Skip to main content

In China, the BATX are storming the health insurance sector. What lessons can we learn from it today?

By 13 October 2020April 10th, 2024Financial services & institutions

After the reforms launched by Deng Xiao Ping in the late 1970s, the People’s Republic of China (PRC) quickly became “the workshop of the world”. But since the 2010s, China has embarked on a new project, that of regaining its historic place as the world’s leading economic power by 2049 at the latest [year of the PRC’s centenary]. This ambition has favored the rapid emergence of the BATX – the Chinese GAFAMs: Baidu, Alibaba, Tencent and Xiaomi – which are leading the entire country into the digital age and allowing it to quickly enter the 21st century. In the health sector, a major issue for the government, these players are heavily involved in being at the rendezvous of “Health China 2030” and several major innovations have already emerged.

The Chinese, a hyperconnected population

In the field of services, digital technology occupies a central place in China today: more than 800 million inhabitants are connected to the Internet via their smartphone; m-commerce already accounts for over 30% of total retail sales [4% in France, less than 10% in the USA]; every day, more than 150 million Chinese make a purchase on Taobao (Alibaba) via their smartphone; the typical user of WeChat Pay (2nd most used mobile payment system after Alipay) carries out an average of 60 transactions per month …

  • Lesson # 1: To facilitate the development and adoption of new services in the healthcare sector, BATXs rely heavily on their existing digital ecosystem. Tencent, for example, adds to the countless functionalities of Wechat new services dedicated to health (online appointment booking, teleconsultation, ordering of medicines, etc.); Alibaba does the exact same thing with Alipay.

A health system still not worthy of the almost 1st world economic power

           Despite the country’s very rapid economic development, the Chinese health system is still not, after numerous reforms, at the level of the standards of a great economic power and the challenge remains colossal. The stake is all the more important for the government as health constitutes a major source of dissatisfaction of the population [with education and the environment]. These issues are multiple:

  • Public health: for example, over 115+ million people have diabetes, but only 35 million (30%) are diagnosed and 30 million (26%) are treated, not counting the over 400 million people with prediabetes; 120 million Chinese are carriers of the hepatitis B virus (or 1/3 of cases worldwide). This issue is increased by strong inequalities in access to care, both qualitative and quantitative, between towns and the countryside with a very low level of confidence of the population in their doctors and a compulsory visit to the hospital in the absence of city of medicine 1 st use (less than 6% of Chinese doctors are general practitioners [against 50% of doctors liberals in France]).
  • Economic insofar as, due to the persistent weakness of the basic health insurance system and the weak development of private health insurance, the high savings rate of the Chinese (nearly 60% of their income) constitutes a brake on the acceleration of domestic consumption. 97% of the population is admittedly covered by one of the 3 large public basic health insurance systems against 45% in 2006 and less than 5% in 1980. However, these systems show very strong disparities between them depending on whether the beneficiaries live. in town or in the countryside, are migrants or not and whether or not they have access to a compulsory membership system (only 1 out of 3). This results in a very high remaining load, which varies between 30% and 60% depending on the basic speed.
  • Lesson # 2: The Chinese population, whether rich or poor, is used to financing a significant portion of their health costs. From then on, she will be all the more inclined to buy a service as it will add value to it: with teleconsultation for example, Ping An Good Doctor commits to a period of 15 minutes while the average duration of a consultation at the hospital is less than 5 minutes.


Healthy China 2030, a reform plan unattainable without the BATX

In July 2019, the Chinese government published the “Healthy China 2030” action plan to achieve the objectives set 3 years earlier. For the first time, such a plan contains very strong public health and prevention commitments (reduction in smoking, increased physical activity, screening for chronic diseases, etc.); Another major focus of the plan is the establishment of a city of Medicine 1 strecourse. Building on the experience of the failures of previous reforms which gave pride of place to the public hospital service, the government is counting this time on the technology companies Baidu, Alibaba and Tencent but also on Ping An (insurance). At the request of the government, these actors now play a major driving role in the modernization of the health system and adhere to it all the more since they are looking for new sources of growth and their past investments in health (in particular in the management of appointments in which they invested hundreds of millions of dollars between 2014 and 2016) were not successful.

  • Lesson # 3 : strong relationships between a few large technology companies and the government to drive innovation and modernization of the health system, in the context of highly organized competition: in December 2017, the government retained the system of artificial intelligence from Tencent as the national benchmark platform for artificial intelligence applied to medical diagnostics. But each competitor of Tencent has also been designated as a national reference center, but in other fields of application (Baidu for the electric vehicle and Alibaba for the Smart City).

2 examples clearly illustrate this dynamic at work in China today: Ping An Good Doctor and Xiang Hu Bao.

