PICC Health Insurance Ltd, China's first specialized health insurance company, opened a branch in Beijing yesterday.

Other Chinese firms offer health insurance as well as other kinds of insurance, but PICC Health Insurance Ltd is the first enterprise in the country to only deal with the former.

There is a huge demand for health insurance in the world's most populous country. As many as 65 percent of Chinese residents list illness as one of their three greatest concerns, PICC Holding officials said.

According to unofficial estimates, the market may grow to 300 billion yuan (US$36 billion) by 2008.

However, despite the huge growth potential, commercial health insurance still plays a minor role in the domestic market, covering only 10 percent of Chinese residents' total medical costs.

Many of China's health insurance providers said they are frustrated with the high risks in the business. Loss ratios for health insurance have been as much as 200 percent for some insurers in recent years.

Some even reportedly suspended the sale of health insurance products earlier this year. All Chinese life insurance companies can underwrite health insurance policies and property insurers were allowed to sell short-term health insurance from last year. This is part of the problem, some experts said.

"A lack of specialization is the major reason for the risks," Wang Xujin, an insurance professor at the Beijing Technology and Business University, told China Daily. "Health insurance, which is hugely different from life insurance in terms of actuarial analysis, risk control and other factors, must be operated by specialized providers."

Chinese insurers mostly deal with health insurance the same way they deal with life insurance, which often leads to improper underwriting practices and weak claims appraisals that Wang said contribute to the high loss ratios.

However, PICC said it is well aware of the importance of specialized management.

Tan Qijian, president of PICC Health Insurance Beijing branch, said health insurance is separate to life insurance and the firm will introduce a method to control medical fees.

PICC has launched three categories of health insurance targeting hospital patients suffering from severe illnesses.

"We are striving to achieve specialization in business scope, management mechanisms and philosophy," added Tan.

(China Daily August 12, 2005)