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A Study on the Development of Health Insurance(1)

A Study on the Development of Health Insurance(1)

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‘Winner of D.

Subrahmaniam Award 2010-11 {III}’

TOPIC: A study on the development Health Insurance - its history, current scenario & the future prospects in India…….
By: Mr. Dilpreet Singh, ARM-Sales Training, ICICI Prudential Life Insurance, New Delhi, Email: dilpreet111@gmail.com. ABSTRACT {Article at a Glance} This article is divided into 5 sections respectively. Each of these sections highlights an important area, which is related to the concept of Health Insurance. In addition, every section helps in developing an overall understanding, of the journey of Health Insurance to present state (avatar)& tries to inculcate a perspective, of appreciating the importance of Health Insurance & the its bright future as being the ‘Insurance of Tomorrow’. The sections are as follows:1. History of Healthcare & the evolution of Health Insurance {Introduction} 2. The Health Insurance initiatives of the State in the last 60 years 3. The current Health Insurance scenario (penetration) 4. The Gaps & improvements area in Health Insurance 5. The Future opportunities in this sector in India {Article}

Introduction
The English word "health" comes from the Old English word hale, meaning "wholeness, a being whole, sound or well,”. At the time of the creation of the World Health Organization (WHO), in 1948, health was defined as being "a state of complete physical, mental, and social well-being and not merely the absence of disease or infirmity" The term health insurance is generally used to describe a form of insurance that pays for medical expenses. It is sometimes used more broadly to include insurance covering disability or long term nursing or custodial care needs. It may be provided through a government-sponsored social insurance program, or from private insurance companies. For an individual, either at a personal level or the family front, of which he or she is a part, health is an extremely important subject, which needs to be given priority. The same concept can be extended to the level of the country, where the health of the citizens, comes at the core for its long term sustainable development.

The history of the concept Health insurance can be traced back to the year 188384, when in Germany, compulsory accident and sickness insurance was initiated by Otto von Bismarck. The same concept was also adopted by Great Britain, France, Chile, the Soviet Union, and other nations after World War I. In the year 1946, in Britain the National Health Insurance which went into effect in 1948 provided the most comprehensive compulsory medical care plan. In which individual obtained free medical attention by participating doctors of National Health Service. The cost was met by the national government and local taxation & nominal charges for some services were levied. Similarly 1958 the Canadian Hospital and Diagnoses Act provided full hospital services almost free of charge in public wards. The concept of National health insurance widely adopted in Europe and parts of Asia. Social Security for Health Insurance is a new thing for the Indians. It is a common practice for villagers to take a ‘piruvu’ (a collection) to support a household with a sick patient. However, health insurance, as we know it today, was introduced only in 1912 when the first Insurance Act was passed. The current version of the Insurance Act was introduced in 1938. Since then there was little change till 1972 when the insurance industry was nationalized and 107 private insurance companies were brought under the umbrella of the General Insurance Corporation (GIC). Private and foreign entrepreneurs were allowed to enter the market with the enactment of the Insurance Regulatory and Development Act (IRDA) in 1999. The penetration of health insurance in India has been low. It is estimated that only about 3% to 5% of Indians are covered under any form of health insurance. In terms of the market share, the size of the commercial insurance is barely 1% of the total health spending in the country. The Indian health insurance scenario is a mix of mandatory social health insurance (SHI), voluntary private health insurance and community- based health insurance (CBHI). Health insurance is thus really a minor player in the health ecosystem. Before independence in India, health care has been based on voluntary work. Since ancient times traditional practitioners of health care have contributed to the medicinal needs of society. Acute knowledge in the medicinal properties of plants and herbs were passed on from one generation to another to be used for treatment. The colonial rule and the dominance of the Britishers changed the scenario. Hospitals managed by Christian missionaries took centre stage. Even the intellectual elite in India with their pro west bias favored Western practices. Prior to independence the healthcare in India was in shambles with large number of deaths and spread of infectious diseases. After independence the Government of India laid stress on Primary Health Care and India has put in sustained efforts to better the health care system across the country.

