China’s private health insurance market will grow fivefold to 1.1 trillion yuan ($167 billion) by 2020, fueled by fast-growing demand from the emerging middle class, a report showed on Aug 24.

As wealthy Chinese look for alternatives to the public insurance system, private health insurance has been growing at a compound annual growth rate of 36 percent since 2010 and hit 241 billion yuan as of 2015, according to the report, which was jointly compiled by The Boston Consulting Group and Munich Re.

The fastest growth in the private health insurance sector is expected to be in reimbursement policies, which are more expensive but more flexible than the critical-illness policies that many Chinese have today.

Critical-illness insurance pays a lump sum if an insured person is diagnosed with a covered medical condition, while reimbursement insurance pays on an ongoing basis if a health problem requires multiple medical consultations or hospital visits.

“Private reimbursement insurance makes tremendous sense in China. There isn’t yet a mass market for it because of the cost. But there is a lot of interest and we expect to see many new products in the next few years,” said Luo Ying, a partner at BCG’s Beijing office and a co-author of the report.

For Doris Hoepke, a member of Munich Re’s board of management and responsible for Munich Health, insurers have enormous opportunities if they start formulating the appropriate strategies now.

“To participate in the reimbursement market, organizations need to have a clear understanding of target customers and their needs, which should be reflected in innovative products tailored for these segments.”

The joint study by BCG and Munich Re revealed that the most likely purchaser of reimbursement insurance today is aged 35 to 55, married with children, with a minimum annual household income of 200,000 yuan. This group is expected to grow in China to more than 40 million people by 2020.

Currently, private reimbursement policies are generally sold through group insurance.

“Purchases by individuals remain rare, and pure reimbursement players in China simply haven’t been able to make money due to the small size of the market. This is set to change,” said John Wong, head of BCG’s healthcare practice in China.