Beginning of a health insurance decade

2011 was a positive start to what we believe to be the Health Insurance Decade (2010-2020). Concepts such as health insurance portability and bancassurance have been topics of general conversation, which is a great sign for the times to come.

The Union Budget provided the required sense of direction for higher trajectory growth. Since a vast majority of the Indian population lives below the poverty line across the country, the government's plan to increase health allocation by 20 per cent and widen the scope of the Rashtriya Swasthya Bima Yojana (RSBY) is a positive move and is expected to bring in more opportunities for insurance penetration.

The total allocation for the health sector was hiked to Rs 26,760 crore as compared to Rs 23,530 crore last year. The Union Budget proposed to bring diagnostic tests and hospitals with 25 or more beds with facility of central air conditioning under the service tax regime, resulting in an additional burden for the consumers opting for reimbursement claims under insurance plans and also hurt those going for medical treatment without cover.

Due to the concerns of affordability by the general public, this proposal was squashed later in the year. Additional tax benefits from choosing health insurance policies did not find any mention in this year's budget.
In June, the health insurance sector and the general public awaited the Insurance Regulatory and Development Authority's (IRDA) guidelines on health insurance portability and its implementation. Due to unresolved operational issues, the implementation of health insurance portability was moved to October 1, 2011.

From October 1, 2011, health insurance policyholders were able to port their existing policies to another insurance company, without losing out on the benefits accrued. While people are still unsure of the portability process, many customers have come forward to port and are choosing insurance providers based on service quality standards and products and benefits. Portability brought with it increased levels of standards amongst insurance companies and allows for more cooperation in information sharing between the players.

The second half saw IRDA issuing draft regulations for the licensing of bancassurance agents, primarily to increase access to better healthcare. Today, the gap between the total cost of healthcare incurred by the population and the amount covered by health insurance is as high as $57 billion. Healthcare is an enterprise that is growing rapidly, and spends in this sector will soon touch $200-250 billion.

2011 also saw the entry of a few more players in this segment as well as some product introductions. All these have helped to increase awareness levels across the country, thereby allowing for a better informed customer who will choose a health insurance policy, purely on his or her individual and family requirements, rather than a low premium.

2011 was a year where the health insurance segment leapfrogged over the past few quiet years. We expect to see more players, more innovative products and increased positive regulations from the regulator in order to ensure that gap between healthcare spending and total health insurance coverage reduces sooner, rather than later.