German Health Insurer Tackles China

The battle over revamping the German national health care system has divided political parties in Germany for years. In that time, health care benefits have been reduced, and fees increased. Private health insurance companies have grabbed this opportunity, offering supplementary insurance packages.

But Germany isn’t the only country where the system is changing. In communist-governed China, the issue of private health care has increasingly become an issue. Now, for the first time, the Chinese government has allowed a foreign company access to its health insurance market.

The Deutsche Krankenversicherung (DKV) has acquired a 19 percent stake in the first private health insurance company in China -- the most holding power any foreign investor is allowed. Majority partner is a state company, the People's Insurance Company of China (PICC), one of China’s largest insurance companies.

A high demand

DKV board member Jochen Messemer, who is responsible for the company’s international activities, said he was pleased with the speedy contract settlement.

"We think that the time has come to enter this market in China, especially with a partner like PICC, which has a large network of sales agents," he said. "There is a high demand for private health care in the country."

Until now, Chinese citizens could only acquire private health coverage in a package -- with life insurance, for example. This explains why private health insurance currently makes up a mere 6 percent of the entire market.

But now, Beijing wants to develop specialized health insurance and is employing European know-how to get the system started. Messemer said he hopes to profit from the expertise his company has gained in what were underdeveloped markets in Belgium and Spain. But he also said that entry into China means breaking into new territory.

A budding market

"The market for health insurance here is around €2 to €3 billion ($2.6 to $3.9 billion)," he said. "The question is, how fast will the market continue to grow? In the past few years it has grown by 50 percent each year, just as many other markets have. Two billion euros is nothing considering the size of the potential market. Health insurance as we know it doesn’t actually exist. So, from that point of view, we think that a very large market could develop. Some estimates says it will reach €38 billion by 2010."

PICC Health, as the newly founded company is called, began with €100 million in capital stock and Messemer estimates that the company will break even within the next two to four years. Predictions are difficult, and the borders between the private and public sectors are not always clear cut. After decades of public health care, the Chinese may be slow in the take-up of private health insurance.

"There is an existing public health insurance system, and in the past it provided the services -- especially in the country’s rural regions," he said. "The system is changing at the moment... It will of course be challenging to be a part of developing health insurance for a market where the role of service provider is changing so dramatically."

Starting next year, Messemer hopes to sell the first health insurance policies, initially in larger cities like Beijing. Providing the initial entry into the market is successful, it is hoped that a role out of the service could occur across China.