The mainland's robust economy is not only fuelling demand for commodities and consumer products, growing affluence and an ageing population is also creating a need for better health care and life and non-life insurance products. Kelvyn Young, Swiss Re head of China Healthcare based in Beijing, said there was a demand for the insurance industry to produce products to meet protection needs in all markets, from the mainland's affluent segment and the expatriate market through to mass urban and social health insurance. A recent Swiss Re sigma study estimated that the mainland spent more than US$137billion on health care last year, of which more than 50 per cent was directly paid by households. Commercial medical insurance covered less than 6 per cent of these costs, implying a market potential of US$67billion. According to the Ministry of Health, government health care costs are rising 13 per cent year-on-year. Mr Young said a conservative estimate would indicate the private medical insurance market would be worth in excess of US$6billion in written premiums by 2015 with a compound annual growth rate of more than 10 per cent. He said mainland insurers were looking to introduce wellness offerings similar to sophisticated health and wellness solutions offered in other parts of the world. He said health insurance premiums had grown eightfold over the past six years, demonstrating the sector's ability to meet society's rising demand for medical protection. If a sustainable model, in which social and commercial insurance mechanisms play a meaningful role, is to emerge, greater industry cohesion is required. 'The insurance sector could play a meaningful role in improving access to health care in China, and alleviate the imbalance between rural and urban communities,' said Mr Young. In 2006, Swiss Re was invited by the China Insurance Regulatory Commission to study the development of China's health care system and its implication on private medical insurance. Research indicated the scope of most commercial health insurance plans was limited to critical illness cover. From a public policy perspective, however, the use of critical illness or other fixed benefit plans as a substitute for medical reimbursement schemes on the mainland is not socially desirable. The survey discovered that commercial insurers are operating in an ambiguous policy environment in which social health insurance (SHI) and the commercial market had not reached a clear division of work. Mr Young said for the mainland to capitalise on the administrative efficiencies inherent in private insurance structures, the relevant authorities should consider the potential benefits of Third-Party Administration organisations (TPA). These entities are a proven means of attaining operational efficiencies in the administration of medical insurance schemes in other markets. To help insurers capitalise on the TPA potential, Swiss Re has set up Beijing Prestige Health Consulting Service, which provides services to policyholders and an effective risk management platform for insurers. 'Prestige Health aims to deliver both cost savings and access to broad expertise, allowing insurers to focus resources on competing more effectively through product development, marketing and distribution,' said Mr Young. William Bossany, Munich Re general manager, health, based in Beijing, said 70 per cent of affluent individuals in a private survey showed a desire for better health care coverage in a more comprehensive nature indicating a change in desires and insurance needs. 'As societies become more affluent they usually become more aware of health care risks which include lifestyle changes that can lead to illnesses such as diabetes and heart problems,' he said, adding that the mainland's ageing population was also driving a need for better long-term insurance products that offered financial and health protection. Mr Bossany said Munich Re had a comprehensive understanding of different types of health care systems. 'We are working with the insurance industry to help them develop new products that meet changing needs,' said Mr Bossany. 'We are also helping to improve areas such as claims management expertise, underwriting, analysis, actuarial services, network management and risk management.' David Alexander, Swiss Re head of life and health, Hong Kong and Macau, said there was an important role for the reinsurance industry to play in helping insurance companies in Hong Kong plug an estimated underinsured life protection and critical illness gap of about HK$7trillion in sums assured.