Building a "Care for the Elderly": As the sixth social security insurance is established nationwide, commercial long-term care elevates to a "pillar collaboration" model

Ask AI · How Can Commercial Long-Term Care Insurance Upgrade From an Assist to Pillar Coordination?

With the implementation of the “top-level design” for long-term care insurance, this key institutional arrangement for responding to population aging has officially moved from pilot exploration to a critical stage of being rolled out nationwide under a three-year framework. This not only fills the gap in China’s social security system regarding disability care coverage, but also opens up a brand-new space for growth in the insurance industry.

Against the backdrop of policy measures accelerating their rollout, commercial insurance companies are also participating in long-term care insurance at deep levels—both as important operational and implementation forces for policy-based long-term care insurance, and as they leverage commercial long-term care insurance as a starting point to provide key coordinated support for a multi-tiered protection system.

“Rolling out long-term care insurance nationwide is not a matter of simply copying pilot programs; it requires a comprehensive upgrade in the reconfiguration of institutional elements and governance capabilities. We need to build a systematic solution of ‘standards as the foundation, tech-enabled empowerment, and ecosystem-wide coordination.’” Li Jinsong, general manager of China Taiping Insurance’s life unit, as an enterprise in the first batch tasked with policy-based long-term care insurance, said in an interview with First Financial reporter recently.

At the same time, the reporter noted that from the end of last year to now, multiple insurance companies have successively launched commercial long-term care insurance. In this regard, Li Jinsong believes that, under the “sixth social insurance” positioning in social security, policy-based long-term care insurance still has the main goal of “covering basics and achieving broad coverage,” whereas commercial long-term care insurance is upgrading from an auxiliary supplement to social security into “pillar coordination” in elderly care and health protection. It can meet the more diversified care and support needs of disabled elderly people beyond basic living assistance. Future development space is also equally broad.

Policy-Based Long-Term Care Insurance Fully Rolled Out, Insurers’ Operations Move Toward Refinement

Recently, the document titled Opinions on Accelerating the Establishment of a Long-Term Care Insurance System (hereinafter referred to as the “Opinions”) was officially issued, making clear that a long-term care insurance system suitable for China’s basic national conditions should be basically established within about three years.

In the Opinions, it is made clear that exploration will be made on introducing social forces to participate in the operation and management of services. After the document was released, executives of multiple listed insurers said at their earnings press conferences that they will implement it earnestly and promote high-quality development of long-term care insurance.

In fact, since China launched long-term care insurance pilots in 2016, commercial insurance institutions have already become a key force in implementing the policy on the ground. During this year’s Two Sessions, Wang Yanfang, a deputy to the National People’s Congress and director of the Strategy Research Center (ESG Office) at China Taiping, said that in each pilot city, a new mechanism of cooperation between government and business has been established, with “government operations as the foundation and social forces as the supplement,” adopting a separation model in which the medical insurance department is in charge while commercial insurance companies handle operations. In cities such as Shanghai, Ningbo, Guangzhou, and Fuzhou, commercial insurance companies are entrusted to operate using a “no transfer of funds, purchase of services” approach; in places such as Chengdu, Nantong, Tianjin, and Nanning, commercial insurance companies are entrusted to operate using a “transfer of funds, purchase of services” approach; and in the remaining 40-plus cities, commercial insurance companies are entrusted to implement it using a “transfer of funds, shared risk” approach.

“Deep participation by commercial insurance institutions in the operation of policy-based long-term care insurance, in essence, is about seeking dynamic balance between universal policy objectives and market-oriented operating logic.” Li Jinsong said. By the end of 2025, China Taiping’s life unit had participated in pilot cities for long-term care insurance accounting for nearly 50% nationwide. It operated 66 long-term care insurance projects, served 85 million insured persons, and had made cumulative payments of over RMB 5.3 billion.

Li Jinsong said that during the operation and implementation of policy-based long-term care insurance, commercial insurance institutions still face several challenges. First, in the assessment stage, the determination of disability is highly subjective; traditional manual assessment is prone to interference, which may lead to information asymmetry and moral hazard. Second, care is usually delivered in private scenarios, where “one person watching another” comes at extremely high cost, and service supervision shows fragmentation and lag. Third, actuarial pricing without historical experience data is a common industry problem that is difficult to solve.

In response to the above challenges, Li Jinsong believes that rolling out long-term care insurance nationwide is not a simple copy of pilot experience, but a systematic project involving the reconstruction of institutional elements and an upgrade in governance capabilities. It needs to adhere to a systematic solution of “standards as the foundation, tech-enabled empowerment, and ecosystem-wide coordination.”

