Chinese smartphone giant Xiaomi Corp is officially joining China's rapidly growing online mutual aid industry through the launch of its new platform. The company launched its new crowd-funding healthcare platform called Xiaomi Huzhu on Monday.
Starting this week, users can get access to the company's new service through its official Xiaomi app or its official WeChat account. The service is open to preregistration to all users in mainland China. Running the new business will be Xiaomi's financial technology unit Xiaomi Finance.
Users can join the platform for free with no up-front payments. Each user is entitled to coverage of up to 500,000 yuan or roughly $70,647 for critical illnesses. This includes 82 major diseases, 10 of which are specific to children. Members can also get access to 24-hour online medical consultations through the new platform.
Mutual aid platforms are growing at an exponential rate in China, mostly attracting low to mid-income users in rural areas who otherwise cannot afford to buy or have access to typical insurance plans. Mutual aid platforms are different from normal insurance as claims are paid through a collective claim-sharing mechanism.
Members of a mutual aid platform typically share the cost of any one claim once it has been verified. As an example, if a user claims for a 1,000 yuan coverage for a certain medical treatment, a platform with 1,000 users will have to pay 1 yuan each under a collective claim-sharing scheme.
The service is particularly useful for low-income families given that China's public health care system only covers up to a 60 percent reimbursement for serious diseases. Through the platform, patients can now get access to badly-needed funds to pay off their balances.
Given the nature of the business model, it is not really clear how Xiaomi plans to generate revenue from its new business. Other platform operators do charge a certain fee to members for each claim collected, albeit being just a small percentage of the entire amount. In China, some of the biggest players in the growing industry include Ant Financial's Xiang Hu Bao and Tencent-backed Easy Mutual and Waterdrop Mutual. The three major players have about 10 million members all put together.
Given that claim payments are made by a platform's members and not its operator, the type of business is currently not subject to the China Banking and Insurance Regulatory Commission's regulations. According to a study conducted by Ant Financial Services, China's online mutual aid platforms could reach more than 450 million users by 2025.
