Last August, the Wu family were enjoying a holiday in the Thai coastal resort of Pattaya. Then a boating accident left Mrs Wu with spinal injuries. The local hospital was fairly primitive and it was decided that the patient should be transferred to Bangkok where there were more sophisticated facilities.
After treatment in Bangkok General Hospital, Mrs Wu was taken home for long-term convalescence. This required submitting a request for a stretcher seat on Thai Airways, since Mrs Wu was bed bound, and a team including a doctor and nurse escorting her on the flight to Hong Kong and then on to Shanghai the following day.
The whole medical evacuation process was handled by AEA International Services and the cost, which would certainly have run into several thousand dollars, was covered by an emergency assistance scheme.needs to be done to get the message across, according to 011ivier. "Most of the average Chinese don't see the point of paying extra money when they are 'young and in good health', as we often hear," she says.
High perceived cost is likely to be a barrier in what appears to be a price-sensitive market. Over the recent Spring Festival, a period when many Chinese travel, Europ Assistance lowered the price of its 'safe travel' programme from US$50 a week to US$30. The reduction has made the assistance concept much easier to sell and has resulted in a significant increase in take-up, according to the company.
Expatriates and foreign tourists were the first target of emergency assistance companies when they began selling services in China. Erratic but generally low an increasing number of tourists and foreign executives to take the precaution of buying an emergency assistance policy. In many remote parts of the country, where there is a complete absence of international-quality healthcare, it is particularly advisable because costly evacuation may be the only option in the event of a serious accident or illness.
Foreigners are still the dominant client base of emergency assistance companies in China. The surge in inward investment over the past decade has provided a growing client base.
However the biggest potential growth market of all is in selling to mainland Chinese. According to World Tourism Organisation projections, China will generate 100m international tourists by 2020. "We expect the Chinese market to expand," says Mr Eric Tsui, general manager of AEA. in Hong Kong. "With affluence comes higher expectations. We are looking at opportunities to expand."
Mainland Chinese are already covered by such schemes as employees of multi nationa corporations ocate 11L the mainland. "Travel agents and foreign company human resource managers are more aware of how hazardous it would be to send Chinese clients or staff abroad without any protection," says 011ivier.
Some Chinese companies operating outside the mainland are also taking precautions, including red chips in Hong Kong and those with an international presence such as Bank of China. It is impossible to gauge how many Chinese are already covered via such schemes as many corporations take out membership on a 'no name' basis. But whatever the true figure, it represents only a small segment of the potential market. Selling through insurance policies, credit cards or direct to corporations would begin a real opening up of this market.
Business is likely to be tied closely to the increasing uptake of life insurance policies as well as the frequency of travel.
According to a study by Commercial Union, the life market increased by about 50 per cent between 1994 and 1996 to reach sales of US$6.3bn. Most policy holders are city dwellers. A Gallup survey con-
Getting seriously ill abroad is invariably a stressful and costly experience for any foreign traveller. For Chinese, according to Ms Stephanie 011ivier, Chief Representative of Europ Assistance in Beijing, difficulties are exacerbated if there are language problems or if the traveller is more comfortable with traditional Chinese medicine. Repatriation in case of death is also especially important for Chinese, she says, although this is a very sensitive subject which is difficult to market because of a belief that the mere mention of death may bring bad luck.
Another major problem is ignorance about insurance coverage and general inexperience in travelling abroad. Various newspapers including Beijing Youth Daily, Beijing Economic Daily and China Business have run features explaining how emergency assistance schemes work in the West. However much more ducted last-September revealed that 13 per cent of upper income urban residents in China had life insurance, up from nine per cent in 1996. Moreover, some 42 per cent of those questioned expressed an interest in taking out insurance. The survey showed that the main expectation from life insurance among Chinese was to provide education for their children, to protect against, illness or misfortune, to, mitigate financial disaster and to pro-vide income for retirement.
First insurance deal
Chinese corporations are currently unable to tap the emerging health assistance market, lacking the international network and experience to even contemplate providing services overseas. Within China they don't yet have the management skill to break. into health assistance, says Tsui, although he adds that "eventually they will try to do something". In the mean-time, Chinese insurance companies are building up their presence in local assistance, such as home assistance and auto-mobile assistance.
