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Creating a growth environment for health insurance in Asia

Source: Asia Insurance Review | May 2018

Asia Life & Health Regulation

Willis Re head of life and health actuarial for Asia Pacific, Ms Julia Aslettdiscusses the current challenges faced by health insurers in speeding up the ‘natural cycle’ that many markets witness – developing from a position of over-regulation to a free market that encourages fair competition and the delivery of appropriate cover to the end customer.
By Dawn Sit
Asia not only continues to face a growing aged population, but also an increasingly affluent demographic that is becoming more and more susceptible to chronic lifestyle ailments in the wake of its economic progress and prosperity. Governments, in turn, are racing against time to develop complementary public and private healthcare models to meet the rising demands of healthcare services and to tackle burgeoning costs. 
   Therein lies plenty of opportunity for life and health insurers in the region. In Ms Aslett’s view, the main focus of the industry’s development is likely to be health insurance. But in the pursuit of the segment’s potential, insurance companies continue to face an uphill battle, particularly in managing reimbursement costs for medical services and products; ensuring health product designs are relevant to customer needs; and for markets with low insurance penetration, the need to find ways to bridge the insurance gap. 
   Indeed, when it comes to cost control, Willis Towers Watson’s 2017 Global Medical Trends Survey found that the cost of employer-provided health care benefits in Asia Pacific “continued to climb with little relief in sight”, due to the bulk of the cost increase to advanced medical technology, and the overuse and over-prescription of services. It found that medical insurers in Asia Pacific projected the gross cost of health care benefits to rise 8.6% in 2017. India (20%), Indonesia (11%) and Malaysia (15%) led the upward cost trend, followed by mainland China (10.3%), Hong Kong (9.6%) and the Philippines (9.6%). The outlook for reining in costs in the near term is not optimistic as half of all insurers in the region expected higher or significantly higher medical costs over the next three years.
   Insurers may take heart from the fact that the issue of rising healthcare costs has not gone unnoticed as governments are stepping up efforts to mitigate the problem. Singapore for example, recently announced plans to set up a committee this year to compile fee benchmarks for a sustainable healthcare system in the long term. 
The ‘natural cycle’ of regulations
When it comes to regulating insurance markets, Ms Aslett noted there tends to be a ‘natural cycle’: starting from over-regulation – where insurance supervisors are more prohibitive and retroactive – before developing more experience over time to evolve into a role where its goal is to encourage fair competition and delivery of good cover to customers within solvency constraints. And as Asian countries are each in various stages of development, their respective insurance markets vary accordingly. 
   “For Singapore, the regulator is well-informed and forward-looking, and is keen to work with insurers so the market can be developed quicker. The hope is for regulators in emerging markets to follow soon, to help create a conducive and easier environment for market players,” she said.
Tackling technology and millennials
The rise of millennials and the onslaught of technology have also made the insurance industry sit up and take note of the fact that change is upon it regardless whether it likes it or not, and that players need to reassess their approach to designing appropriate cover for their customers. Greater computing powers, Ms Aslett said, evidently gives rise to new tools and greater analytic capabilities. But the key challenge that insurers need to grapple with is obtaining good and relevant data. 
   “I believe no new major advancements are possible without getting more and cleaner data. Life insurers usually have rather limited data, but this can all be changed if wearables do find their way into products. We need to watch the space for tech start-ups and insurer collaborations that could change the insurance data landscape,” she said.
Collaboration for sustainability
Ultimately, to ensure a sustainable healthcare system and thriving health insurance segment, she noted that collaboration between all stakeholders – healthcare providers, insurers and governments – is crucial. Ms Aslett said, “Healthcare providers will benefit from easier operational procedures and collaborations with insurers and administrators; health insurers want fair market competition and to be better able to control medical costs; and authorities want to ensure policyholders get the best deal while insurers stay solvent. So the only way forward is cooperation and collaboration between all parties.”
   “It won’t be easy as interests are not always aligned. But I believe governments should encourage these collaborations and invite input from insurers, healthcare providers, and even tech companies,” she said. A 
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