“ 2015年，我意识到当时中国的保险主要服务中产和以上的家庭，其实中国缺乏的是普惠性保险，真正能保障蓝领和其他中低收入群体。” 33岁的沈鹏说。“尽管有这么多人可以使用互联网服务，但我认为用互联网方式做普惠保险是很有机会和意义的一个事情。”
Online mutual aid platforms are plugging a health care gap in China for those on lower incomes
China has dozens of online mutual aid platforms, with the three biggest players each having more than 10 million members
The platforms are popular among low- and middle-income households in rural areas, where there is often a lack of quality hospitals and affordable care.
Pay less than US$1 and get up to 100,000 yuan (US$14,144) of help if you face a critical illness – this is how an online health care mutual aid platform helped rural resident Hu Youbin pay medical expenses when he was diagnosed with cancer last year.
In a country with a population of over 1.4 billion and uneven access to quality health care, poverty due to serious illness is a reality that many low and middle-income households like Hu’s have to potentially face.
However, the situation has been improving as Chinese tech giants including e-commerce company Alibaba, search engine Baidu, on-demand delivery company Meituan Dianping, ride-hailing operator Didi Chuxing and smartphone maker Xiaomi now offer more affordable health care plans via mutual aid platforms, which operate as a collective claim-sharing mechanism.
Unlike other crowdfunding platforms where people raise funds for specific projects with certain amounts of money, participants of mutual aid platforms share the cost of a claim only when it has been verified – so a 1,000 yuan claim for medical treatment by a person would end up as a cost of 1 yuan each for a pool of 1,000 people in a mutual aid scheme. Platform operators typically charge a fee to members when collecting for a claim.
“I joined the platform because I wanted to help others. One or two yuan is not big money,” Hu, one of the beneficiaries on Alibaba’s mutual aid platform Xiang Hu Bao, said. “I did not expect that I would benefit [from the service] and I did not want to. But I had no choice when I got ill.”
From China’s Hunan province, 56-year-old Hu was diagnosed with oral cancer last April and had surgery the following month. His family spent about 140,000 yuan on living expenses and medical fees – equal to more than two years of their income. By the time Hu got ill, he had paid 4.79 yuan in total to cover claims from about 2,200 members like him.
Launched in October 2018, Xiang Hu Bao, which literally means “mutual protection”, is now the country’s largest online mutual aid platform, attracting over 100 million users in less than two years. Available within the Alipay app, it provides a basic health plan to protect participants against 100 kinds of critical illnesses.
“This is totally beyond my expectation. I was surprised and even a little bit worried later on whether our service capacity was enough,” Yin Ming, vice-president of Ant Group, the operator of Alipay said, adding that there were over 1 million newly registered users on the launch day of Xiang Hu Bao. Ant Group is an affiliate of Alibaba, which owns the South China Morning Post.
Similar to other mutual aid platforms, Xiang Hu Bao now charges an 8 per cent management fee for claims, which is used for verification, payment and transfer fees as well as staff salaries.
Although the company does not rely on Xiang Hu Bao to earn money, the platform promotes Alipay’s insurance business. As of September 2019, premium health policies sold by third party insurance companies on the Ant Insurance Platform have increased more than 60 per cent year on year.
In the past two decades, the Chinese government has set up three health insurance schemes in an attempt to achieve universal health coverage for its citizens. Together, they constitute the foundation for health care financing in China today, covering 95 per cent of the nation’s residents by the end of 2011, according to the World Bank.
However, China still lags behind western countries when it comes to the maturity of the commercial insurance industry and it still faces several challenges to insure the world’s largest population against serious illness.
China has dozens of online mutual aid platforms, with the three biggest players each having more than 10 million members. Apart from Xiang Hu Bao, Waterdrop Mutual and Easy Mutual – both backed by gaming giant Tencent Holdings – had garnered 14 million and 15 million members respectively by the end of March, according to an industry white paper published by Ant Group last month.
Waterdrop was founded in 2016 by Shen Peng, who six years earlier had joined Meituan straight out of university as the start-up’s tenth employee. He rose to be head of Meituan’s core food delivery business but had developed an interest in health insurance since childhood when he was raised in a residential community for staff of the People's Insurance Company of China (PICC).
