Alibaba's financial arm Ant Financial and Trust Mutual Life have launched Xianghubao, a mutual health insurance product, which attracted more than 10 million subscribers within nine days of its launch on 16 October.
62.5% of subscribers who participated in a research conducted by Ant Financial said they had not bought commercial health insurance before they joined the mutual health insurance plan.
The Xianghubao experience shows that insurance demand is high, yet it is still difficult to sell most insurance products. The popularity of the product exposes three gaps in the insurance market:
Conceptual gap
First, there is a conceptual gap. Several policyholders view insurance more from the perspective of personal investment returns. They believe that since that they have spent money to buy insurance, it is only appropriate that insurers make some payout to them, or otherwise the policyholders would suffer a loss.
In addition, many policyholders are unaware of the difference between Xianghubao's one-year critical illness coverage and medium- and long-term critical illness insurance offered by traditional insurers. The one-year mutual insurance cover is not a substitute for long-term critical illness insurance.
Trust gap
Second, there is a trust gap. Insurance companies need to establish in the hearts of their customers that they represent long-term quality and credibility. In the past, the business growth model was to tap new business from the acquaintances of agents and sales personnel. While premium income may grow in the short term, the negative image engendered of the insurance is difficult to eradicate in a short period of time.
Supply gap
Third, there is a supply gap. Insurance companies need to pay more attention to the real needs of customers and increase the effective supply of products. In the past two years, there have been many innovations in insurance products and services, but they are far from enough for the vast insurance market. For example, there are not enough insurance products for some sub-health groups and senior citizens.
Xianghubao
Under Xianghubao, those allowed to subscribe to the mutual plan should be in good health and aged between 18 and 59. They can include their non-adult children in the plan. They enjoy insurance coverage for 100 major illnesses, including malignant tumors. The cover is CNY100,000 ($14,400) for subscribers aged between 40 and 59; and CNY300,000 for those younger than 40.
Subscribers will share equally, irrespective of their age, the costs of insurance payouts and management fees only when claims are lodged. The management fees, amounting to 10% of a payout, are payable only when a claim is filed.
Public announcements will be made twice a month about claims. Objections can be raised against the claims. If there are no objections, the claim payment will be made.
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This first appeared on Asia Insurance Review's premium eWeekly China service.
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