Health insurance sector: Less penetrated but more opportunities

Mayank Bathwal, CEO – Aditya Birla Health Insurance Co, elaborates on the importance of health insurance for Indian population and its future growth prospects


Mayank Bathwal

Healthcare issues have remained a challenge in India for a very long time. A significant part of the population is ageing and the funds available for healthcare are lower than what is required. According to the Economic Survey 2015-16, the expenditure by the central and state governments on health as a percentage of GDP was 1.3 per cent. The World Health Statistics also suggest that India’s per capita government expenditure on health in 2012 was $60, while the US spent $4,153.

While India has made significant gains in terms of health indicators – demographic, infrastructural and epidemiological, it continues to struggle with newer challenges. The country is now in the midst of a dual disease burden of communicable and non-communicable diseases. This is coupled with spiralling health costs, high financial burden on the poor and erosion in their incomes. The changing lifestyle patterns have made the Indian diaspora more vulnerable to diseases and the cost of medical expenditure is on a rise due to the growth of the private sector in the healthcare segment, lack of healthcare infrastructure available in the public sector and the government’s inability to provide benefits to a large number of people.

All of this has led to higher out-of-pocket health care expenses in the country. A large number of Indians still pay their medical bills by either borrowing money or by selling assets. There is very low penetration of the health insurances with only 27 per cent of the total population of India being covered under the various health insurance schemes. With the majority covered under either government or employer programmes and voluntary, private health insurance has around three per cent penetration of the country’s population. Clearly, there is an urgent need to pay attention on increasing the penetration of health insurance policies in the country.

The health insurance sector in India is unable to keep up with the growth in GDP, which is one of the main causes behind its decline. However, there are multiple factors that have led to the low penetration of health insurance policies in the nation.

Low awareness: Lack of awareness is one of the key reasons behind the country being highly un-insured or under-insured. Even today, most of the people are unaware of health insurance products and their benefits. Some people understand the significance of these products but take very little attempts to buy them. One might be covered by their corporates but with the rising inflation this cover isn’t sufficient and there is a need to have adequate health insurance coverage. The insurance companies need to widen their reach for increasing awareness.

Inadequate coverage: Presently most Indian insurers are reluctant to cover people with chronic conditions because of the risks associated with them. Even if they are covered it is only for hospitalisation with a substantial waiting period and sub-limits. Since a big part of the medical expenditure goes uncovered, people end up paying out-of-pocket which isn’t an ideal situation for them.

Perception of affordability: The rising cost of medical expenses has also led to the problem of affordability of the insurance policies for the common man, especially in the tier II/III cities. Maximum health insurance companies falter when they try selling insurances mainly as a tax saving instrument instead of risk covering instrument. This has also led to the formation of misconceptions in the people’s perception about insurance products.

Potential for growth in this sector

There is immense potential for growth as the Indian market is highly under penetrated and is vastly underexposed to benefits of health insurance. Last decade and a half has seen very rapid expansion of health insurance coverage in India. There are increasing attempts to create insurance awareness, and inflationary healthcare costs due to technological advancement in medical science is also contributing potential for growth.

In 2003-04, the total premium for health insurance in India was Rs 1370 core. which has risen in FY 2017 to Rs 30,000 crore. This is a CAGR of nearly 30 per cent, making health insurance the fastest growing segment in the Indian insurance sector.

Currently, the focus of health insurance is limited largely to covering hospitalisation expenses. So a large part of customer segment like the very young and healthy, don’t feel the need for health insurance as they don’t consider hospitalisation a serious probability. In recent times, the health insurance industry has evolved and there are insurers who in addition to the no claim bonus incentivise their customers for staying active and fit. There are cash equivalent rewards which can be used for health related expenses like buying medicines and pay for diagnostic tests, day care treatment, out-patient expenses (OPD), alternative treatments (which are traditionally excluded) or most importantly can use it towards the payment of future premium.

Besides changing lifestyles that cause conditions like diabetes and hypertension, high level of pollution across Indian cities is acting as a catalyst for diseases such as cardiovascular disease etc. According to the reports published by National Health Profile – Central Bureau of Health Intelligence and International Diabetes Federation, India is now both the cardiovascular disease and the diabetes capital of the world and the third most obese country behind the US and China. Earlier, Indian insurers were reluctant to cover people with chronic diseases; even if they are cover it was only for hospitalisation with a substantial waiting period and sub-limits.  However, insurers have now introduced specialised treatment and management programmes for people with chronic conditions that is in addition to a comprehensive hospitalisation policy, which offers day one cover for diabetes, hypertension, hyperlipidemia and asthma.

Health insurance penetration is bound to increase even more if the insurers actively spread awareness about the benefits of health insurance coverage enabling people meet the untoward expenses arising out of unexpected ailments.

The higher cost of medical expenses can also act as a trigger for growth in this space. This can be done through knowledge dissemination and promotion of risks and rewards of getting covered under policies. The companies can make sure that the nation gets to reap benefits of the National Health Policy (NPH) 2017 that has spoken about achieving Universal Health Coverage through promoting card-based health insurance schemes. This policy recognises the critical gaps in public health services which would be filled by ‘strategic purchasing.’

However, insurers should also come up with influential marketing campaigns, workshops, seminars that could be good options to achieve the same. The companies can also conduct training and skill development programmes for increasing the effectiveness of the communications made by agents who sell in policies. They can go to the roots and concentrate on the rural areas, tier II & III cities.

Thus, it is clear that there is a huge scope for the sector to innovate and introduce best practices to engage and acquire new customers. By 2020, India’s insurable population is projected to reach 750 million; the life expectancy is projected to reach 74 years; and a large part of the existing market is still untapped. There are myriads of opportunities available and all one needs do is just strike while the iron is hot.