The country’s health spend as a percentage of the gross domestic product may be one of the lowest in the world, but the business of health insurance is getting healthier by the day.
While countries like Canada and the US spend 17.9 % and 19% of their total yearly budgets on health care respectively, in India it is only 34 %.
However, factors like rising income levels and a growing elderly population are driving the growth in the industry. In addition, changing demographics, disease profiles and the shift from chronic to lifestyle diseases has led to increased spending on healthcare delivery.
“The highly competitive and stressful times are definitely taking a toll on the health of our people. The problem gets magnified among the youth. For example, a young heart is far more damaged and suffers a more dangerous heart attack than that of an older person,” explains Dr Ramakant Panda, an eminent cardiac surgeon, who performed a bypass operation on PM Manmohan Singh.
With 80% of all health expenditure borne by patients and their families, the importance of adequate planning for health contingencies cannot be overemphasised, especially given the steep escalation in healthcare costs. Inflation in medical costs has been running in double digits—higher than overall inflation—for the past four years and is scorching the middle class and the poor alike, a survey by global consultancy firm Towers Watson has found. Worse, the situation is not going to get better any time soon.
The health insurance business, which has been predominantly within the non-life sector as part of the miscellaneous accident portfolio, has emerged as one of the most promising growth segments with increase in not only number of products but also in the number of insurance companies, including life insurers and stand alone health insurers, venturing into the health insurance market.
With increasing focus on health care in the country, health insurance in a very short span of time has emerged as the second largest portfolio in the domestic general insurance industry. With a premium size of almost R10,000 crore, the segment is witnessing a growth of 25% and insurers say in another two years it will be the single biggest premium driver in quantum accretion. As far as growth rate is concerned, it has already beaten motor business, which contributes the largest premium income for general insurers. The health segment contributed over 22% of the total premium in 2010-11 (21.06% in 2009-10). With increasing demand, the health insurance industry is launching innovative products and improving the post-sales services with a sophisticated IT back up to enable policyholder to plan comprehensive protection against health eventualities by combining hospitalisation indemnity products with supplementary covers or additional policies to meet specific needs of the policyholder.
In their second round of revamping the claim services, some of the general insurers are even offering cashless service to enable a policy holder’s hospital bills to be settled by insurers through a professional middle entity called Third Party Administrators (TPA) without even involving the latter to take direct responsibility of such services.
Two top private sector general insurers—ICICI Lombard General Insurance and Bajaj Allianz General Insurance—have even done away with the services of TPAs.
Bajaj Allianz General Insurance has gone for automation of cashless management process which, the company says, has resulted in a drastic improvement in the response time to 40 minutes as on date. The company now directly transfers the claim amount to the insured accounts and also provides SMS alerts to the insured at important stages in the claims process.
One of the latest entrants in health insurance space is L&T Insurance, which has launched a unique product to allow customers to buy a policy till the age of 60. The policy, called Medisure Prime Insurance, can be renewed as long as the customer survives and the premium will not increase annually after the policy holder turns 80 years of age.
The company has chalked out a strategy to focus exclusively on the retail segment. Y M Deosthalee, CMD, L&T Insurance, says the products would cater to individuals rather than the corporate or group health segments where it is a tad more difficult to make profits.
“Retail health insurance if sold carefully is a profitable proposition,” says Deosthalee, pointing out that with the rise in the standard of living as also in the cost of healthcare, the need for health insurance is rapidly increasing.
“The policy provides an additional cover equivalent to the sum assured for the treatment of a critical illness,” adds Joydeep Roy, CEO, L&T Insurance, adding that at least 22 features have been built into the product to address both problems of health and services.
The largest private sector general insurance company, ICICI Lombard General Insurance company, has seen a good response for one of its products called Secure Mind. It is basically a packaged and benefit product, which is offered with loans availed by customers from financial institutions and serves as a financial protection to them along with the benefits of a health insurance product. The product provides the coverage for nine major medical illnesses and procedures like cancer, end-stage renal failure, multiple sclerosis, major organ transplant, heart valve replacement, coronary artery bypass graft, stroke, paralysis, myocardial infraction and death and permanent total disability due to accidents and loss of job.
