Summary of Key Points
In 2025, China's commercial health insurance market finally managed to break through the trillion-yuan mark, but the growth rate has significantly slowed down (only 2.4% year-on-year in November 2025), far falling short of the 2-trillion target set for 2019 (which was only met halfway). The industry faces three major challenges: users perceive the insurance as uneconomical (due to low payout rates and the feeling that their payments are not effectively utilized); approximately 400 million patients with chronic diseases are denied coverage; and there is a lack of effective health management services. Additionally, the role of commercial insurance is unclear, as it competes with medical insurance for market share. To move forward, the industry needs to transform from a mere intermediary that collects premiums and pays out claims to a comprehensive service platform that truly manages users' health.
1. Reaching the Trillion-Yuan Mark: A Laborious Process
The achievement of a trillion-yuan market size in 2025 may seem like a milestone, but the path was particularly difficult:
- Dramatic Growth Slower: The annual growth rate of health insurance exceeded 30% from 2012 to 2019 (especially for million-dollar medical and critical illness insurance policies), but in November 2025, it dropped to just 2.4%, the lowest rate in the past five years.
- Large Gap from the Target: Policies aimed to reach a 2-trillion market size by 2025 were not met; only half of this goal has been achieved so far.
- Change in Growth Quality: Previously, growth relied on critical illness and million-dollar medical insurance policies, which generated substantial profits. Now, new sales of these policies have declined significantly, turning them into businesses that rely on existing customer bases rather than new demand.
2. Why Do Users Feel They Are Losing Money?
The industry's overall payout rate is around 40%, meaning that for every 100 yuan in premiums paid, less than 40 yuan is actually used for payouts (compared to 50%-80% in mature markets). Users feel that they are constantly paying without receiving any benefits, due to two main issues:
- Products Not Keeping Up with Policy Changes: With the implementation of DRG/DIP reforms (fee-for-service systems), medical insurance has reduced hospitalization costs significantly, leaving users with little out-of-pocket expense. As a result, they rarely reach the deductible amounts required for million-dollar medical insurance policies, making it ineffective.
- High Channel Costs: Short-term health insurance products (such as million-dollar medical insurance) have low premiums, prompting users to avoid purchasing them. Insurance companies rely on internet intermediaries to acquire customers, with channel fees accounting for around 35% of the total premium. Combined with low payout rates, many companies struggle to break even or even incur losses, creating a vicious cycle where neither insurers nor users benefit.
3. 400 Million Chronic Disease Patients Denied Coverage
China has 400 million patients with chronic diseases (such as hypertension, diabetes, and nodules), but traditional health insurance policies either directly deny them coverage or exclude these conditions from the insurance scope. This represents a major structural issue in the industry, as those who need insurance the most are excluded.
There have been some improvements in recent years: for example, Taibao's products cover patients after thyroid cancer surgery, Ping An focuses on cardiovascular diseases, and Taikang covers blood tumors. However, the real challenge lies in what to do after issuing policies—rather than simply rejecting high-risk applicants through strict underwriting, companies should use health management strategies (such as encouraging medication and exercise) to reduce the risk of claims. Most insurers still lack the capability to do this effectively.
4. Health Management as the Key to Breaking the Cycle
International success stories, such as South Africa's Discovery Group's Vitality program, provide inspiration. This program uses rewards and premium discounts to encourage healthy behaviors (exercise, check-ups, screenings), resulting in:
- A 57% reduction in mortality risk and a 47% reduction in disability risk among high-level members.
- Rewards for active participants exceeded 60% of the annual claims amount (the industry average is only 20%-30%).
In simple terms, this approach transforms health insurance from a system that pays out after death to one that provides benefits while people are still alive. Domestic companies like AIA and Ping An are adopting similar approaches, but there is still much work to be done to truly improve health outcomes—particularly in terms of data collection, access to medical resources, and the ability to provide effective interventions.
5. The Future Direction for Commercial Insurance
Commercial insurance should not compete with medical insurance for the same market segments but should play a complementary role. Medical insurance focuses on providing basic coverage, while commercial insurance can focus on areas not covered by it, such as:
- Innovative drugs (expensive but effective, not covered by medical insurance).
- High-value medical services (such as premium check-ups and private hospitals).
- Coverage for rare and chronic diseases.
- Reimbursement for medication purchased outside of hospitals.
Government policies in 2025 have also signaled this shift, with the release of a list of innovative drugs encouraging commercial insurance to fund these treatments. Only insurers that can shift from collecting premiums and paying out claims to managing users' health will thrive in the future.
In Conclusion
The future of health insurance does not lie in developing more flashy products but in whether companies can transform from mere intermediaries collecting money into true "health managers" that help users improve their well-being. This is the core challenge for the industry to overcome its current limitations.