Compared with WellPoint, Swiss Re and Bupa, DKV has moved quicker and more aggressively. In 2004, the German insurer took a 19.9 percent stake in PICC Health Insurance Co, China's first specialized health insurer. It is optimistic that the sector will move in its favor.

"We hope that the Chinese regulator will issue an independent rule on health insurance companies," said Jochen Messemer, a member of the executive board of DKV. He hopes China will increase the number of joint venture branches a company is allowed to open a year. This appears to be a sign of the group's commitment to the industry.

Yet despite the positive predictions that experts have for the market, the four established Chinese local health insurers - PICC Health Insurance Co Ltd, Ping An Health Insurance Co Ltd, Kunlun Health Insurance Co Ltd and Reward Health Insurance Co Ltd - are witnessing a difficult spell.

Statistics from the China Insurance Regulatory Commission (CIRC) show that the premiums of those four companies reached 2.62 billion yuan by the end of last year, accounting for 6.7 percent of the whole health insurance market. From the 2.62 billion yuan premiums, PICC Health won the lion's share with a premium income of 2.61 billion yuan.

Lin Yaomin, president of Kunlun Health Insurance, said professional health insurers are mainly developing protection-oriented products, but currently investment-oriented products are more popular with consumers.

"We are now having a really difficult time," Lin told the Economic Observer.

Currently, China's health insurance products are not only run by professional health insurance companies but also by life and non-life insurers. As general insurers often take health insurance as additional risk or have even been known to send them to their clients as presents - most health insurance premiums are taken by general insurers.

According to Fang Zhinan, general manager of CITIC-Prudential Life Insurance (Beijing branch), professional health insurance companies will struggle to beat life insurers in the short term.

"With a small customer base, health insurers are faced with pretty high risks, due to the law of large numbers, and the fundamentals of the insurance industry," Fang told China Daily.

Without a policy that supports professional health insurers, it will be difficult to make a profit, he added.

It seems that for the time being, professional health insurance groups' main advantages lie with their more delicate services.

(China Daily June 4, 2008)