For example, in the assessment stage, the Opinions clearly state that it is necessary to improve a nationwide unified standard for disability level assessment. Li Jinsong said that nationwide unified standards are a prerequisite, but the implementation of standards depends on operable assessment tools and anti-fraud mechanisms. He suggested adopting a three-tier system of “digital pre-screening + AI assessment + dynamic traceability”: using a risk-layering AI screening tool for remote self-assessment to reduce invalid applications; enabling compulsory evidence storage during the assessment process; and tracing back and reviewing abnormal indicators to monitor assessment quality.

In terms of service supply, Li Jinsong believes the goal should shift from “having services” to “having better services,” which requires rebuilding an incentive-compatible mechanism for service supply. The Opinions indicate that it is necessary to establish and improve a long-term care insurance service quality evaluation mechanism and an incentive-binding and constraint mechanism for cost control. In this regard, he suggested that graded and categorized management of care institutions could be promoted. Meanwhile, linking payments to caregivers’ compensation can enhance the occupational attractiveness of nursing staff. On the regulatory side, intelligent supervision systems can be built using technologies such as the Internet of Things and wearable devices. By analyzing elderly people’s activity trajectories and vital sign data, the authenticity and effectiveness of care services can be verified in reverse.

As for fund risk control, the Opinions emphasize establishing fund operation monitoring and risk prevention mechanisms and conducting mid- to long-term actuarial analysis. It also calls for improving mechanisms for punishing individuals and institutions involved in insurance fraud and other bad acts. Li Jinsong also believes that fund safety is the lifeline for the system’s sustainability. He suggested building a cross-department and cross-industry “big brain for long-term care insurance risk control”: breaking down data silos among departments such as medical insurance, health and wellness, civil affairs, public security, and judicial authorities, and establishing “four-dimensional profiles” of insured persons, assessment institutions, care institutions, and caregivers. For example, by comparing medical insurance visit records with long-term care insurance assessment results, fraudulent behaviors such as “still receiving home-care benefits during hospitalization” can be identified. At the same time, by using machine-learning algorithms to extract features from historical fraud cases, a risk scoring model can be constructed. Additionally, a “blacklist” system in the long-term care insurance sector could be established to impose industry bans on insured persons, institutions, and individuals involved in insurance fraud, and incorporate them into the social credit system.

Commercial Long-Term Care Insurance Moves Toward “Pillar Coordination”

According to data from the fifth national sampling survey on the living situations of urban and rural elderly people, in 2021 China had approximately 35 million elderly people with disabilities or partial disabilities, accounting for 11.6% of all elderly people. Based on calculations, by 2035, the number of elderly people with disabilities in China will reach 46 million, and by 2050 it will rise to around 58 million.

A research report titled China’s Commercial Nursing Insurance Development Opportunities, jointly released in 2022 by the China Insurance Industry Association and Swiss Re’s Reinsurance Research Institute (hereinafter referred to as the “Research Report”), shows that demand for long-term care services will reach RMB 3.1 trillion by 2030 and nearly RMB 6.6 trillion by 2040.

Industry insiders generally believe that once the national rollout button for the policy-based long-term care insurance system is pressed, it will clearly improve the level of care service protection for disabled elderly people in China and, to a certain extent, address the dilemma of “one person becomes disabled and the whole family becomes unbalanced.” However, on top of policy-based long-term care insurance, there are still large volumes of differentiated care service needs waiting to be met. The above-mentioned research report states that international experience shows that coordinated development between social-care insurance and commercial insurance is the development direction for raising the overall protection level.

“In the ‘15th Five-Year Plan to 20th Five-Year Plan’ period, the strategic positioning of commercial insurance will upgrade from the ‘auxiliary supplement’ in the social security system to ‘pillar coordination’ in elderly care and health protection. Policy-based long-term care insurance is positioned as ‘covering basics and achieving broad coverage,’ providing a safety-net role. But as differentiated and personalized care and support needs for disabled elderly people continue to grow, this is precisely the space where commercial long-term care insurance will focus its efforts.” Li Jinsong said.

