Waterdrop: Using crowdfunding and social media to disrupt health insurance

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Insurtech startup Waterdrop helps families in China who cannot afford medical treatment to raise money via online mutual aid and crowdfunding, while selling insurance plans too 

In October 2018, two-year-old Wang Chenchen was diagnosed with retinoblastoma, throwing his family into a panic. Like many Chinese, the Wangs did not have private insurance. Though the national basic healthcare insurance program is available to 98% of the country's population, it only covers a small proportion of treatment fees. In the case of the Wangs, retinoblastoma was not an illness covered by public health insurance until nearly a year later, in August 2019.

To give Chenchen the best medical resources – available usually only in the biggest cities – his parents had to move from their home in Inner Mongolia to Jinan city in Shandong province, where Chenchen could get proper treatment. This meant they had to give up their employment, too. Chenchen's father vowed to save his son, even if it meant selling all of the family's valuables.

Fortunately, it did not come to that. Soon after the diagnosis, the Wangs received RMB 300,000 for Chenchen, which is roughly what they would have received as payout under a private health insurance plan for the child. This money allowed Chenchen to receive treatment in Jinan city as planned. 

The funds came from an online peer-to-peer “mutual aid” plan that Chenchen's father had subscribed to via Shuidi Huzhu, or Waterdrop Mutual Help, a platform operated by Chinese startup Waterdrop. Under the plan, hundreds of millions of Shuidi Huzhu users each chipped in cents to help Chenchen's father, just as he had also pledged to do the same if any other user required such crowdfunded medical coverage.

Similar stories of people receiving crowdfunded medical coverage make the news every day. Many Chinese citizens are now leveraging online tools to cope with the dire situations they find themselves in when stricken with critical diseases or serious illnesses.

As of August 2019, Shuidi Huzhu had helped more than 5,000 families via mutual aid while its crowdfunding platform, Shuidi Chou, had helped hundreds of thousands of individuals diagnosed with critical diseases, according to Waterdrop

Waterdrop's CEO Shen Peng believes that by providing these tools for free, his startup can “safeguard the wellbeing of hundreds of millions of families” while growing a successful business.

All for one, one for all

"The idea came to me in 2015 when I was working at [restaurant review and takeout delivery app] Meituan Dianping, where many young employees are the breadwinners of their families. Once they fall sick, their families would be shattered and they would not be able to afford quality treatment," Shen said, noting that many of them did not have private health insurance.  

Although more and more Chinese citizens know about commercial health insurance, many still regard it as unnecessary or too expensive, especially those with lower incomes. In 2018, the per capita disposable income was RMB 24,336 while premiums for commercial health insurance could cost up to a few thousand RMB a year.

At the time, Meituan Dianping would make company-wide appeals for donations for colleagues diagnosed with critical illnesses. Inspired, Shen decided to found Waterdrop in 2016 with the slogan of "All for one, one for all." 

"Each person’s caring act is a water drop.  Though small, when pooled together, the waterdrops can be very valuable for those in a desert, and even become the Pacific Ocean," said Shen.

Shuidi Huzhu, Waterdrop's mutual aid platform and first product, was launched in May 2016. To join a mutual aid plan on Shuidi Huzhu, users pay only RMB 9 monthly. The plans are age-group specific, so members of each plan roughly share the same chances of falling ill. The money paid is stored in the user's personal account. A maximum of RMB 3 is deducted from each user's account whenever a payout is made to a member of the group plan diagnosed with certain diseases – provided the member has been in the program for more than 180 days. Each payout is capped at RMB 300,000. While Shuidi Huzhu is free to use, it takes an 8% management fee from every payout.

Waterdrop launched its crowdfunding platform, Shuidi Chou, a month later to help those who needed help urgently, but did not know about or had not joined any mutual aid plans. Shuidi Chou does not charge commission, and the money raised via the platform goes directly to the fundraisers’ bank accounts.

Each person’s caring act is a water drop.  Though small, when pooled together, the waterdrops can be very valuable

Online insurance broker, too

Waterdrop does not offer Shuidi Huzhu as a substitute for private health insurance.

Shuidi Huzhu and Shuidi Chou have helped Waterdrop attract a huge user base and online following. In 2017, Waterdrop launched its e-marketplace for commercial insurance, Shuidi Bao. It later changed its name to Shuidi Insurance Mall, or Shuidi Baoxian Shangcheng in Chinese, selling private health insurance plans to Waterdrop's users and online followers.

Based on the sales funnel process, each Waterdrop crowdfunding campaign is usually shared on social networks, like WeChat. Each time a donation is made, the contributor will see an ad of Waterdrop's mutual aid plans on the crowdfunding page. Having just read the sad stories – which might even be those of unfortunate friends – users are usually more inclined to join a mutual aid plan. Those who are especially worried about their health might be intrigued by Waterdrop's health insurance products from Shuidi Bao that are advertised via Shuidi Huzhu, its mutual aid platform.

At the same time, Waterdrop has been working with insurance companies to customize insurance products based on its users' profiles, such as instalment payment plans for low-income users. 

"The current insurance products were designed for companies, high net worth individuals and the new middle class," said Shen. “We want to meet the needs of young internet users and people from lower-tier cities.”

As of August 2019, Waterdrop had sold commercial insurance plans to 6m users. For 90% of them, it was their first time buying an insurance policy. 

Although no specific numbers were disclosed, Waterdrop insisted that the commissions earned from selling commercial insurance products were its main source of revenue. 

Trust issues

There are quite a number of players in China providing healthcare-related mutual aid and crowdfunding services, including Alibaba's Ant Financial. Waterdrop is the largest player in the market by number of users.

Faced with stiff competition, Waterdrop is aware that maintaining a reputation of trust is critical to its success. Despite the startup's best efforts, however, alleged or actual cases of fraud have surfaced, hurting its name. 

In May 2019, the wife of Wu Shuai, a celebrity comedian, launched a crowdfunding campaign on Shuidi Chou to raise RMB 1m for her husband, who had suffered a brain hemorrhage. When it was revealed that Wu owned two houses, each worth RMB 6m, in Beijing and a car, netizens questioned why the platform had even approved the campaign in the first place.

Waterdrop later suspended the campaign and pledged to exercise greater care when reviewing crowdfunding applications. To the company, protecting the goodwill of donors from abuse is as important as helping people in need. 

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Edited by Celine Lim, Wang Xiao'e

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