This leaves the market largely open to foreign providers. AEA recently concluded a 24-hour emergency assistance and general medical advice agreement with the Shenzhen-based Ping An Insurance. "This is the first agreement between an emergency assistance company and an insurer from China," says Tsui. "It is an important breakthrough in the Chinese insurance market which is becoming more aware of market needs and more aware of emergency assistance."
Ping An is regarded as the most aggressive Chinese insurance company. Established in 1998, it recorded gross premiums of Yn10.1bn (US$1.2bn) in the first half of 1997 ?up 91 per cent on the same period in 1996. In the life insurance market the People's Insurance Company of China (PICC) has the lion's share of the market the market, but there is intense competition for second place with the likes of China Pacific Insurance.
Ping An will sell programmes to high-er-income group and business travellers. At this stage the service covers only over-seas travel a definition which includes Hong Kong, Macau and Taiwan but domestic travel is also being considered.
AEA's principal competitor,, International SOS Assistance, is anxious not to get left behind. Currently it offers its services to mainland Chinese via international corporations, but it is also talking with insurance companies.
"We have a couple of potential insurance clients but nothing yet to announce. Hopefully we will be in a position to announce something in the next two months," says Ms Sally Lee, sales and marketing director of International SOS Assistance in Hong Kong.
Europ Assistance, which says it hopes to sign up its first Chinese corporate client in the next few months, also claims to be in discussions with the insurance companies, so the competition has suddenly become very intense.
The agreement with Ping An is an exclusive one in the sense that under the terms of the contract Ping An cannot sign up with another emergency assistance organisation. However, Tsui says in future Chinese insurers are most likely to establish multi-service agreements. This would be especially true in the case of a company the size of PICC which dominates all areas of insurance. In Hong Kong about 60 per cent of business is conducted through insurers and it is common in the SAR for insurers to have arrangements with two or three service providers.
Foreign insurance companies with a licence to operate in China are also getting in on the act. Many insurance companies have their own emergency assistance companies ?Gesa, for example, being owned by Axa Insurance. Others, such as AIG, employ independent suppliers. AIG has made the biggest mark ot any foreign insurer in China, being particularly successful in selling life policies to Shanghainese. In China it provides a range of travel insurance products to serve the domestic, outbound and inbound tourist. These services include emergency assistance, evacuation and repatriation.
AIG products are also available for purchase at travel agencies in China, an area which represents another way into this market. For example, CITS Overseas Economic Corporation, a subsidiary of China International Travel Service, sells emergency assistance products provided by Europ Assistance. So far around 600 mainland subscribers have signed up for such coverage.
Then there are direct sales to corporations. "The mainland Chinese market is not growing as fast as in Hong Kong but it is much more mature and corporations are more aware of the services that we provide than three years ago," says Lee.
Livier says multinationals are more receptive to the concept of emergency assistance but awareness among Chinese companies is developing. "It is simply a matter of time and budget," she comments. "One of the problems is that they don't know in which budget to put medical insurance." Europ Assistance hopes to sign up its first Chinese corporate client in the next few months.
Currently, the number ot mainland Chinese actually making overseas trips remains relatively small. For the average citizen it can be difficult to source a pass-port and visa, let alone raise the money for a flight. This is the main reason why not every company is rushing in to target Chinese nationals. Medex of the US, for example, targets Chinese through individual and group plans but it is not yet entering into discussions with Chinese insurers or corporations. Ms Patricia Tarrant of Medex in the US says the company is watching developments in China, but for the time being other countries such as Turkey have a higher priority.
Leading visitor source
However nobody doubts the potential for growth as disposable income levels rise and as countries such as the Philippines, Thailand, Malaysia, Australia and New Zealand have signed approved official tourist destination status agreements with China which should stimulate the outbound market.
Hong Kong Tourist Association figures reveal that 2.06m mainland Chinese visited Hong Kong in the first 11 months of 1997 ?down 1.8 per cent on the previous year but still comfortably the largest source of visitors. "We expect Chinese to be leading visitors to Hong Kong and the region," says Tsui.