Health Insurance China
China Insurance News
As the Chinese economy continues to grow and expand the country is being seen as a major global market, and this is drawing many corporations from all over the world to Beijing and Shanghai in an effort to build their profiles in the Mainland market. Many of these companies have no history of working in China and have encountered a myriad of difficulties stemming from the cultural confusion. The difficulties that foreign corporations are having in the Chinese market are readily viewable in the nation's insurance industry which is, for the most part, dominated by Chinese insurance companies.
China has, at current count, 135 insurance companies working in and around the country; however foreign corporations and investment only account for 7% of the total Chinese insurance market. This is despite the fact that over 47 insurance organizations located in China are funded by foreign owned entities, showing that despite the eagerness of foreign enterprises to enter the Chinese market they are having great trouble doing so. There are some exceptions to this trend though, with companies such as Royal and Sun Alliance, who have a history in China dating back to 1853, and it is this experience that has allowed R&SA to become one of the most successful foreign insurers on the mainland.
One of the main reasons that foreign insurance companies are trying so hard to enter the Chinese market is due to the increase in expatriates in the country. In recent years more and more overseas nationals have been relocating to the People's Republic of China in order to capitalize on the massive growth in the economy and take advantage of the unique lifestyle and opportunities that the mainland offers. With the increase in expatriates also comes the need for western style insurance and protection, and as a result the interest from international and foreign based insurance organizations towards the Chinese market has also boomed.
Why then, if these corporations are so interested in establishing themselves on the mainland, are they having so much trouble doing so? Part of the issue may be due to certain cultural and societal issues towards which foreign nationals often have a hard time adjusting. Understanding the Chinese marketplace can be difficult, and it is partly due to this that the only foreign owned insurance companies in China that are enjoying great success are the ones, like Royal and Sun Alliance, that have a long history of providing high quality products to individuals throughout China.
It is this ability to bridge the cultural gaps that still, to some extent, exist between the Western and Asian economies that help to make a successful insurance company, and sadly many top class insurance companies do not realize this. There are, however, some exciting new changes in the Chinese insurance industry as the economy continues to further open and more and more international investment flows into the nation. The number of foreign corporations accessing the insurance market in China is growing, and will continue to grow, as the nations industrial and technological might continue to grow and gain ground on western competitors.
This means two things, the first is that the number of foreign insurance organizations in China will continue to rise, giving expatriates in the country the assurance that they will be able to deal with insurers offering products with which they are already familiar. This will in turn help more foreign nationals to achieve their full potential in this booming economy and in turn serve to lure more expatriates to the country creating a cyclical effect. The second effect that this will have is towards the innovation and creation of new insurance products and the implementation of higher quality products giving both Chinese and foreign nationals the assurances that they need, that despite whatever happens they will have the protection and services that they deserve at their disposal.
When travelling in China it is important to be aware of the following:
- You must ensure that you have a valid visa before you arrive in China. Fines will be levied if you overstay your visa so make sure you check your visa validity.
- It is important to obtain comprehensive medical and travel insurance before arriving in China. Be careful to check exactly what is covered in your policy and be aware of any exclusions contained in the policy.
- There have been new outbreaks of Bird Flu (Avian Influenza) in China which have resulted in a small number of human fatalities. You should ensure that all poultry dishes are cooked thoroughly and avoid places where you may come into contact with wild or domestic birds.
- Incidents of serious crimes against foreigners in China are rare. You should however be careful when visiting expatriate bars, street markets and Beijing International Airport as pickpockets are known to operate in these areas.
- The typhoon season in China is between May and November.
- When entering China for a period of over six months, you will be required to produce a health certificate which has been ratified by a Chinese embassy.
- Drug offences in China carry serious punishments including, in some instances, the death penalty.
The Chinese Central Government issued the general guidelines upon which the social security system in China operates since the late 1990s; however when it comes to the specifics of the system and how social security within the PRC will be administered, the central government has appointed local level government institutions to implement the management. This approach is seen as the only workable solution for a country as large as the People’s Republic of China, as any central management with specific contribution levels and benefit payments would be unworkable when applied to populations in cities as diverse as Urumqi, Chengdu, Harbin, Beijing and Guangzhou, to name but a few.
