From Claims Control to Operational Governance

Managing post-pandemic risk in high-end medical insurance

BY JACKY HE May 2026

In many insurance lines, periods of stress follow a familiar pattern: deteriorating experience prompts corrective action, which alters behavior, and those behavioral changes further destabilize results. At times, actuaries recognize this dynamic in hindsight, after loss ratios, lapses or utilization trends have already exceeded expectations.

In the post-pandemic environment, this pattern has become more pronounced in medical insurance, but the underlying challenge is not unique to health. It reflects a broader actuarial question: What happens when traditional, post-event controls are no longer sufficient to stabilize a system shaped by human behavior, operational incentives and delayed feedback?

This article explores that question through the lens of medical insurance, offering experiential insights into the actuarial and operational trade-offs that arise when managing risk in complex, behavior-driven systems.

It delves into the crisis of uncontrolled loss ratios faced by companies operating in the high-end medical insurance sector and outlines the process of operational restructuring through systematic governance. The examples I share are from my experience at AIA and may be applicable to others in the actuarial and insurance fields.

A LOOK AT LOSS RATIOS

High-end medical insurance experienced a sharp rise in loss ratios in 2023, although it did not meet the technical definition of “death spiral insurance.” AIA, as an example, has gradually brought the outpatient loss ratio back to a healthy range by implementing a series of measures, including establishing end-to-end claims management and control, implementing hierarchical management of customers and agents, optimizing hospital networks and adjusting product structures.

I believe that the sustainable development of health insurance may be supported by shifting from a “claim control mindset” to “operational transformation.” I also advocate building a “second growth curve” centered on customers, driven by data and supported by cross-departmental collaboration to transform policy sales into health ecosystem operations.

MEDICAL SYSTEMS: FROM CUSTOMER ACQUISITION GATEWAYS TO HIGH-END STRATEGY

AIA’s medical insurance system, as an example, has established a multi-tiered product structure ranging from entry-level to high-end offerings with distinct hierarchies and complementary functions, spanning basic protection to the high-end market.

BASIC ACCIDENT AND HEALTH PROTECTION—CUSTOMER ACQUISITION GATEWAY

This includes the most inclusive and entry-level medical products, usually marketed under the “one yuan per day” positioning. These products offer low insured amounts and cover basic liabilities, such as accident insurance and accidental outpatient care. Their core mission is to support agents in customer acquisition and relationship building, enabling the sales team to quickly reach new customers, establish initial trust and accumulate customer data.

MILLION-DOLLAR MEDICAL INSURANCE—INCLUSIVE MID-TIER PRODUCT

As an article in The Actuary Asia notes, million-dollar medical insurance has become a standard offering in China’s health insurance market. Through tiered pricing and modular liability design, the company, for example, has made this product available for independent purchase and flexible combination with long-term products such as critical illness insurance and annuity insurance, thereby providing customers with more comprehensive health protection.

DIAGNOSIS-RELATED GROUP (DRG) MEDICAL PLAN—EXPLORING COVERAGE

Since 2023, the company has attempted to launch DRG-type medical products, expand international and specialized medical resources outside the public healthcare system, and explore new paths for hierarchical medical treatment and cost control. This effort aligns with the direction of medical reform and lays the foundation for the company to build a comprehensive health service platform in the future.

HIGH-END MEDICAL INSURANCE—THE PINNACLE OF THE SYSTEM

As the company’s strategic focus, high-end medical insurance serves as an exclusive service provider for high-net-worth customers and is also key for building a comprehensive health ecosystem—an integrated network of services that goes beyond traditional insurance reimbursement. A health ecosystem might include:

Insurance coverage
Provider networks
Health management services
Digital health tools
Care coordination and navigation services
Pharmacy and drug management
Data integration across the care journey

By integrating proven medical resources and providing personalized health management solutions, high-end medical insurance, in my view, is evolving from a mere expense reimbursement product into an integrated service platform that combines insurance, medical care, health management and more.

STRATEGIC SIGNIFICANCE OF MEDICAL INSURANCE

Medical insurance is not only an integral part of a product portfolio, but also a vital link for connecting with customers. Compared with life insurance, medical insurance involves more frequent interactions with customers across claims of settlement, consulting and health management, which can enhance customer retention.

For example, the company uses a percentage system to measure the customer conversion rate of its medical insurance products. For entry-level products and customers with million-dollar medical insurance, the policy upgrade rate exceeds 10% within six months; for high-end medical insurance customers, this rate can approach 20%. These figures demonstrate that within the overall product structure, medical insurance serves not only as a risk management tool but also as the primary touchpoint for customer relationship management.

Through the gateway of medical insurance, customers may gradually extend their coverage to include long-term products such as critical illness insurance and annuities, facilitating the transition from one-time transactions to long-term relationships.

UNCONTROLLED LOSS RATIOS

Among the four medical insurance product structures outlined above, the most challenging segment, in my view, is high-end medical insurance. As an example, AIA has built a sizable high-end medical insurance portfolio among urban middle- and high-income segments. Since 2023, in the post-pandemic era, high-end medical insurance has entered an unprecedented risk cycle, characterized by deteriorating claims performance and a sharp surge in loss ratios, making it a focal point of industry attention.

