Xu Huifeng knows he is a lucky guy. After moving back to China seven years ago, the insurance service business he started is expanding around the country and on its way to becoming a huge success.

LUCKY BIRD: Xu Huifeng, head of an insurance service company, established his business in Beijing's Wangjing Overseas Students Pioneer Park and looks forward to a successful future (LIU XINLIAN)

"I made the right decision at the right time," said Xu, an entrepreneur educated overseas.

Xu's company, Digimedex Assured Life Infortech Corp., was the first to bring the concept of third-party administration (TPA)-a way for companies to contract out formerly core functions of their business-to China's insurance industry. He likes to call his work "selling water beside a gold mine," because he provides an integral service to China's highly profitable insurance sector.

For policy holders, Digimedex's wide network of medical professionals will drop in to conduct physical examinations at a convenient time and location. For their insurers, Digimedex provides a preferred provider organization (PPO) to control medical costs which had previously damaged the Chinese insurance industry's profit margins.

Since its launch in the 1980s, China's commercial health insurance industry, which provides policies to cover peoples' health and medical expenses, has had a tough time becoming profitable.

The high claim rate, claims payable as a percentage of premium income, remains the key factor in China's commercial insurance problems. Some health insurance risks witnessed a claim rate of 60-90 percent, exceeding the break-even point of 70 percent; some even as high as 100 percent.

Because insurance companies were unable to effectively calculate real therapeutic costs and the actual health condition of policyholders, some people applied for insurance without notifying the companies of pre-existing diseases. Some of the fraud took on conspiratorial tones, with policyholders cheating their insurance companies in concert with their hospitals.

But in the health insurance industry of advanced countries, TPA has played an important role. Insurance companies outsource claims processing administration to TPA providers. The TPA provider, in turn, is an independent third party that provides legally binding professional services and hi-tech solutions to insurance companies and the insured. TPA firms stand between the insurer, the insured and the medical service provider to help cut down claim rates and control medical costs.

A broad horizon

After obtaining a master's degree in pathology from Xi'an-based Fourth Military Medical University, Xu moved to the United States in 1988. Four years later, he earned a medical degree from the American Academy of Ophthalmology.

After years of working for Hooper Holmes, America's leading provider of risk assessment services for the insurance industry, Xu moved back to China in 2002 to start Digimedex.

The company has been the beneficiary of a series of favorable policies and funding from the Chinese Government, including support funds from Zhongguancun Science and Technology Park, China's Silicon Valley. The company also gets rent remission from Chaoyang District Government and Wangjing Overseas Students Pioneer Park, subsidies from the Beijing Municipal Government and supporting funds and free loans from the Suzhou Municipal Government.