“In 2015, I was aware that China's insurance industry mainly served middle and higher class families. What China lacked was inclusive insurance to cover blue-collar workers and other middle or low-income groups,” the 33-year-old Shen said. “While internet services are available to so many people, I think using the internet as a way to develop inclusive insurance is a promising and meaningful thing.”
With a total of 310 million premium users across all platforms by the end of last year, Waterdrop now has three major business sectors: online mutual aid platform Waterdrop Mutual, insurance sales platform Waterdrop Insurance Mall and Waterdrop Crowdfunding, where poor people with critical illnesses can post their medical records online and ask for donations. So far, the mutual aid platform has helped more than 10,000 members with over 1.5 billion yuan in medical expenses claimed.
Shen said that while mutual help plans are cost-effective for users, the challenge from a business perspective was to find multiple profit streams to allow rapid growth. “The company has different businesses and we can import traffic among different sectors … we are using profitable businesses to feed these unprofitable businesses,” he said.
In fact, Waterdrop Insurance Mall is the company’s only profitable business so far. Losses for Waterdrop Mutual and Waterdrop Crowdfunding can be as high as several hundred million yuan per year, but the insurance mall’s annualised premiums per month have surpassed 1 billion yuan, making the whole company profitable over the past two months, according to Shen.
Beijing resident Li Xiaotong, 33, found Water Mutual two years ago via Waterdrop Crowdfunding, where she donated money to help the sick relative of a friend. From there, she got to know about Waterdrop Mutual and joined two mutual aid plans focusing on cancer.
“I never thought about [buying] commercial insurance because my income [is low],” Li, who works as a civil servant, said. “But for online mutual aid platforms, the money each participant needs to pay is very low.”
She paid just over 100 yuan in the past two years to get a total of 400,000 yuan from her two plans after being diagnosed with breast cancer in 2018.
“The money is absolutely enough for surgery and other expenses including examinations during the rehabilitation process,” Li said. “It’s a great help because if we just rely on our salaries we will be under huge [economic] pressure.”
Since the 2003 Sars outbreak, health care in China has become a leading national concern. Often highlighted by the popular phrase, kan-bing-nan, kan-bing-gui (seeking care is difficult and expensive), health care costs can be devastating.
Mutual aid platforms are popular among China’s low- and middle-income households in rural areas, where there is often a lack of quality hospitals and affordable medical care. For Xiang Hu Bao, 60 per cent of users are from third or even lower-tier cities and 70 per cent of them earn less than 100,000 yuan a year, while on Waterdrop Mutual, 75 per cent of users come from third or even lower-tier cities.
These platforms are also cooperating with traditional insurance companies. Waterdrop Insurance Mall works with more than 60 insurance companies – including China Life, China Taiping, Ping An, Taikang Life, PICC and Aixin Life – and has more than 80 insurance products. Waterdrop earns around 30 per cent commission from traditional insurance products sold on its platform.
“For insurance companies, if we are expanding our business, the difficulty is we need to know where our [potential] clients are and their characteristics,” said Li Yu, deputy general manager of Beijing-based Aixin Life Insurance. “In this regard, Waterdrop has made it very clear with broad categories and various labels for its users.”
Aixin Life, which has worked with Waterdrop since the end of last year, has two products on Insurance Mall – an annuity product and Children’s Critical Illness Insurance, the latter being a customised product based on big data from Waterdrop.
“For a large country like China, the health condition of people in Beijing is definitely different from those in Guangdong province. But in the traditional insurance pricing model, we treat them the same way,” Li said. “For these platforms with large [volumes of] traffic, they can employ internet finance technologies to divide their clients into clearer categories based on health condition, regions, ages etc … every customer may have hundreds of labels.”
Further, insurance products selling online can be updated faster and offer a more diverse range of policies within one larger category of products.
Mutual aid plans are not technically insurance, as payouts are not provided by the company, and are therefore not subject to regulations from the China Banking and Insurance Regulatory Commission.
However, as China aims to build a “multi-tiered medical insurance system”, in February the government officially included online mutual aid in the national health care security system to support its development.
By 2025, China's online mutual aid industry is expected to reach 450 million users or nearly one-third of the country’s population, Ant Group’s whitepaper said.
“In the future, we hope to join hands with our partners to create China’s Kaiser Permanente or UnitedHealth model,” Shen said.
Shen has even bigger ambitions. Although Waterdrop will focus on the China market over the next three to five years, longer term he wants to introduce the model to countries involved in Beijing’s Belt and Road Initiative.