On one hand, pent-up demand for medical treatment has been released in a concentrated manner, leading to a surge in patient volumes at high-end private hospitals. On the other hand, medical costs have risen across the board, with some non-premium hospitals adopting “high-end” pricing models, driving claims amounts to record highs, particularly for plans that include outpatient benefits, which entered into an unsustainable range in 2023.

Potentially more profound risks stem from the interaction between customer behavior and channel practices. Three broad examples:

Some agents may use underwriting and claim rules to get customers to seek a potential overabundance of medical treatment and file concentrated claims.
Customers share information among themselves, leading to an increase in renewals by those with pre-existing conditions and preemptive claims filings.
Medical institutions submit large bills, and what could be considered unnecessary treatments are prescribed more frequently.

The combination of these factors has trapped high-end medical insurance in something similar to the aforementioned “death spiral”—rising loss ratios → premium hikes → policy surrenders → risk concentration → widening losses.

THE PATH TO SYSTEM RECONSTRUCTION

When risks accumulated to a critical point, the traditional passive claims management model could no longer sustain business operations. After the company identified a sharp surge in high-end medical insurance claims in the first half of 2023, it established a special working group consisting of multiple departments, including product development, actuarial, claims, health services and high-net-worth business.

The group analyzed historical claims data and explored feasible risk control paths. It was important to strategically reconstruct the operational logic of health insurance and transform risk management from a “post-event remedy” approach to a “full-process prevention and control” model.

Using research and claims data, the company began building an end-to-end risk control system covering underwriting, sales, medical treatment, claims settlement and product iteration. Focusing on the core dimensions of claims management, customer stratification, agent governance, medical service network optimization, and product structure upgrading, the company built a closed-loop risk prevention and control mechanism, achieving a strategic leap from business crisis response to governance system reconstruction.

CLAIMS MANAGEMENT: BUILDING A FULL-CYCLE RISK CONTROL DEFENSE LINE (PRE-EVENT, IN-EVENT, POST-EVENT)

To enhance the timeliness and accuracy of risk identification, the company established a monitoring system throughout the insurance lifecycle that implements interventions in three phases. In the pre-event control phase, the focus is on rule pre-positioning and risk early warning. The company introduced a pre-authorization system, establishing prior approval mechanisms for high-cost or high-frequency medical services to closely monitor medical expenditures. Meanwhile, it established a “risk list database” covering high-risk customers, physicians, and medical institutions, which serves as an important basis for underwriting and claims decision-making. In the in-event control phase, technical tools are used to combine real-time monitoring with manual intervention.

The company deployed an intelligent monitoring system that identifies abnormal claims events based on behavioral patterns, enabling automatic alerts and hierarchical response mechanisms. Additionally, an anti-fraud model was developed to comprehensively analyze indicators such as customer claim frequency, payment amount distribution, and diagnosis consistency, identifying potential fraudulent or improper claim behavior and improving inspection efficiency.

In the post-event management phase, emphasis is placed on experience summarization and data feedback. Through a unified data analysis platform, regular claims risk reports are generated to systematically sort out changes in claims structure and characteristics of typical cases. More importantly, data silos between the claims, sales, and actuarial systems are eliminated, enabling cross-departmental information sharing and collaborative optimization, and forming a closed-loop management mechanism of “identification-response-improvement.”

CUSTOMER STRATIFICATION AND COLLABORATIVE SALES-SIDE GOVERNANCE: ADVANCING PREEMPTIVE RISK IDENTIFICATION

To move away from the traditional passive underwriting model, the company developed a data-driven customer hierarchical management system. Customers are grouped into risk tiers, and differentiated service and risk-intervention strategies are implemented accordingly. For high-risk customer groups, the company intervenes early in the underwriting and claims decision-making processes, formulating personalized protection plans based on factors such as medical history and healthcare-seeking habits to mitigate moral hazard and adverse selection.

At the same time, the agent team was incorporated into the overall risk control framework, forming a “two-way governance” mechanism. On one hand, early warnings, coaching, or suspension of business qualifications are imposed on agents with abnormally high loss ratios. On the other hand, a health insurance compliance assessment system was established, integrating the claims performance of the customer groups under each agent into the performance evaluation system to align sales behaviors with the company’s long-term interests. On this basis, the marketing philosophy was shifted from “short-term transaction orientation” to “long-term customer relationship management,” enhancing customer lifetime value.

HOSPITAL NETWORK GOVERNANCE AND PRODUCT STRUCTURE OPTIMIZATION: ACHIEVING STRATEGIC UPGRADE FROM “CLAIMS CONTROL” TO “MEDICAL SERVICE CONTROL”

Industry practices have shown that the core contradiction in medical insurance does not lie in whether to settle claims but in the uncontrollability of the medical service supply side. To address this, starting in 2023, the company set out to reconstruct its network of cooperating hospitals and implement refined hierarchical management. Participating institutions are classified into four categories: preferred hospitals, direct billing network hospitals, premium hospitals, and blacklisted hospitals, with differentiated settlement policies and customer guidance mechanisms. The company negotiated with private medical institutions to secure fee-discount agreements and upper-limit control clauses, seeking to address potentially unreasonable medical expenditures.