We need to understand the various methods that are used by individuals & families in financing the overall health care expenditure. the ‘Bhore Committee Report’ attempted to analyze the state of health care in India and to make recommendations for the improvement of health care services in India.  Flow-chart showing options of Healthcare Expense financing by individuals or families State Funded State /Public Social Security External Funded Health Expenditure Out of Pocket Private Health Insurance Private External Sourced . as reflected in the postcolonial government of India's Five-Year Plans. Alternate sources of finance were critical for the sustainability of the health sector. On the eve of India's independence in 1947.In 1947. the Bhore Committee Report became the template for the structure of health care services in India in the postcolonial era. There is a basic structure & process as to how ‘Healthcare Expenditure’ is financed by people in India. I am providing below a flowchart. The government initiative was not enough to meet the demands from a growing population be it in primary. before we go into further details regarding the various initiatives of state & society. secondary or tertiary health care. highlighting the various options undertaken to finance their health care expense.

procure the money personally) or with the help pf ‘State or Society/public’. In 1980's realizing that the government on its own would not be able to provide for health care.e.7% in private sector (78% of overall spending). BPO. I.e. The establishment of private sector has resulted in the emergence of opportunities in terms of medical equipment. available with any person. the government allowed the entry of private sector to reduce the gap between supply and demand for healthcare. the person again has 3 options.  External Source – By way of managing personal loans from friends & family or Banks etc In the case of Public Financing option. It can either be done. sector (this accounts for 22% of overall spending) and 4. by way of which health care expense can be tackled. provides for the medical care or gives some subsidy.  Private Health Insurance – The expense is taken care by the health policy. In case of Private financing. ‘privately’ (i. which are under-mentioned: Out of Pocket – Self financing. undermentioned: State Funded – The Govt.2% is in the Govt. you are covered for medical. The quality of service provided was excellent especially in the hospitals run by charitable trusts and religious foundations.There are mainly 2 ways. the person pays from his or her own pocket & savings. there are 3 options. non-profit or charitable organizations. . The private hospitals are managed by corporate. small hospitals and nursing homes.  Social security – In developed countries by paying a small amount to the state. which the person owns. information technology in health services.  External funded – Aid or grants etc Till about 20 years back.5 to 7% of GDP on Health care (official estimates around 6%) out of which 1. the private sectors venture in the health care sector consisted of only solo practitioners. Telemedicine and medical tourism  The current Health Insurance scenario India spends about 6.

which caters to all the citizens of our country. Based on ownership the existing health insurance schemes can be broadly divided into 4 categories. It is estimated that employer managed systems cover about 20-30 million of population. such as:  Government or state-based systems  Market-based systems (private and voluntary)  Employer provided insurance schemes  Member organization (NGO or cooperative)-based systems The 3 broad institutions under which the above-mentioned 4 health Insurances schemes are offered. we yet do not have any universal health insurance plan. . There are various types of health overages in India.In India. are under-mentioned pictorially:- Health Insurance Plans Private Social Community Based / Micro Insurance Market & Employer M based Schemes Government or State based Schemes NGO or Cooperative based CHI Government or state-based systems Government or state-based systems include Central Government Health Scheme (CGHS) and Employees State Insurance Scheme (ESIS). The schemes run by member-based organizations cover about 5 per cent of population in various ways.