According to The Practice Research on China’s Commercial Long-Term Care Insurance in issue 12 of Shanghai Insurance in 2024 (hereinafter referred to as the “Practice Research”), China’s commercial long-term care insurance accounts for a relatively low share among health insurance and has lagged in development. Although it experienced rapid growth during the stage of personal insurance premium rate market-oriented reform (with 2016 premiums reaching RMB 120.8 billion, about 30% of health insurance), many products deviated from the essence of protection. In 2017, new regulatory rules standardized product design, and the industry adjusted dramatically. In 2018, the share of commercial long-term care insurance premiums within health insurance fell to 0.7%. In recent years, as population aging intensified and policies encouraged development, commercial long-term care insurance gradually warmed back up; by 2021, premiums recovered to RMB 13.2 billion.

Source: Issue 12 of Shanghai Insurance (2024), The Practice Research on China’s Commercial Long-Term Care Insurance, authors include Luo Wanyan, School of Finance, Yunnan University of Finance and Economics, and others

A First Financial reporter, after checking information with the China Insurance Industry Association, found that there are currently 159 nursing insurance products on the market. Among 4,821 health insurance products, the share is only 3.3%.

However, with the implementation of the “sixth social insurance” for social security, recent market layouts and product promotions for commercial long-term care insurance have also noticeably heated up. Life insurers such as Taiping Insurance’s life unit, New China Life, Taikang Life, and Metropolitan Life have all launched commercial nursing insurance products from the end of last year into this year.

From Li Jinsong’s perspective, from an industry development viewpoint, building up commercial long-term care insurance is both an external requirement for filling gaps in protection and an internal need for life insurers to break through in transformation. In recent years, the structure of the traditional health insurance market has undergone profound changes: advantages of critical illness insurance products have weakened, price competitiveness has declined, the demographic dividend of agent channels has gradually diminished, and products such as million-medical insurance have made limited value contributions. The life insurance industry urgently needs new business engines to optimize its structure and activate growth. Long-term care protection, together with medical and disease protection, forms a complete health protection closed loop. It precisely fills a key gap in the current protection system and has become an important direction for industry transformation.

Several industry insiders interviewed said that although commercial long-term care insurance is still in its early stage of market development, with low market awareness, a small scale, and low penetration, on one hand, as policy-based long-term care insurance is promoted nationwide, it is itself a deep risk awareness and dissemination exercise for society as a whole, which will effectively awaken families’ attention and awareness of potential long-term care financial risks and prevention. On the other hand, given the greater flexibility in service design of commercial long-term care insurance products, as residents’ elderly care concepts improve and care needs are released, the development of commercial long-term care insurance will gradually accelerate, and the future space is huge.

From a Single Form to Ecosystem-Based Development

So how does commercial long-term care insurance’s product and service design reflect flexibility?

According to data from the Practice Research, in terms of product form, nursing insurance currently mostly appears as a standalone product, and traditional-form products account for the overwhelming majority.

Source: Issue 12 of Shanghai Insurance (2024), The Practice Research on China’s Commercial Long-Term Care Insurance, authors include Luo Wanyan, School of Finance, Yunnan University of Finance and Economics, and others

But based on commercial long-term care insurance launched by recent insurers, the product innovation forms are clearly much richer.

For example, Metropolitan Life launched a “Metropolitan Long Fu” tax-advantaged nursing insurance product, while China Taiping’s life unit recently launched “Yi Hu Tian Nian,” attempting to combine nursing protection with an elderly pension annuity, balancing both protection and capital accumulation functions. Li Jinsong said such design is because the promotion of nursing insurance needs to be phased in. Since consumers’ understanding of nursing protection varies significantly, but elderly care demand is relatively widespread and strong, the idea is to start from elderly care demand, pair it with high-leverage nursing protection, and allow customers to flexibly allocate coverage according to their own health conditions and elderly care expectations.

In terms of the service ecosystem, head insurers’ commercial long-term care insurance is extending from “single protection” toward an “integrated medical and elderly care” ecosystem. For instance, China Taiping’s “Yi Hu” series is also linked to admission rights to elderly care communities and includes benefits such as health management and home-based elderly care. Its service model has been upgraded from “post-claim payment” to “full-cycle management,” enabling it to develop in a complementary way with policy-based long-term care insurance.

Industry insiders believe that long-term care insurance is not simply an insurance product, but a social governance tool for responding to population aging. If commercial long-term care insurance can achieve “pillar coordination,” it will not only complement policy-based long-term care insurance, but also push the insurance industry to transform from “selling products” to “selling services.” Ultimately, it will form a multi-tiered long-term care protection system, realizing “care for the elderly” amid the “silver-haired wave.”

(This article is from First Financial)