This product is a benefit product where the sum insured is paid as a lump sum. For the loss of job cover, the company pays three EMIs. For a person aged 37 years, with the insured sum of R25 lakh and a tenure of five years, the premium for Secure Mind works out to R75,250.
“The product is a win-win proposition for the customer and the financial institution. In the event of the claim, we pay the lender whereby the customer is relieved of the loan and the FI’s loan book is also secured,” says Sanjay Datta, head, customer service, health and motor, ICICI Lombard General Insurance.
Similarly, Antony Jacob, CEO, Apollo Munich Health Insurance, says his company’s policies promise to refrain from loading any customer at the time of renewal in case of a claim or even worsening of his/her health condition after taking the policy.
“We believe loading applied on an individual customer due to claims is unfair as it would make it all the more difficult for the customer to continue his cover (due to the high cost added to the premium) at a time when he is more likely to be hospitalised or has taken ill.
Also, Apollo Munich’s policies offer 100% lifelong renewal, without any co-payment or sub-limit options, regardless of the size or nature of claim made during the tenure of the insured period or due to any change in the member’s health status after he or she joins. “This is a unique feature that Apollo Munich has offered for the first time in the marketplace,” says Jacob.
Unlike most plans available in the market, Apollo Munich also extends cover for expenses related to dental and optical care as an added benefit within its Easy Health plan for certain variants.
Regulatory Initiatives
The segment regulator IRDA has been consistently attempting to address and resolve the key issues faced by health insurance sector. One of the initiatives has been the creation of a checklist for facilitating processing of health insurance products filed by non-life insurance companies. The checklist is created by analysing the observations of the health section over the last two years, across various categories of health products.
The checklist is intended for self-administration by companies for products filed by them so that the inconsistencies are eliminated at their end before the documents are submitted to IRDA. Based on the checklist and as a step towards creating an online library of products, the health section has designed a product database that would capture all important features of health products to the granularity of sub-limits, age-wise premium rates and exclusions.
In addition, once the software is put into place and the data keyed in for health products, the product database will enable IRDA to perform comparative analysis across all health products, says J Hari Narayan, chairman, IRDA.
All these initiatives are set to be introduced in due course and also online filing of health insurance products by insurance companies.
While processing health products under the existing file and use (F&U) formats, health section has recognised the need for more health specific information from insurance companies at the time of filing of products. Taking cognisance of this and with a view to enhance the health product processing, the health section has re-designed File & Use formats (where insurers have to first get approval for the products from the insurance regulator) for filing of health insurance products.
Hari Naryan explains, “While insisting on the sustainability and viability of the products with respect to the rates and discounts filed under File & Use procedures, the authority also requires the insurance companies to submit their past experience on similar products and their analysis to support the price mechanism filed by them.” He adds, “As more people buy health insurance to meet the requirement of funding health care for themselves and their families, the necessity of a close monitoring of the pricing mechanism of health products by the insurance regulator becomes important.”
Health Insurance Portability
Further, insurers expect health insurance portability (HIP), which came into force on October 1, to be a game changer in domestic health insurance industry. According to general insurers, health insurance portability, though more complex than mobile number portability, is likely to see a greater response.
Neeraj Basur, CFO, Max Bupa Health Insurance, says, “The industry is likely to witness some migration as HIP allows policyholders, locked in their existing health insurance policies, to evaluate other options, without fearing the loss of benefits for the waiting period served with their existing insurer.”
Jacob, on the other hand, maintains the move will raise service standards and see increased competition among insurers to retain their existing customers. “The regulation is expected to bring in new benchmarks in terms of service standards and delivery mechanisms for insurance players. In the long-run, a company with better services will gain the trust of customers,’’ says Jacob.
Datta of ICICI Lombard General Insurance says that a common data sharing platform will help all insurers access information pertaining to portability. However what will decide the fate of the health insurance business is customer satisfaction from the services point of view,” says GV Rao, a former CMD of state owned Oriental Insurance.
At present customer dissatisfaction is really rampant despite tall claims by insurers. Insurance regulator has an important role to play and its timely intervention can assure customers and help the business to grow,” adds Rao.
It's bound to happen sooner than later because health insurance provides a common platform for all segments of health care providers like hospitals, doctors, pharmacists and above all insurers, and it's in their interest to transform the health care industry keeping in view the rising customer expectations.