This scheme is mainly funded through Central Government funds. The CGHS has been criticized from the point of view of quality and accessibility. Central Government Health Scheme (CGHS)      Started in 1954 with 16 allopathic dispensaries covering 2.3 lac beneficiaries Provides comprehensive medical care to central govt. all employees of the Central Government (present and retired). which provide medical benefits to specific sections of our society. judges. It aims at providing comprehensive medical care to the Central Government employees and the benefits offered include all outpatient facilities. freedom fighters and journalists are covered under the Central Government Health Scheme (CGHS).But there are some special insurance schemes promoted by the Government. employees Mutual advantage to both employee and employer Now 320 dispensaries/hospitals in various systems of medicines covering 42. MPs. This scheme was designed to replace the cumbersome and expensive system of reimbursements (GOI. 1994). Subscribers have complained of high out-of-pocket expenses due to slow reimbursement and incomplete coverage for private health care (as only 80% of cost is reimbursed if referral is made to private facility when such facilities are not available with the CGHS). with premiums ranging from Rs 15 to Rs 150 per month based on salary scales. This scheme provides protection to . spread across 22 cities. some autonomous and semi-government organizations. Beneficiaries at this moment are around 432 000. The coverage of this scheme has grown substantially with provision for the nonallopathic systems of medicine as well as for allopathy.76 lac beneficiaries Since 1954. Employee and State Insurance Scheme (ESIS) The enactment of the Employees State Insurance Act in 1948 led to formulation of the Employees State Insurance Scheme. The under-mentioned initiatives & schemes are those which have been promoted by the Government or with the help of the Government. Inpatient facilities in government hospitals and approved private hospitals are also covered. and preventive and promotive care in dispensaries.

and 12.employees against loss of wages due to inability to work due to sickness. 42 annexes and 1 450 dispensaries with over 23 000 beds facilities. Service establishments like shops. the ESIS scheme covered all power-using non-seasonal factories employing 10 or more people.per capita insured person.2000) found that over half of those covered did not seek care from ESIS facilities. restaurants. with a prepayment contribution in the form of a payroll tax of 1. it was extended to cover employees working in all non-power using factories with 20 or more persons. lack of interest or low interest on part of employees and low awareness of ESI procedures. 6 500. there were 125 hospitals. Originally. maternity. with total expenditure of Rs 3 300 million or Rs 400/. low quality drugs. were some of the reasons cited/ .75% of employees' wages to be paid by the employers. The ESIS programme has attracted considerable criticism. impudent behaviour of personnel. long waiting periods. hotels. and road transport and news papers printing are now covered. cinema houses.5% of the total expenses are borne by the state governments. While persons working in mines and plantations. The monthly wage limit for enrolment in the ESIS is Rs. 1994 as quoted in Ellis R et a. It offers medical and cash benefits. The number of beneficiaries is over 33 million spread over 620 ESI centers across states. 4. preventive and promotive care and health education. Unsatisfactory nature of ESIS services. disability and death due to employment injury. Later. The scheme is managed and financed by the Employees State Insurance Corporation (a public undertaking) through the state governments. A report based on patient surveys conducted in Gujarat (Shariff. or an organization offering health benefits as good as or better than ESIS. Medical care is also provided to employees and their family members without fee for service. Under the ESIS. are specifically excluded.75% by employees.

It also seeks to increase the aggregate public health investment through increased contribution from the Central as well as state governments and encourages the setting up of private insurance instruments for increasing the scope of coverage of the secondary and tertiary sector under private health insurance packages. Plantation Labour Act 1951. which is not available within the government system. which reduces such inequities and allows the disadvantaged sections of the population a fairer access to public health services.Other Government Initiatives Apart from the government-run schemes.9% to 2. The Government of Andhra Pradesh pays a premium of Rs 75 per acceptor. The coverage is for common illnesses and accident insurance benefits are also offered. namely the New India Assurance Company. under the provisions of the Maternity Benefit (Amendment) Act 1995. The National Health Policy 2002 acknowledges this and aims to evolve a policy structure. The benefits to be availed of. the Andhra Pradesh government is implementing the Aarogya Raksha Scheme since 2000. various state governments have begun health insurance initiatives. The Government of India has also undertaken initiatives to address issues relating to access to public health systems especially for the vulnerable sections of the society. All people living below the poverty line and those who accept permanent methods of family planning are eligible to be covered under this scheme. with a view to increase the utilization of permanent methods of family planning by covering the health risks of the acceptors. Workmen’s Compensation (Amendment) Act 1984. This scheme can be availed by all permanent residents of Goa with an income below Rs 50 000 per annum for hospitalization care.4000 per year for the acceptor and for his / her two children for a total period of five years from date of the family planning operation. The Government of Goa along with the New India Assurance Company in 1988 developed a medical reimbursement mechanism. The hospital bill is directly reimbursed by the Insurance Company.5% to 7% of the budget by 2005. to be further increased to 8% by 2010. Health insurance initiatives by State Governments In the recent past. The State government spending for health in turn would increase from 5. For instance. The non- . social security benefits for the disadvantaged groups can be availed of. Beedi Workers Welfare Fund Act 1976 and Building and other Construction Workers (Regulation of Employment and Conditions of Service) Act. Mine Mines Labour Welfare Fund Act 1946. 1996. Ensuring more equitable access to health services across the social and geographical expanse of the country is the main objective of the policy. include hospitalization costs up to Rs. The government envisages an increase in health expenditure as a % of GDP from existing 0.0 % by 2010 and an increase in the share of central grants from the existing 15% to constitute at least 25% of total public health spending by 2010.

