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Positive Signals from Now Health International in China

Posted on Jan 15, 2013 by Sergio Ulloa ()

The first major international medical insurer to announce premium increases this year is Now Health International (NHI) and in a very positive move, the company's Managing Director - Ralph Tam, confirmed that there will be no premium increase in this review for China.

This is excellent news for Pacific Prime and its clients and sends a strong signal about both the rate of premium increases in the Chinese market, and NHI's commitment to growth in one of the world's current hot spots for 'International Health Insurance'.

Now Health International partnered with China based Minan Property and Casualty Company Limited in 2012 to deliver an onshore health insurance solution that mimicked its international plan, creating new plans that included both individual and corporate solutions. Many insurers entering China typically tend to license either an individual or corporate solution first and then develop it (such as Aetna and Allianz), but NHI's decision to invest in licensing both solutions from the beginning clearly demonstrates the insurer's commitment to the China market. The tax-deductible, RMB-denominated product is also available not only to the classic expat market, but also to Chinese local nationals, opening up a huge market opportunity that has previously been overlooked.

Neil Raymond, CEO of Pacific Prime commented: "We are really pleased to see the effort and commitment that Now Health are putting into China, they have an experienced management team and a clear vision of what they want to do and how they want to operate. In fact, our only real issue is the complexity of their pricing model as they have so many options."

Now Health has chosen to make a wide range of options available so clients have the capability to customize their plans and control costs in China, one of the most expensive countries in the world for private health care. These options have created a certain amount of confusion for clients who often require sufficient advice and guidance to help them select the right plan. However, the new options do mean that plans can become quite bespoke. The options include:

1) Restricted access to High Cost Providers - clients can choose to have either a co-insurance, or complete exclusion for treatment at more expensive facilities to help bring down the cost of the insurance significantly.

2) Co-insurances on in and outpatient options - clients can reduce the cost of their health cover by introducing co-insurances on inpatient and outpatient options, an unusual feature from an insurer.

3) Private room restriction - this option allows policyholders in China to considerably reduce costs by only staying in a semi private room (if hospitalized in Hong Kong), or by paying a co-insurance in a private room for admission in expensive facilities in mainland China. China has a bizarre pricing structure in private hospitals in that patients pay more for medical treatment if they stay in a private room than if they stay in a semi private room.

4) Greater China option - this option limits cover to the Greater China region (Mainland China, Hong Kong, Taiwan and Macau) thereby benefiting those clients that have no need for coverage other than within this specified region. However, it should be noted that this does not reduce the premium by a large amount as the cover in China is almost as expensive as anywhere in the world outside the USA, the UAE and Singapore.

These types of options require an excellent intermediary capability to be able to explain and advise clients as well as a sufficient operating and support system to insure that plans and claims can be managed successfully. Now Health has invested heavily in putting these systems into place and the rewards are now starting to show as service levels that have been achieved, even with a complex product structure and numerous compliance and jurisdiction issues, are well above those of competitors in the market.

The fact that Now health have not made any alterations to their plans with regards to this year is a testament to the depth of research and local knowledge the China based team at Now Health have to offer, showing considerable promise regarding their placement in the market in the future.

The final piece of the service proposition that NHI appears to have got right in China refers to their direct billing provider network. NHI has implemented a very comprehensive network including all of the major private clinics and hospitals such as Parkway, American Sino and United Family. Direct billing is often overlooked by most other insurers but in an increasingly competitive market, this will be an important differentiating factor. Furthermore, with very high utility for clients, this will be especially beneficial to policyholders in China where the 'pay and claim back' model is extremely cumbersome due to a poor postal system, expensive banking transaction costs and a currency that is not freely convertible.

Further to this, the fact that Now health have hired staff to create their own network, as opposed to accessing an existing network through a third party administrator, will allow the insurer to maintain control and provide immediate resolution of any possible issues that clients may experience, resulting in high levels of customer satisfaction and maximizing their client retention.

For these reasons, direct billing is almost essential to be considered a competitor in the market. Neil Raymond commented: "Now Health seems to have got most things right with their approach to China. Plans and service capabilities are sound and the direct billing network is excellent. The only remaining issues we have revolve around payment frequency and the small premium discrepancy between on and offshore plans which we would like to see closed. In the long term though, we are sure Now Health is going to be a key player here".

The upcoming year will be the first full year of operation in China for Now Health and Pacific Prime is very positive about the company's ability to have a significant impact in the market. Despite being a relatively new entrant, the experienced and focused management team, together with the 'zero' premium increase in the February rate review, will definitely make for an attractive proposition to clients in 2013.

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