IPMI markets of China, Hong Kong and Singapore
Of the three markets, including the traditional IPMI segment and the PMI plus segment, China was the best performer between 2017 and 2020. The traditional IPMI market grew by 10%, while the PMI plus segment grew by 28% and together they are worth more than $2.5 billion. In Hong Kong, the overall market rose 14%, although the traditional segment was only 3.3% compared to 35% for the PMI plus. Singapore’s traditional growing IPMI market grew by 9.2%, with PMI plus at a relatively modest 11.2%. Much of the growth in all countries was driven by premium inflation.
In terms of margin, data is less easy to find and analyze. The PMI plus could continue to grow in the short term, but the perceived lack of profitability could lead to a return to the traditional IPMI. In China, there was a range of reported margins during this period. The most profitable segments are SMEs and Individuals. Profitability in the Hong Kong market is slim and trending lower due to strong competition, downgrading and high medical costs. This is particularly evident in the PMI plus market. Profitability in Singapore varies widely from segment to segment. The most profitable segment is Individual, especially on the expensive policy side.
What are the main drivers of growth and how are they changing?
The customer’s need continues, but has changed composition. The traditional demand from Western corporate expatriates is now declining, but senior local corporate executives still demand the best level of health care benefits from their employers, to keep them in their jobs. Across the region, the quality of local care, despite new construction, remains relatively low, with few and often underfunded hospitals and clinics. The wealthiest and the HNWI want health insurance that is generous enough to cover this care deficit. However, the need tends to be more regional than international/global, reducing the price.
Also on a negative note, given the global economic conditions, the corporate segment remains very price sensitive and HR professionals are trying to buy less rich and even non-international products like the PMI plus, resulting in a premium lower per person.
As of this writing, macro forces now include China’s possible alignment with Russia over Ukraine, which could further aggravate the low level of Sino-US relations.
The localization policies prevailing in the three markets are also important. Governments are legislating for more “local” hires rather than expatriates; for example, the Singaporean government frequently tightens its foreign visa requirements.
There are, however, new trends that are leading to an increase in the demand for IPMI products. These include increased demand from more individuals, both high net worth individuals and high net worth individuals. Some of them are business assignees who are unhappy with their business downgrade. New buyers like entrepreneurs and digital nomads are highly mobile in their work habits and prioritize healthcare. They therefore now require IPMI products rather than travel products.
Other bright spots are the improving GDP outlook and continued price increases forced by medical cost inflation, which are expected to return to pre-Covid historic levels. (see graphs 2 & 3)
Outlook by market until 2025
The region as a whole is expected to continue its relatively rapid economic growth at a CAGR of around 6.91% (including inflation) outpacing global GDP growth of 5.54%. As a result, the region’s GWP IPMI will also grow rapidly from 2021 to 2025 at a CAGR of 11.18%.
The biggest growth opportunity in China is in digital health and digital health services
IPMI growth in China has returned to pre-Covid double-digit levels in 2021. In the short term, there is a drop in demand from traditional expats, but this will be offset by an increase in demand from Chinese HNWIs and the burgeoning middle classes, which have more income to spend on health care. In the longer term, demand will increase particularly in Tier Two and Tier Three cities. Additionally, the outbound market is expected to grow as Chinese companies increasingly send Chinese expatriates on overseas assignments to Europe and Africa. The most significant growth opportunity in China is in digital health and digital health services, especially the digital therapeutics market, which is currently undeveloped. There is also significant demand from brokers for digital innovations that can facilitate the process of buying IPMI products. The geopolitical relations between China and the United States (Taiwanese problem) remain an unknown. If these continue to deteriorate, the economy will be affected, as will the number of regional and western expatriates returning to the country.
Hong Kong is currently in a state of deep uncertainty, with political unrest and strict quarantine measures still in place. In the short term, we expect a drop in demand from Western expats there, but the longer term outlook looks brighter as we expect growth from the HNW segment of Hong Kong nationals and Mainland Chinese. Hong Kong will remain a key financial market for China, as there is the likely creation of the Greater Bay Area linking Hong Kong with several major cities in Guangdong province. The PMI plus segment will continue to grow, with demand driven by remaining price-conscious expats as well as more local Chinese and Hong Kong nationals switching to purely domestic plans.
cost containment will also be very important as supplier costs continue to rise and drive up IPMI premiums
Singapore’s recession in 2020 was deeper than expected. The International Monetary Fund has forecast economic growth to remain at 3.2% in 2022 and 2.7% in 2023. This has had an upside, in that the Singapore government is now trying to encourage more foreigners in the country, contrary to recent trends. Additionally, continued instability in Hong Kong and poor US-China geopolitics should give Singapore the advantage of being the best gateway to Southeast Asia for North American and European companies.
In all markets, cost containment will also be very important as supplier costs continue to rise and drive up IPMI premiums. IPMI insurers will increasingly need to keep an eye out for opportunities in the lower end of the IPMI and PMI plus spaces, as “traditional” high-end IPMI risks becoming too expensive for the market.
Adapt, change, grow – IPMI is strong
We conclude that the Asian Tiger is not dead, but it is changing dramatically and IPMI providers will need to be nimble to keep up with these market changes. China, the fastest recovering country from Covid, rebounded quickly, but will be damaged if tensions between China/US and China/Taiwan increase and/or if Covid persists. Singapore’s comeback has been slow and we expect it to continue to improve, but only slowly. Hong Kong’s recovery has been slow and will remain so. The creation of the Greater Bay Area has the potential to eventually stimulate greater demand for IPMI products.