In order to preserve the essence of the general guidelines, the social insurance, when applied to urban areas all over China, is subdivided into the following five distinct categories:
(a.) Medical insurance
(b.) Maternity insurance
(c.) Unemployment insurance
(d.) Occupational injury insurance
A summarised description of how these different insurance categories function follows;
(a.) Medical insurance
Both employers and employees are required to make contributions to the medical insurance fund, which allows Chinese citizens to cover, in whole or in part, the costs of the medical expenses incurred by an illness or injury. Most cities in China require the patient to pay from their own pocket a certain percentage of the total hospital bill, which contrasts with hospitals in other countries where the medical treatment is provided free of charge. The most straightforward case for payment of this fee happens when the hospital is based in the same city where the medical insurance premiums are being paid, and it becomes complicated in cases where an employee falls ill or is injured whilst on holidays or a business trip. For these latter cases, the reimbursement of the fee paid as a percentage of the total hospital bill will be subjected to some rules, including whether or not it falls in the category of urgent medical treatment, plus certain other special requirements that the patient must satisfy.
Chinese citizens covered by medical insurance are issued with a card which represents the account into which a small monthly contribution is deposited. These funds can be used at pharmacies to buy medicine or other goods, or even to settle small medical expenses at hospitals.
(b.) Maternity insurance
Unlike medical insurance, the contributions towards maternity insurance plans are made only by employers. When an employee becomes pregnant, a lump sum amount is awarded to cover, in whole or in part, costs associated with the birth of the child. Furthermore, during the period of maternity leave, the salary of the employee will be paid by the maternity fund.
The Chinese maternity insurance scheme caps the amount of contribution towards the employee's salary equal to three times the average salary in the region in which she is located. Some companies pay the difference between the amount provided by the maternity insurance fund and the actual salary of the employee in cases in which the employee earns more than three times the average regional salary, to ensure that the employee receives her full salary during the period of maternity leave.
(c.) Unemployment insurance
Companies operating in all major cities in China are expected to contribute towards unemployment insurance and, in the majority of these cities, require their employees to also make a contribution. Should the employee become unemployed, a claim will allow them to receive unemployment benefits, provided contributions to the unemployment insurance fund have been made for a minimum period of one year.
The exact amount paid from the unemployment insurance fund will be a fixed amount that varies from city to city, and it is unrelated to the employee's salary or the total amount the individual had contributed to the fund in excess of the one-year minimum requirement. Furthermore, unemployment benefits can be enjoyed for a maximum of 24 months.
(d.) Occupational injury insurance
Contributions to the occupational injury insurance fund are only made by the employer, and the amount depends upon the nature of the work performed by the employees. The amount of contribution is directly proportional to the degree of danger in the workplace, which means that the more dangerous the nature of the work the employee engages on, the higher the percentage of contribution to the occupational injury insurance fund becomes. The percentage range for such contribution varies between 0.4 and 2 percent of the gross salary paid to the employee. Ultimately, the local social insurance bureau will determine the exact amount of the percentage premium, based on the category of industry the company is deemed to belong to.
Should an employee suffer an injury as a result of an accident at work, the employer is required to collect all material evidence related to the injury, all costs associated with its treatment, then apply for reimbursement from the occupational insurance fund. During the period of recovery, the employee is entitled to receive the full amount of salary from the employer.
Contributions towards the retirement fund are made on a monthly basis by both the employee and the employer. As it is the case in many other countries, China has put in place a system to ensure that its citizens receive a pension upon retirement. The portion of the contributions made by the employee are pooled into a personal contributions fund, which are directly accrued to the individual, so that when the individual retires, automatically becomes entitled to directly draw from this fund.
Unlike how the employee contributions are handled, the contributions from the employer are deposited into a social pool. Funds from this social pool are distributed to all citizens that have contributed to the retirement fund during their working life. Citizens that have exhausted the balance of their personal contribution account are still entitled to receive a monthly income from the funds in this social pool, although the amount is likely to be just a few hundred Renminbi. In China, pension contributions are generally the largest component of social insurance made by both the employer and the employee.
There is in place now in China a housing fund that only the employer contributes to. However, this fund is handled separately from the social insurance funds described above.
Labelled as "mandatory benefits", the social insurance and housing funds are usually managed by, and considered the responsibility of, the employer; although payments to the social insurance funds can be lumped together and paid each month to the social insurance bureau. The monthly amount corresponding to the housing contribution is paid directly to the housing fund bureau.
For more information about China, the health insurance plans that we can offer there, or to receive a free quote, please contact one of our expert advisers today.