According to a recent study from Roland Berger Strategy Consultants, the health insurance industry in Southeast Asia is expected to grow to US$ 24 Billion by 2020 – four times the estimated $6 Billion value back in 2010 – at a compound annual growth rate of 15%. While Pacific Prime analysts believe this growth is tremendously beneficial for clients in the area as more options are likely to become available, it also means that the buying process will become more complicated for clients.
"As disposable incomes and the number of wealthier consumers spike in the region, personal health is fast becoming the number one priority for them," said the co-author of the study, Mr Philippe Chassat, Partner and Head of Financial Services Southeast Asia, Roland Berger Strategy Consultants. As the overall wealth continues to grow in Southeast Asia so too will the demand for quality healthcare.
The wealthy in Southeast Asia accounts for more than 17 million households, and 69% of Southeast Asia's wealthy live in the six largest economies of the region.
"With proliferation of wealth, people are prepared to pay more and in return," Chassat added, "they want to avoid the long waiting time, access to the safest and latest medical technologies, and be given he assurance to get the best logistical support from top healthcare facilities."
Group corporate policies – including multinationals, the "upper-end" of SMEs, and large domestic corporates – are expected to increase in market share from 20-25% in 2010 to 35-45% by 2020.
The study shows that health insurance in Singapore in particular is expected to increase by 400% by 2020, reaching a value of $6.8 billion. The report projects that an average person's annual spending on healthcare in Singapore will increase by more than 80% to $3,232 in 2020. There have also been recent government announcements to increase healthcare funding from the public sector as well. According to a recent Globalsurance review of premium inflation for eight international insurers, Singapore was the region that saw the largest average increase in premium rates over the last 12 months.
This overall increase of wealth has also been especially apparent in China, where nominal GDP per capita has exceeded USD 6,000, and healthcare is predicted to be one of the fastest growing expenditures. Premiums have already increased 25.8% to US$9.6 Billion in the first half of this year alone. By the end of 2013 there is also estimated to be over 200 million elderly people in China, which will contribute to the demand in the sector.
The Chinese government has recognized the importance of the healthcare industry and has made several reforms in recent years to ensure growth and improve regulations, and the efforts seem to have paid off. The percentage of Chinese citizens who have access to healthcare grew from 10% in 2004 to 95% in 2011. Several major insurance providers, such as Bupa, Cigna, and Allianz, have increased their marketing efforts in recent years, with recent successful campaigns on major illness being attributed as the reason for the rapid growth so far in 2013.
Healthcare costs in the wealthier regions of Southeast Asia have grown considerably in recent years with many hospitals already having surpassed US healthcare costs for similar levels of treatment. Chassat recommends that insurers should "tightly manage their portfolio profitability" and aim to keep premiums affordable in order to grow the industry. In order to keep premiums down, insurance providers and healthcare providers need to cooperate closely, claims management needs to be improved, and operating processes need to be streamlined.
The study also recommended that individual policies, which are the most profitable segment, will need to be balanced with group policies, the segment with the fastest growth.
The Outlook for PPI Clients
Pacific Prime analysts believe that the growth in Southeast Asia is beneficial for clients in the long run, though such a high level of growth in the industry comes with a few complications.
Pacific Prime's CCO Owen Ryan said, "The good news is that with growth comes competition, meaning that services will improve and there will be new and better options for clients to choose from". The increase of demand in the region has seen an equally high surge of new insurers joining the market with innovative policies and processes for clients.
Ryan continued, "The downside is that while the increase of high net worth citizens means that more first-class medical treatments will become available, it also means that premiums will increase as well". With the number of wealthy individuals in the region continuing to increase, so too does their buying power and their willingness to spend on quality and costly healthcare procedures.
"However, there will be eventually be more cost-effective insurance plans on the market to balance this, which is good", Ryan added, "although it does complicate the process of choosing a plan. Clients will soon be faced with a lot more options in front of them with different levels of cover to choose from".