Xiaomi Finance, the fintech arm of smartphone vendor Xiaomi (HKG: 1810), has announced its intention to roll out a mutual aid plan which will provide basic protection against critical illnesses for its users, according to Xiaomi Finance’s official Weibo account.
The plan, to be available to the public from June 15, named Xiaomi Huzhu Jihua (or “mutual aid plan” in English), will provide participants with a basic health plan covering costs related to 82 critical illnesses and another 10 illnesses mainly affecting children.
The mutual aid plan, which is available from the Xiaomi Finance app, does not require admission fees, nor regular payments, which differentiate it from commercial insurance policies. Instead, when a participant makes a claim to cover a medical bill, the user receives a one-time payout where the cost is shared equally with all other members. Hence, the payments and their frequency can fluctuate.
Mutual aid plans are not technically insurance, as payouts are not provided by the company, and are therefore not subject to regulations from the China Banking and Insurance Regulatory Commission. However, their function is similar. The popularity of mutual aid plans comes from the fact they are largely more affordable than private insurance, which usually cost thousands of yuan or higher per year in China.
Compared with Xiang Hu Bao, China’s first-ever mutual aid product launched inside Alipay by Ant Financial in 2018, Xiaomi Huzhu offers a one-time payout of up to RMB 500,000 (USD 70,644), higher than the highest payout amount of RMB 300,000 designated in Xiang Hu Bao.
In addition to Ant Financial, China’s largest ride-hailing platform Didi Chuxing, retailer Suning, food delivery firm Meituan Dianping, cybersecurity software developer Qihoo 360, search giant Baidu, and social media platform Weibo, have all recently launched mutual aid products.
Xiaomi will compete to gain its foothold in the market, which is expected to reach 450 million users, or nearly 32% of the country’s population, by 2025. Ant Financial has gained two-thirds of the market share in 2019, with more than 100 million users out of the 150 million users in total, KrASIA reported.
The majority of Xiang Hu Bao’s participants are from middle or low-income communities, who are at great risk of falling into poverty if they become critically ill, Ant Financial said last November.