Redefining Insurance or going back to the roots?
What if you did not have to pay premiums to health insurance companies, but you would still get coverage for an adverse eventuality such as a heart attack or cancer? How about if there were no intermediary selling insurance or managing the claims payment? What if there was a way to bring back the first principles of insurance, where people got together to pool money and cover risks that a few of the participants in the pool could face?
Xiang Hu Bao means "mutual protection"
Xiang Hu Bao is an online platform that employs this exact business model. It was launched in Oct 2018. By Nov 2019, the platform had amassed over 100M (more than 10x the population of the UAE) , of active users.
It is a sort of mutual health insurance program launched by the company that Jack Ma built. The ANT group launched the platform (Yes, ANT, the same group under intense scrutiny by the Chinese regulators because of its outspoken leader). The platform "functions" as a top of the funnel for many of its other financial products which is a low-cost acquisition model.
Operating Model
Insurance penetration in China is lower than in the OECD countries, and awareness in the rural markets is not high. One way of increasing penetration is by making insurance costs low and making sure claims are paid. The platform achieves this by employing the following operating model:
- Members get together to cover each other. The platform merely facilitates the program. It protects members against 100 named critical and other illnesses.
- Requires no upfront payment of premium, and anyone under 59 years can signup.
- It is not an insurance company and thus does not need to comply with regulations. Low cost and administration
- The value proposition is simple; if claims are approved, the members do not need to pay more than $0.015 for every critically ill person.
- Blockchain technology is used to perform Know your customer checks and to ensure claims documentation is tamperproof.
- In case of a claims dispute, there is a "jury" of thousands of "pre-approved" users who vote to decide if the claim should be paid out or not.
- The membership consists mostly of people in rural China who earn less than US$15000 annually.
- ANT financial charges an 8% admin fee for managing the program, and this is also shared by the 100M+ members.
- The program offers a maximum payout of 300k Yuan (~US$43,000) on each claim covering critical illnesses. There is a 90 day waiting period before the members can claim
The majority of Xiang Hu Bao’s participants are from middle or low-income communities who are at significant risk of falling into poverty if they become critically ill. As per surveys, as much as a third of its members intend to purchase “traditional” health insurance policies presumably because they have understood the value of insurance.
This kind of program ensures basic health insurance coverage at an affordable cost that enterprising insurers can replicate in low-income or low insurance penetration countries.
sources:
https://eastmeetswest.substack.com/p/understanding-ant-group
https://www.scmp.com/business/companies/article/3039554
