Are offshore policies worth it?

Ever receive those enticing emails from independent financial advisors (IFAs) or inexperienced insurance brokers offering phenomenal cover at a very low price? Next time around spare your valuable time and send it straight to the ‘Junk’ folder.

Throughout the years One World Cover has found an alarming number of companies, international schools, families and individuals in mainland China still purchase medical cover offshore, with international insurers headquartered outside the country in Hong Kong, or even as far away as London and the US. We find that often the primary reason for this practice is the belief that offshore insurance products appear to be better value.

However, upon closer inspection the many disadvantages that come with purchasing offshore, and in turn the benefits enjoyed when obtaining licensed, China-based medical insurance products, become readily apparent:

Pay and claim in local currency, and receive tax benefits too

Offshore insurance policies are typically denominated in US dollars, Euros, or British pound sterling, and therefore payment and claims reimbursement are made in one of these currencies throughout the duration of the policy. Needless to say this can be a significant inconvenience when most enterprises and individuals in China do the majority of their banking in the country’s local currency, the renminbi.

In addition, when denominated in a currency other than the renminbi, coverage of the insurance plan is then subject to daily exchange rates, and therefore the limits of cover can change in accordance with these rates. In other words, if the value of the US dollar decreases, or the Chinese renminbi increases, suddenly when you were a few years ago covered for Rmb 8 million, you are now covered for a lesser Rmb 6.4 million. On the other hand, an insurance policy in full compliance with the China Insurance Regulatory Commission (CIRC) is denominated in Chinese renminbi, so whilst in China the limits of cover will not fluctuate with the currency market, payments are accepted in renminbi, and medical claims are reimbursed in the local currency as well.

Further to this, as any established company or international school in China is well aware, receipts for large business transactions, also known as fapiao, can be highly beneficial as they are tax deductible. Of course such benefits are not available for transactions made in other currencies outside mainland China, which is especially disadvantageous when paying a premium upwards of Rmb 1 million.

Plan designs made by the China market, for the China market

Whenever purchasing a product either for yourself or your business, you always ensure the product is specially designed to function well in your country of residence and business market, so why should circumstances be any different when it comes to medical cover? One World Cover’s team of consultants strictly provide medical insurance plans that are fully compliant with the rules and regulations of the CIRC, designed for sustainable use in China with benefit-rich packages, and offered through licensed and well-established international insurers currently available in the China market today.

In addition to these key benefits, a licensed, China-based medical insurance policy also provides localized servicing with insurers’ service centers in Shanghai and/or Beijing, as well as extensive direct billing networks throughout Greater China (Mainland China, Hong Kong, Macau, Taiwan).

On-the-ground servicing and hassle-free medical care

The support network within China tends to be much more extensive when purchasing a locally licensed policy. It goes without saying that local support teams of licensed international insurers in China generally have a better understanding of China-based medical facilities and can assist you far more efficiently within China when it comes to advice relating to medical issues, as they will have relationships with more local hospitals and clinics, know where the best doctors are for any particular problem, and so on. Also, as you have a local support hub it is considerably easier to get in contact with customer service staff and handle medical claims.

When purchasing an offshore policy it can sometimes be quite difficult to get someone to assist you, particularly when having to coordinate emergency calls to coincide with the time zone where your insurer is located. Handling medical claims can also be very frustrating and time-consuming, often resulting in payments being made out-of-pocket and then the typical wait of 15 working days or more to be reimbursed.

When covered under a localized international medical insurance plan it is much easier to get in touch with support personnel, especially if you have an experienced broker such as One World Cover, with extensive knowledge of the inner workings of the available insurance providers. International insurers with localized servicing have much better experience with claim management in China, as well as methods to limit claim exposure, thereby reducing renewal rates.

Legal assistance with medical claims disputes

When faced with a dispute over a large insurance claim on an offshore insurance policy, you will have no legal recourse, as the policy is already illegal under China insurance law. For example, let’s say one day you start to experience back problems for which you need to have surgery. The insurance provider then declines to cover the cost of the medical treatment received, claiming it as a pre-existing medical condition. You and your lawyer collect proof that this is in fact not the case, and bring your case to the CIRC. This authoritative body will then inform you that this policy is not within their jurisdiction, and therefore they are unable to assist you (In fact they may even charge you for the unpaid tax on your insurance!). Even if you then take your case to the governing body pertaining to that insurance policy, they will also be unable to assist you, as you are not a current resident of that country. In the end, you will be stuck with a potentially very large medical bill that will certainly create a major financial burden of potentially Rmb100,000 or more.

On the other hand, when there is a dispute on a licensed, China-based medical plan, you may go to the CIRC to assist in your dispute with the insurer.

Still want to keep that high salary in China?

In recent years we have come across an interesting trend whilst working with international schools in second- and third-tier cities in China that is expected to become more prevalent throughout the country in future: In order to complete the necessary work authorization processes, company or school employees are required to show the local government proof of purchased private medical insurance through an insurer licensed to distribute medical insurance products in China.

This still relatively new regulation is already enforced in Zhuhai, and more recently in Qingdao, and given the increasing number of regulations applicable to expatriates in China there is nothing to indicate that this requirement will not eventually spread to the country’s major cities, including Shanghai and Beijing. Therefore there may come a day in the not-so-distant future where you may be required to show proof of private, locally licensed medical cover in order to keep your business, or even maintain your own employment in China.

Expert consultants provide expert advice, not illegal cover

Although purchasing an offshore insurance policy may seem like a good idea to save on cost, it is clear that purchasing a locally licensed insurance plan is the legal, and therefore safer, option in China. Buying a licensed policy has advantages for each of the disadvantages of buying offshore, where the only advantage seems to be the perceived better “bargain”.

Simply put, when in China, buy in China.

For more information on international insurers licensed to sell medical insurance products in China, please visit One World Cover’s Health Insurance in China webpage, or directly contact us to further discuss with one of our expert insurance consultants.