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Health Insurance Scenario In India

                                                                            by shri Jagendra Kumar 

Healthcare in India is in a state of transition. Increased income for the middle classes, better lifestyles, health consciousness among the majority of classes, price liberalisation, reduction in bureaucracy and the introduction of private healthcare financing have all made a world of difference. With rise in the incidence of diabetes, cancer and cardiovascular diseases, the spending pattern will change dramatically especially in the private sector. Private participation is helping bridge the wide inter-regional disparities on the health front. Already, telemedicine has brought one of the paradigm shifts in the healthcare industry by delivering specialised advice to patients in remote locations using information communication technology. Expenditure on healthcare will more than double in next six years. As a result, the contribution of the sector to GDP is expected to increase from 5.2% at present to 8.5% over the next 10 years. In the next decade, the healthcare spending is expected to increase to Rs 2,00,000 crore from the current Rs 86,000 crore.

Many new policies, hybrid policies and medical arrangements are being introduced in the market. The Indian Government and the insurance industry have begun working on two key requirements to facilitate growth - hospital accreditation and the standardisation of rates. The Quality Council of India is now in the process of giving accreditation based on the parameters evolved by the healthcare industry. Corporates and hospitals are forging tie-ups with big overseas insurance firms to boost health tourism. The Ranbaxy promoted Fortis Healthcare Ltd has recently tied up with a host of insurance firms like Cigna, HTH Worldwide, Atena, Bupa and Vanbreda to provide health insurance cover to the patients visiting the hospital chain. Many other hospitals are in the process of striking similar agreements. Fortis agreements would initially cover only foreign students, expats and tourists who require treatment while they are in India. Till now, they had to fly to Singapore to get the insurance benefit. This is the first step towards recognising India to extend insurance cover to the patients in their home countries who want to visit India for treatment.

Bargain for Bancassurance

With insurance companies recording losses of over 100% on their premiums, they are unwilling to push sales of health insurance plans. However, health insurance continues to be a product that is bought as add-ons to other insurance products. Public sector banks, which enter into bancassurance partnerships with insurance companies, are demanding a group health cover for their customers from insurance companies. The latest to offer a group health plan is National Insurance, which has issued Baroda Health Policy to Bank of Baroda, its bancassurance partner. While banks see cheap health insurance as a selling proposition that will earn customer loyalty, insurers are willing to offer these policies in the hope that banks will sell more insurance products to the same customers in future.

Health Insurance Company

An exclusive health insurance company "Star Health and Allied Insurance" is launching its first product soon. The company would focus mainly on the southern states and expects to have 75 officials in the region. The claims experience in the southern states is much better. The experience in Delhi and Mumbai is not so good. With a 26% FDI, the company has a capital base of Rs 105 crore. The market potential for health insurance is at least Rs 15,000 crore, while only about Rs 1700 crore has been tapped so far. A huge distribution network is required to sell health covers. In fact, 51% FDI is being canvassed for companies selling only health insurance products. LIC too is keen on health insurance. Bajaj Allianz General Insurance Company and ICICI Lombard Insurance Company are the first two insurance companies in the country to offer a product covering pre-existing diseases. Of course, these are governed by certain terms and conditions.

Untapped Rural and Semi Urban Areas

Insurance companies are now looking to tap the vast, largely untapped markets in the rural and semi-urban areas. At least 5 of the 14 private life insurance companies have made significant investment in their rural distribution network and tie-ups. The sector’s biggest player, LIC, which owns 75% of the total life insurance market, gets nearly 25% of its business from the rural areas. In India, 26% of the population, covering over 5 crore families, comes under ‘Below Poverty Line’ or the BPL category. With IRDA taking initiatives allowing insurers to sell micro-insurance products through NGOs, Micro Finance Institutions and Self Help Groups under its Micro Insurance Regulations, the rural insurance business would witness faster growth.

Group Insurance Covers

Private insurers are coming forward to provide group coverage for large number of people of various lower and middle income segments. ICICI Lombard is offering Group Personal Accident Insurance cover sponsored by Mahanagar Gas Limited to over 2.25 lakh drivers operating CNG-driven taxi and auto rickshaws within MGL’s area of operation. This Mahasuraksha Yojna will benefit 10,00,000 persons including drivers and their families. ICICI Lombard has also insured teachers of Government schools of Rajasthan under the State Mediclaim Policy. Under Vivekanand Samuh Yojna launched in MP, ICICI Lombard provides ‘Below Poverty Line’ families in case of death and disability caused by accident or natural calamity. The insurer has also launched group health insurance policies in Kerala and Assam as well. The National Pharmaceutical Policy draft has proposed setting up a new health insurance scheme - Rastriya Swasthya Bima Yojna for ‘Below Poverty Line’ category. Under the scheme, the benefits of hospitalisation up to Rs 15,000 and Rs 500 for medicines as outpatients per annum per family would be made available. A low-cost health insurance scheme, Yeshasvini, is also run by the Karnataka State Government. LIC has grown faster than private companies in group business in all three counts-premium, sum insured and number of lives. Out of the total premium of Rs 3,766 crore generated by the industry this year, LIC alone accounts for Rs 3,051 crore. Life insurance companies, which have built mortality and morbidity statistics as part of their ongoing process of medico-actuarial investigations, have some advantages over general insurance companies.

Third Party Administrators

There has been a lot of innovation on both ‘life’ and ‘non-life’ fronts. Third Party Administrators (TPAs) are the new breed of intermediaries in the sector, and it is benefiting both the insured and the insurer. While the insured is benefited by the service, insurers are benefited by reduction in their administrative costs. TPAs tie-up with hospitals which offer hospitalisation services. Further, each TPA may tie-up with any number of insurers and likewise each insurer can empanel any number of TPAs.

As a result of financial limitation in the individual’s paying capacity, health insurance in India cannot be made mandatory. Insurance in India has always been sold and not bought. Current premium charges are roughly 1.5% of the sum assured, meaning that with the premium received from a hundred policyholders, the company can clear the entire claim of just one. This is an astounding statistic if we compare the cost of medical insurance in Western countries, which is much higher. Roughly 8% of all the policyholders make claims every year, making it extremely difficult for insurance companies to continue at the prevailing rates. The claim ratio is averaging around 125%.

Healthcare costs are increasing globally due to higher usage, legal environment and overall costs. The premium from health insurance has grown from about Rs 400 crore in