Sunday, 2024 July 21

Mutual aid plans, not health insurance, emerge as go-to coverage solution in China

Cancer is rarely something young people think of. But when cancer does hit, it could be a disaster physically and financially.

Rao, who was born in rural areas in Southwest China’s Sichuan province, revealed some of his experience in an open letter in the channel of Xiang Hu Bao inside Alipay, without disclosing his full name. Xiang Hu Bao was launched in October 2018 as one of China’s first mutual aid plans by Ant Financial, which was renamed as Ant Group this month.

Unlike insurance, this type of coverage gathers a group of mostly healthy people to mitigate each other’s critical illness risk. If someone falls ill with one of the 100 serious conditions covered, they are entitled to payouts of RMB 100,000 (USD 14,140) to RMB 300,000 (USD 42,421) paid for by all the group’s members. Instead of an insurer paying out, it’s the group’s members.

He wrote that he worked in China’s IT industry and was mainly thinking of working hard to improve his family’s life after graduating from a university, but lost his job when he was diagnosed with a brain tumor. However, one of his happiest days came when he got notified that his claim for RMB 300,000 would be disclosed for public review. 

About 20 days after the disclosure, this 29-year-old man did get the money on April 14 this year, according to information right below his open letter.

While Rao never personally met his 101 million “donors”, all of whom were Xiang Hu Bao users, he thanked them for sharing his burden.

China is unique in that mutual aid is the popular choice for many people, instead of health insurance. Among its 1.4 billion people, the penetration rate for insurance is at a low due to high premiums relative to average incomes and widespread concern that insurers will fail to compensate by resorting to a myriad of loopholes and legal excuses. Xu Han, founder of online insurance sales platform Xiaoyusan told Aifenxi, a think tank, in January this year that in the United States, each citizen holds 4.4 insurance policies on average while in China the average is 0.4 policies per citizen.

While some people hedge their bets by having both insurance and mutual aid, a whitepaper released by Ant Financial in May shows that nearly 70% of mutual aid plan users in China are not covered by commercial health insurance. Meanwhile. 80% of users earn less than USD 1,180 per month.

Zhu, who works for a software company told KrASIA without disclosing his full name due to privacy, about what attracted him to Xiang Hu Bao. Signing up right after the plan was rolled out in October 2018, he later enrolled his kids in this plan on behalf of them and convinced his wife and in-laws to join too.

“It is easy to join and to back out, without cumbersome procedures, and is more trustworthy than insurance companies in my opinion,” he said.

As part of the plan,  Zhu pays a varying amount every half month, which went from RMD 0.03 in his first payment to RMB 3.96 (56 US cents) in his last. As more and more people have been joining Xiang Hu Bao, the sum of each contribution is increasing too, as shown in Zhu’s case.

“That minimal amount of money does bring aid to someone at his/her days with the most bitterness,” said Zhang, who works for a United Nations agency and is also a Xiang Hu Bao member. Unlike Zhu, Zhang has bought a critical illness insurance policy via WeChat.

“I hope I will never ‘use’ Xiang Hu Bao”, she told KrASIA this week, adding that “she views the health plan more as a charitable move.”

Xiang Hu Bao had gained 50 million users by April 2019, less than half a year after its launch, and had acquired 100 million users as of last November.

While these contributions are negligible for the plan’s members, the total amount raised since the plan was launched is RMB 6.6 billion (USD 933.7 million) as of June 24. The plan has so far compensated 46,128 persons and their families.

But Ant Financial is not the only company looking to capitalize on the popularity of mutual aid health coverage.  While Xiang Hu Bao remains dominant with 106.3 million users as of June 24, other tech companies have moved in. Xiaomi Finance, the fintech arm of smartphone vendor Xiaomi (HKG: 1810), has rolled out a mutual aid plan called Xiaomi Huzhu as of June 15.

The plan, which is available inside the Xiaomi Finance app, provides basic protection against 82 critical illnesses and another 10 illnesses mainly affecting children, allowing inflicted users to claim as high as RMB 500,000, (USD 70,644), higher than Xiang Hu Bao’s RMB 300,000. Xiaomi Huzhu has gained more than 8,000 users since launch, but all of them have to pass a 180-day probation period before being finally included in the program.

Earlier than Xiaomi, retailer Suning’s financial arm Suning Finance, rolled out a mutual aid plan called Ning Hu Bao in 2019, covering 150 critical illnesses and deaths due to such illnesses and accidents. The income contribution for each Ning Hu Bao user is RMB 1 yuan to help one stomach cancer patient who claims RMB 100,000, as shown by information on the mutual aid plan.

China’s largest ride-hailing platform Didi Chuxing, rolled out a mutual help plan called Diandi Xianghu inside its app in 2018 but renamed this plan into Diandi Shouhu in April this year. As of June 24, Diandi Shouhu has gained 1.1 million users.

China’s online mutual aid industry will reach 450 million users, about 32% of the country’s population, by 2025, Ant Financial said in a whitepaper it published in May. That figure is three times the number of users in 2019. In this whitepaper, 80% of those surveyed reported that they felt more secure after joining Xiang Hu Bao.

If things go as predicted, this fintech innovation originating from China is sure to provide a sense of security to more people, democratizing access to aid as opposed to costly insurance programs.

Jingli Song
Jingli Song
I believe Chinese innovation at various level needs to be known by the world.

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