is a massive potential market, which means insurers will likely be wanting to capitalize on this. One way we predict they will do this is by either introducing new maternity plans, or tweaking existing plans to make them more appealing to clients. This could include increased coverage elements and benefit levels, or even premium adjustments.
3. There will be a fundamental shift in how people buy and retain maternity plans
Over the past few years Pacific Prime has identified a trend among maternity plans sold in China. The vast majority of mothers will secure a plan with maternity coverage for the waiting period before claims can be made and during the pregnancy and then move to a cheaper plan shortly after.
With the relaxation of the one-child policy Pacific Prime predicts that there will be a shift in how people purchase these plans in China. Namely, plans will be retained longer by mothers planning to have a second child.
When plans are retained longer, insurers have a much easier time predicting claims and can more accurately develop risk management strategies. In time, this usually leads to a stabilization of premiums across the industry. What this may mean for those purchasing the plan is lower premium increases, and possibly even lower premiums for some plans.
If you are planning to have a child, maternity insurance is essential in China, especially if you are planning to give birth at a western hospital, which can be prohibitively expensive. Therefore, securing a health insurance plan would be beneficial. Contact one of our experts today to learn more about your options and any future changes to maternity or family health insurance plans in China.