In product design, I believe the company has struck a balance among protection needs, customer experience, and risk prevention and control. An outpatient visit limit and a tiered co-payment mechanism are implemented, with the co-payment ratio dynamically adjusted based on consultation frequency to curb resource abuse. Annual compensation caps are set for nonessential items such as traditional Chinese medicine services and high-end physical examinations, ensuring that protection focuses on necessary medical needs. In addition, health management-related benefits are expanded to include vaccination services and chronic disease interventions, helping customers improve health behaviors. In pricing strategy, premiums are moderately increased, and the concept of “dynamic rate adjustment amid medical inflation” is communicated to customers through education, enhancing market acceptance.

GOVERNANCE OUTCOMES: DATA-VALIDATING SYSTEM RECONSTRUCTION

After one year of governance, I believe the company’s high-end medical insurance business has achieved marked results, with a clear trend of reduced risk.

In terms of overall loss ratios, the company’s hospitalization plans have remained at a healthy level with controllable fluctuations. Outpatient plans have continued to decline for two consecutive years since the peak of claims in 2023. Among them, the decline in the loss ratio in 2024 was more due to the return of medical treatment demand to normal levels after the pandemic, and the initial results of governance had not yet appeared, with the outpatient loss ratio still at a relatively high level (above 100%); in 2025, the governance effect was fully reflected, with the outpatient loss ratio dropping rapidly to below the level before 2022, returning to a healthy range. This demonstrates the effectiveness of implementing claims management, hospital hierarchical management and product adjustments.

In terms of customer behavior, the average number of outpatient visits per person has decreased, especially for high-frequency medical treatment, and the proportion of high-risk customers has decreased, indicating that customers are seeking medical treatment in a more refined, concentrated manner. At the same time, the cost per outpatient visit has increased slightly, and claims behavior has shifted from “frequent small amounts” to “necessary claims,” with a healthier structure.

At the policy level, the surrender rate rose briefly in the early stages of implementation, starting in 2024, but stabilized after six months. With improvements in customer education and service experience, the retention rate has continued to increase, and policy quality has been significantly optimized.

These improvements are not accidental; they are the result of systematic linkage. By 2025, the loss ratio, customer retention rate and risk curve have all returned to a healthy state, marking the completion of the restructuring of the high-end medical insurance operation system.

OPERATIONAL INSIGHTS: FROM “CLAIMS CONTROL” TO “OPERATIONAL TRANSFORMATION”

In my experience, the governance of high-end medical insurance has reignited AIA’s reflections on medical insurance management. The core of health insurance risk lies not in claims payment itself but in operational logic. Claim control is a results-oriented approach, yet it is not a viable long-term solution, in my view. The real key lies in continuously optimizing the operational system. Here are four ways that have proven beneficial in my work experience:

Data-driven decision-making: Integrating actuarial, claims, and sales data to enable real-time monitoring and early warning of trends.
Customer-centricity: Prioritizing customer education, health management and risk communication.
Cross-departmental collaboration: Fostering teamwork among product, actuarial, operations and sales channel teams to create an integrated operational community.
Market-oriented, flexible cost-control mechanisms: Establishing external constraints and price guidance through hospital stratification and negotiation.

I believe that only when the company truly understands why claims occur can it maintain long-term stability in the complex health insurance market.

INDUSTRY IMPLICATIONS: THE “SECOND GROWTH CURVE” OF HEALTH INSURANCE

For health insurance to achieve sustainable development, I believe it’s important to build a “second growth curve”—one that no longer relies on scale expansion but on risk-pricing, customer relationship management and service integration capabilities. Here are three ways that may be beneficial for those in the industry:

From policies to ecosystems: Medical insurance serves as an entry point for customer relationships, extending customer lifetime value through services such as health management and chronic disease intervention.
From claims settlement to risk management: Risk control is not about denying claims but about guiding customer behaviors and fostering mutual trust.
From short-term gains to long-term sustainability: Dynamic pricing, customer education and health management are standardized as long-term mechanisms.

IN CLOSING

Cyclical fluctuations are an inevitable stage in the growth of insurance companies in the health insurance sector. I believe that only by elevating risk governance to a systematic capability and transforming claims-related issues into operational logic may insurers discover new possibilities in an uncertain environment.

Further, I believe the breakthrough in medical insurance does not lie in repricing products but in reshaping operational logic. When health insurance loses its “health,” the only way forward is to restore health to its operations.

Jacky He, FSA, is Chief Actuary of AIA China, based in Shanghai.

Statements of fact and opinions expressed herein are those of the individual authors and
are not necessarily those of the Society of Actuaries or the respective authors’ employers.