For every claim-free year. They mainly cover hospitalization expenses provided it is for at least 24 hours. negotiations are under way with the IRA to seek service tax exemption. This premium entitles them to hospitalization coverage in the government hospitals up to a maximum of Rs 2500 per year. the PRI (Rs 100) and from the beneficiary (Rs 62. consultant doctor's fees. There are many employers who reimburse costs of medical expenses of the employees with or without contribution from the . most plans now come with sub-limits for each of these heads. loss of wages at Rs. available is provided below:Individual health plan: . Currently. The amount for the premium would be recovered from the drug budget (Rs 100). including hospitalization for common illnesses. deliveries involving surgical procedures (either to the mother or the newborn). Reimbursements are made to an insurance fund which has been set up by the NGO / PRI with the support of UNDP. Market-based systems (private and voluntary) In the Open Market based category. most plans add 5 per cent to the sum insured. The Government of Kerala is planning to launch a pilot project of health insurance for the 30% families living below the poverty line. A pilot project on health insurance was launched by the Government of Karnataka and the UNDP in two blocks since October 2002. commonly known as 'Mediclaim' policies. unlike the past. there are various Health Insurance plans being offered by both Private & Public Insurance companies. Market-based systems (voluntary and private) have Mediclaim scheme which covers about 2. Instead of payment by the beneficiary. They usually do not cover pre-existing diseases or complications arising from them for the first four years of the policy. The scheme would be associated with a government insurance company.5 million of population. A Broad outline of the health plans. claims for specific ailments may not be allowed in the first or second year. ambulance charges. The overall limit is Rs 30 000 for the insured person for a period of one year. oxygen and operation theatre charges are the usual inclusions. 50 per day as well as drug expenses at Rs 50 per day. The beneficiaries include the entire population of these blocks. However. with the Government of Karnataka subsidizing the premium of those below poverty line and those belonging to Scheduled Castes/ Scheduled Tribes. The aim of the project was to develop and test a model of community health financing suited for rural community.50) while the benefits available would include cover for hospitalization. The expenses for hospital bed. Besides.availability of services requires certification from the hospital Dean or Director Health Services. The premium is Rs 30 per person per year. thereby increasing the access to medical care of the poor.These are the so-called 'traditional' health insurance covers. nursing. This scheme would be applicable in 216 government hospitals. surgeon's fees. Smart Card facility would be offered. cost of blood. The maximum benefit per family would be Rs 20 000. The proposed premium is Rs 250 plus 5% tax.