The rapid development of Ping An Haoyisheng (Good Doctor)

For 12 years, the insurer PingAn – one of the major players in the sector at the global level – has invested heavily in technology (1% of its annual turnover) and has developed its own cloud infrastructure solutions, its Artificial Intelligence algorithms ( IA), its voice recognition and facial recognition solution with more than 30,000 engineers working in R&D, including 1,000 dedicated to AI. Launched at the end of 2005, Ping An’s health insurance business is now driven by Ping An Healthcare & Technology, better known as Ping An Good Doctor, a spin off of Ping An floated on the Hong Kong Stock Exchange in May 2018 (with a valuation of € 6 billion).

Ping An Good Doctor (PAGD) has been deploying for 5 years a complete ecosystem dedicated to health, very clearly in support of the government plan. PAGD offers an integrated first-line service offering everything a general practitioner can do without requiring face-to-face contact; all these services (selection of a professional, making an appointment, teleconsultation, delivery of medicines at home in 1 hour, payment) are only accessible from a smartphone and apply to both prevention and diagnosis, treatment acute or soon to be chronic disease management (developing); to operate these services, PAGD relies on its 1,196 in-house physicians, 5,293 partner physicians and its network of more than 3,000 hospitals.To these services for individuals must be added the many programs in place in more than 250 municipalities – in charge of the basic insurance system – to fight against over-prescription, over-billing, and improve their knowledge of risk.

On January 1, 2019 PAGD launched its first One-minute Clinics in 8 provinces. Like a 3 m² photo booth accessible 24/7 where an “AI Doctor” establishes a medical pre-diagnosis in a few minutes and where a real doctor completes and finalizes the diagnosis by remote consultation (advice + prescription if necessary) ; “Doctor AI” is trained on over 2,000 common pathologies by 200 doctors from Ping An and the base of 300+ million past consultations. A vending machine has around a hundred common medicines; in the event of a missing medication, it is of course possible to order it online on the application and have it delivered. These booths are installed everywhere: on sidewalks, in pharmacies but also in companies (such as the VW plant in Shanghai). Today,for serious medical situations, PAGD asks to go to a doctor for a physical consultation; on the other hand, PAGD will then send prevention messages. The first 1,000 units will be deployed by the end of the year, to serve 3 million people.

If Ping An Good Doctor is today the leader in this new market, it is not the only operator insofar as Tencent Trusted Doctors, Ali Health or Baidu Healthcare are developing very similar ecosystems.

  • Lesson # 4: A few very large competing players are developing very comparable ecosystems: with a very strong “new technologies” component, a large number of partnerships, accessible exclusively via smartphone, covering all health needs including insurance.


Xiang Hu Bao, mutual coverage

A Chinese study in 2016 had shown that 14% of rural families (50 +% of the population) were ruined due to a serious illness and one in 3 people had given up seeing a doctor despite a serious illness. The financing of health spending is another major issue for the Chinese government, especially as it seeks to reduce the savings rate to support the development of domestic consumption.

Despite significant tax incentives, providing households with health insurance is still limited because the cost of these contracts is still too high for a large part of the population. BATX have developed solutions to reach this population and raise awareness about insurance.

In 2017, Alipay and Taikang Insurance joined forces to launch free health insurance coverage, accessible from Alipay (Alibaba’s electronic wallet) and based on criteria mastered by Alipay: by activating the option in Alipay, there is almost immediate access to additional reimbursement of health costs paid online up to RMB 5000 (630 €), with the possibility of taking out a back-up insurance contract. In one month, the solution attracted 13 million people who activated the option.

In 2018, Ant Financial (financial services division of Alibaba) launched Xiang Hu Bao (“mutual coverage”) and has since convinced with already more than 100 million users: it is a wide coverage of the number illnesses (even Covid 19), up to RMB 300,000 [against 500,000 for traditional insurance contracts] with the exclusion of people over 60 and without initial contribution; the health costs of beneficiaries are shared between all members. In 2019, each member had to pay… RMB 29 (€ 3.66). 2/3 of users earn less than RMB 100,000 (€ 12,580) per year. The CBIRC (Chinese ACPR) prohibited these products from presenting themselves as insurance; they then chose to call themselves “mutual” for some, health crowdfunding for others. Today,the number of participants in this new type of coverage, which has since been copied by Tencent, Xiaomi and Didi, is estimated at more than 150 million.

  • Lesson # 5: The few very large technology companies benefit from a market of gigantic size (19% of the world population) but also from a regulatory context very favorable to innovation (the government legislates after observing the 1st impacts of innovations) driven by long-term planning.
  • Lesson # 6  : These big players, with the support of the government, have all the means to develop new O2O (online to offline) economic models that Ping An Good Doctor perfectly illustrates and that Amazon’s projects (agreement with JP Morgan and Berckshire Hathaway) or Apple (integration of Health Records into the Apple Health application and purchase of health centers for its employees in San Francisco) foreshadow the United States.

For the moment, the French framework, beyond the size effect and despite all the government announcements, is still very far from promoting the emergence of this type of model.

Olivier Milcamps


Leave a Reply