Mutual aid - Rethinking the Health Insurance Business Model for the Digital Age

Ant Financial (the company behind Alipay - one of the two dominant mobile payment systems in China) offers a wide range of financial services. One is Xiang Hu Bao (which has no English name and roughly translates as “taking care of each other”) - a new, very basic kind of health insurance.

If you are 19 to 49 years old and reasonably healthy, you can register for the service in order to receive a cash payment contributing to your medical expenses, when you fall critically ill - up to 300,000 yuan (about US$45,000).

It only covers very dire situations. So this is not an alternative to a real health insurance. But the innovative business model uses digital tech in very interesting ways:

  • There are no monthly premiums. Instead the system uses a Crowdfunding-like approach: the sum, paid out to cover healthcare costs (+8% fee for Ant Financial), is split evenly among all users. The bills come in every two weeks and amount rarely to more than a few cents - for 2019 the fees are capped at 188 Yuan (about $28). So the service is very cheap, because it is basically just a feature in a mobile app and does away with most of the overhead cost of a traditional insurance.

  • The mobile app is also used to resolve conflicts between customers and the service - using Crowdsourcing: disputes over claims are resolved by juries consisting of hundreds of thousands of pre-approved users, who vote on whether to pay or not.

  • To combat fraud, the service is using Blockchain technology for all relevant transactions.

Xiang Hu Bao already has 63+ million users as of last week, but its aim is to provide basic health plans for 300 million people in the coming two years. And as always in China, when the Alibaba-Ecosystem offers a service, Tencent invests in a competitor: in this case it is called Waterdrop, functions in a very similar way and claims to have 70+ million users.

Key Takeaways:

The idea of providing a much needed service by efficiently using digital tech and splitting the necessary costs without much overhead among all users, is probably an interesting approach for many business models.

More about “Xiang Hu Bao”: