Claims ratio remains low, the short-term health insurance value for money is a mystery

AI · How to Balance Protection and Sustainability with a 70% Ideal Payout Rate?

21st Century Business Herald Reporter Lin Hanyao, Intern Tu Shengqing

In recent years, as public awareness of health protection has fully awakened and a multi-layered medical insurance system continues to improve, personal short-term health insurance products, represented by “million-dollar medical insurance,” have experienced explosive growth.

With the advantage of “low premiums, high coverage,” short-term health insurance has quickly expanded into lower-tier markets, becoming a “gateway” for hundreds of millions of citizens to access commercial medical protection. However, amid rapid growth in premium scale, the “overall claims ratio” of this insurance type has attracted widespread attention.

Recently, the 21st Century Business Herald analyzed the comprehensive claims ratio data for 59 property insurance companies’ personal short-term health insurance for the full year of 2025, comparing it with 2024. The data shows that the median comprehensive claims ratio for these companies in 2025 is only 41.09%, with 34 companies experiencing a decline, accounting for nearly 60%. Additionally, 6 companies reported negative values, and 4 companies had claims ratios exceeding 100%.

Experts interviewed pointed out that the claims ratio reflects both cost structure and channel models, as well as differences in pricing strategies and risk management capabilities. As debates about whether premiums are too high or coverage is sufficient intensify, how to balance enhancing consumer protection and maintaining sustainable operations has become a key issue for the development of short-term health insurance.

More Than Half of Short-Term Health Insurance Claims Ratios Decline

Personal short-term health insurance refers to health insurance sold to individuals with a coverage period of one year or less, without guaranteed renewal clauses. Typical products include million-dollar medical insurance and惠民保 (benefit insurance).

The claims ratio is the proportion of claims paid out by the insurer relative to earned premiums, used to measure operational efficiency and risk control. Its specific formula is: Claims Ratio = (Reinsurance Claims Paid + Reinsurance Unpaid Claims Reserve Transfer) / Earned Premiums after Reinsurance, where the unpaid claims reserve includes incurred but not reported (IBNR) reserves.

The comprehensive claims ratio for personal short-term health insurance indicates the ratio of actual claims expenses (including reserve transfers) to earned premiums, usually expressed as a percentage. It mainly reflects how well the product’s coverage functions are being realized and is a core indicator of risk pricing, claims management, and overall operational stability.

The 21st Century Business Herald reviewed data from 59 property insurance companies over the past two years and found that the median comprehensive claims ratio for 2025 is 41.09%. Year-over-year, 34 companies saw a decrease, 23 increased, 1 remained unchanged, and 1 was not comparable due to no relevant business in 2024.

Data shows that 18 companies had claims ratio fluctuations within 5 percentage points over the two years, including Rongtong Property & Casualty, Jintai Property & Casualty, China United Insurance, Sunshine Property & Casualty, Ping An Property & Casualty, China Life Property & Casualty, PICC Property & Casualty, Taiping Property & Casualty, and ZhongAn Insurance.

Among these 59 companies, the highest claims ratio in 2025 was Sunshine Agriculture Mutual, at 1103.25%.

According to the company’s official website, Sunshine Agriculture Mutual did not sell personal short-term health insurance or incur related claims in 2024, resulting in a claims ratio of 0% for that year. By the end of February 2025, the company had two active personal short-term health insurance products, and by the end of 2025, it had five, with the claims ratio rising to 1103.25%.

Additionally, BYD Insurance’s 2024 claims ratio was -10,133.97%, but it quickly rebounded to 103.99% in 2025, swinging over 10,000 basis points within two years.

BYD Insurance explained in its announcement that its personal short-term health insurance business ceased issuing new policies in July 2022 and resumed operations in March 2025. Since earned premiums were minimal during this period, the overall claims ratio deviated from pricing expectations. As operations progress, this indicator is expected to gradually return to the anticipated level.

Negative Claims Ratios as Financial Adjustments

Looking at individual companies, there is clear industry differentiation.

The top three companies in 2025 with the highest claims ratios are Sunshine Agriculture Mutual, Anbang Property & Casualty, and Huahai Property & Casualty, while the lowest three are Yanzhao Property & Casualty, Xinan Auto Insurance, and Huanong Property & Casualty.

Among the 59 companies, four reported claims ratios over 100%: Sunshine Agriculture Mutual (1103.25%), Anbang Property & Casualty (124.66%), Huahai Property & Casualty (104.75%), and BYD Insurance (103.99%).

Six companies reported negative claims ratios: China Railway Property & Casualty (-0.44%), Zhufeng Property & Casualty (-3.54%), Zhongcheng Property & Casualty (-30.02%), Huanong Property & Casualty (-76.41%), Xinan Auto Insurance (-173.57%), and Yanzhao Property & Casualty (-352.06%). Notably, Yanzhao’s ratio shifted from 10.59% in 2024 to -352.06% in 2025, and Huanong’s from 12.62% to -76.41%.

Regarding the “Negative Claims Ratio” Phenomenon, Professor Zhu Junsheng pointed out that such cases do not mean there are no claims. This often relates to reserve releases, business restructuring, or data adjustments, and is fundamentally a result of financial and actuarial processing.

He explained, “From an industry perspective, this phenomenon is more common among small and medium-sized insurers, and is somewhat sporadic. It also reflects industry segmentation.” Zhu noted that leading companies, with larger risk pools, more data, and more stable operations, tend to have more controlled claims ratio fluctuations. Smaller firms, constrained by scale, product concentration, and operational stability, are more susceptible to claim volatility or business adjustments, which can amplify these indicators. Therefore, this phenomenon is not widespread.

He also emphasized that negative claims ratios highlight room for improvement in actuarial pricing, risk management, and business structuring for some institutions. If such fluctuations persist or widen, they could pose risks to operational stability.

Balancing Protection and Sustainability

Beyond these extreme cases, the overall downward or low-level trend in industry claims ratios over the past two years warrants further analysis.

Postdoctoral researcher and professor Zhu Junsheng of Peking University’s School of Economics told 21st Century Business Herald that the decline in the 2025 personal short-term health insurance claims ratio is due to multiple structural factors rather than a single shock.

First, regarding cost structure, short-term health insurance—especially million-dollar medical insurance—relies heavily on internet channels. Under a “traffic-driven” sales model, customer acquisition costs, channel expenses, and operational costs are high, continuously squeezing claims ratios. Second, market competition has intensified, with diverse participants maintaining high levels of channel and traffic investment, making it difficult to significantly reduce expense ratios. Third, the “one-year + adjustable rate” nature of these products means insurers typically reserve a safety margin in pricing, which also objectively lowers claims ratios.

He pointed out that the low claims ratios of some companies may be related to conservative pricing, strict claims standards, or service quality issues, which require careful evaluation.

In recent years, some voices have attributed the low claims ratios of personal short-term health insurance to excessive premiums and insufficient coverage, claiming insurers are profiting excessively from these products.

In response to these sharp criticisms, Professor Zhu offered a more rational perspective.

He believes that, overall, the low claims ratios of some companies do reflect a relatively limited proportion of premiums used for actual coverage, but this must be analyzed in conjunction with expense levels and business models. It cannot be simply equated with “excessive premiums.”

“Claims ratio and consumer protection are important but non-linear,” Zhu said. A claims ratio within a reasonable range usually indicates better coverage realization and helps build customer trust. However, pursuing high claims ratios without proper risk control and expense management could undermine long-term sustainability.

He explained that, based on the logic of commercial health insurance operations, a claims ratio around 70% is an ideal range when expenses are relatively reasonable. Within this range, consumer protection and product attractiveness are enhanced, while insurers retain necessary expense and profit margins to sustain operations.

Zhu concluded that maintaining a claims ratio in this reasonable zone generally signifies higher protection fulfillment and can strengthen customer trust; but overemphasizing high claims ratios at the expense of risk management and cost control may weaken long-term viability.