In Depth: Lawsuits Lay Bare Shortcomings of China’s Commercial Insurers

Commercial health insurance is marketed as a safety net offering protection above basic medical plans, but many families only discover the limitations of such policies when filing a claim. This was the case for Beijing resident Du Mengda, who in July 2020 purchased a critical illness policy from Fosun United Health Insurance for her infant son, Haohao. The children's policy, launched in 2019, promised coverage for 215 conditions—including rare and mental illnesses—for annual premiums of 1,977.1 yuan ($282) over 30 years, extending into 2090 and seemingly securing Haohao's future [para. 1][para. 2].

Critical illness coverage pays a one-time lump sum after diagnosis of a covered disease, intended to offset treatment expenses and income loss. Though demand has plateaued and insurers have tightened pricing due to reduced assumed interest rates, families like Du's are still drawn in by online promotions [para. 3]. However, this security unraveled when Haohao was diagnosed with Duchenne muscular dystrophy (DMD) in early 2023—a rare, severe genetic disorder primarily affecting boys, leading to muscle wasting, loss of mobility by age 10, and early death [para. 4].

Du’s policy outlined eight benefit categories, each offering 500,000 yuan for major or rare illnesses, including severe muscular dystrophy. DMD's inclusion under multiple benefit categories suggested eligibility for dual payouts [para. 5]. Yet, when Du filed a claim in July 2024, Fosun United denied it, asserting Haohao did not meet their restrictive definition of “severe” DMD and citing missing diagnostic tests and insufficient proof of reduced daily function [para. 6][para. 7].

Disputes such as Du's are frequent, as insurers rely on strict contract definitions—often out of step with current medical standards—to limit payouts, especially for rare diseases where diagnosis is complex and therapy is costly [para. 7]. They require a condition to reach a particular severity before paying, and criteria are rigorously enforced [para. 8].

The heart of Du's case was the diagnostic method. Haohao’s DMD was confirmed through genetic testing—now the clinical gold standard in China—but Fosun United insisted on outdated procedures: electromyography, muscle biopsy, and evidence of functional decline [para. 9][para. 10][para. 11]. Medical guidelines from the National Health Commission (2019) and Chinese Medical Association (2024) recommend genetic testing as sufficient, and Haohao’s hospital records matched all clinical requirements. Doctors did not advise invasive tests, considering them unnecessary and risky [para. 12]. Nevertheless, insurers often demand older diagnostic evidence, leaving families in distress [para. 13].

A further dispute centered on definitions of "severity." Insurers use the inability to conduct three of six daily activities (dressing, moving, walking, eating, toileting, bathing) as a severity threshold, according to 2020 standards. Du argued that this test was inappropriate for a toddler, but Fosun United disagreed, stating the standard applied post-age 3. An October 2024 rehabilitation assessment confirmed Haohao’s impairments, but the insurer referred Du to institutions that did not even evaluate DMD [para. 14][para. 15][para. 16][para. 17][para. 18].

Du sued Fosun United in August 2024 for 1 million yuan. The court ruled for Du in March 2025, accepting genetic testing as reliable and rehabilitation records as proof of severity, and ordered the payout plus premium waiver. The insurer’s appeal was rejected in September 2025, with the court urging insurers to update contracts to reflect medical advances and adopt a more "human-centered" approach [para. 19][para. 20].

Fosun United, despite regulatory compliance and apparent solvency, has poor customer satisfaction and high complaint rates. Requirements for claim payments among Chinese health insurers remain strict industry-wide, often necessitating muscle biopsies and strict activity thresholds. Courts have frequently sided with patients, recognizing the tension between clinical diagnosis and outdated insurance terms [para. 21][para. 22][para. 23][para. 24].

Between 2021 and 2022, over 300 policy disputes reached Chinese courts, nearly half over definitions, coverage, or severity. Regulations require disease definitions to match accepted medical standards, but contract terms often lag behind clinical practice, putting families at a disadvantage. China’s payout ratios remain well below international norms, at 40-41%, compared to 60-70% abroad [para. 25][para. 26][para. 27].

Calls continue to bring insurance contracts in line with current medical knowledge and treatments, allowing either genetic testing or biopsies for diagnosis. Until such harmonization is achieved, patients remain vulnerable to restrictive contract terms and the costly, distressing process of legal recourse [para. 28][para. 29][para. 30][para. 31][para. 32].