In recent years, long-term medical insurance has emerged as a new competitive arena for life insurance companies due to its “guaranteed renewal” feature. As the market for million-dollar medical insurance becomes saturated, long-term medical insurance products with terms of 5 years, 10 years, or even 20 years have been launched, filling the gap in consumers’ demand for stable medical coverage. However, the “death spiral” risk of long-term medical insurance has also come to the fore – the loss of healthy customers and the accumulation of sick individuals may lead to an increase in the payout rate. Balancing the certainty of renewal with risk management has become a key issue for the industry.
The favorable policies have provided support for the development of long-term medical insurance. In 2020, the China Banking and Insurance Regulatory Commission clarified the rate adjustment rules for long-term medical insurance and encouraged insurance companies to develop such products. Currently, the first batch of products have been in operation for five years, and the overall compensation rate in the industry remains at a low level. No rate adjustment has been triggered yet. However, industry insiders point out that as the number of patients with underlying conditions continues to increase, the compensation pressure will gradually emerge. The next few years will be a key period for observing the evolution of risks.
To address the “death spiral” risk, insurance companies are breaking through from multiple aspects such as underwriting, health management, and dynamic pricing. For instance, they precisely identify customer risks through big data and implement detailed claims management; at the same time, they enhance health management services, such as chronic disease intervention and medical advance payment, to increase customer loyalty. Additionally, in product design, they introduce clauses like no-renewal discounts and liability escalation to attract healthy customers to remain.
Sunshine Life Insurance and other institutions believe that long-term medical insurance will become the core competitive edge for life insurance companies. With the advancement of medical insurance payment reforms, the supplementary role of commercial medical insurance is becoming increasingly prominent. Long-term and differentiated products better meet market demands. Against the backdrop of the decline in the attractiveness of savings insurance, the strategic position of health insurance has been further strengthened.
In the future, the market space for long-term medical insurance is expected to continue to expand, but it will test the risk pricing and operational capabilities of insurance companies. How to strike a balance between “renewal stability” and “risk controllability” will determine whether life insurance companies can break through in this field.
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