It does not cover outpatient treatments. The health insurance products are generally complicated and it is suggested that GIC and its subsidiary companies who deal in non-life insurance market which is dominated by mandated insurance such as accident. The current statistics on health insurance indicate that out of 1 billion populations only about 2. The benefits remain largely the same. under the name Mediclaim. It should also be recognized that because of technicalities of health service business there are number of cumbersome rules which have hampered the acceptance of the scheme. which could be catastrophic. Mediclaim scheme is also available for groups with substantial discount in premium. Now a person between 3 months to 80 years of age can be granted Mediclaim policy up to maximum coverage of Rs. It is also reported that in number of cases the applicants of older ages have been refused to become member of Mediclaim scheme due to unnecessary conservatism of the companies. It is estimated that about 20 million employees may be covered by such reimbursement arrangements Mediclaim being one of the oldest & most popular health insurance plans. for a family. Mediclaim is a reimbursement base insurance for hospitalization. a Rs 200. a brief summary of its development. thereafter Mediclaim has been revised to make it attractive product. say. success & gaps is provided below:History of Mediclaim scheme The government insurance companies started first health insurance in 1986. Rather than buying. and later when the policies were revised these ceilings were removed and total reimbursements were allowed with in the limit of the policy amount. room charges. Mediclaim has provided a model for health insurance for the middle class and the rich. fire and marine. if you bought an . Health insurance also represents very small percentage of overall business of GIC and its subsidiaries hence they have also not focused their attention in this area.5 million of population is covered by Mediclaim scheme. First there is used to be category-wise ceilings on items such as medicine. This scheme is offered by all the four subsidiary companies of GIC. Family floaters Plans. do not have expertise in marketing health insurance and therefore this scheme is not popular.000. The reason for lack of popularity of this scheme could be several.These can be seen as agglomerations of individual health plans. but the sum insured can be availed by any or all members of the family and not a single person. The GIC companies have little interest and mean to monitor the scheme. It covers hospitalization costs. 5 lakh against accidental and sickness hospitalizations during the policy period as per latest guidelines of General Insurance Corporation of India. The total limit for policy coverage was also increased.000 health cover for each member of the family of four by spending for a total cover of Rs 800.employee. operation charges etc.

a portion goes towards medical coverage and the rest of the premium is invested in a fund that operates like a mutual fund. say Rs 500 per day for up to 50 days in a year and up to 250 days during the entire term.This should be the last option when buying health plans. it comes at a lower premium than otherwise. Most can be renewed lifelong or up to the age of 90. and have a fixed coverage of. they may not cover life risk. One can get it in the form of a rider attached to a life insurance cover.000 as opposed to Rs 200. This reduces the need for you to pay from your pocket. say. The policy term is usually longer (10-20 years) if this cover is bought from a life insurer as a rider than from a general insurer (1-5 years).000 in the earlier instance. it pays the entire sum insured and terminates and can happen only once for any particular illness. No claim can be made during the first 90 days of the inception of the policy. those taking SCHP should watch out for certain illnesses as many ailments are excluded from the plan. Although these policies are being sold by life insurers. and only after the policyholder produces proof of the number of days he stayed there. It provides financial assistance if the insured develops a serious ailment. Unit-linked health plans:. Health Ulips are made up of two parts . each person covered under it can avail benefits up to Rs 800. while Senior Citizen Health Plans. Hospital cash benefit has a pre-defined limit in most cases. Each cover has a list of ailments. Out of the premium one pays. Critical illness plan:This is not a substitute for a 'Mediclaim'.000. unlike a standard health insurance policy. the insured has to survive for 30 successive days after the diagnosis. Rs 100. Besides looking for sublimits. Daily hospital cash benefit: . usually 9-12 of them. divorced.usually for the long term .000 or Rs 200. are generally for the age group of 60-80 years.Most Individual Health plans. Senior citizens health plan:. or has a stroke. . the payout is not dependent on the costs actually incurred.These are mostly defined benefit plans . Also. cap the entry age at around 60 years.000. A FF can be bought by an individual who becomes the proposer along with spouse.FF for Rs 800. Senior Citizen Health Plans might even have the option to attach a Critical Illness plan rider. or as a standalone policy from either a life insurer or a non-life insurer. To get the payout.a health plan and a unit-linked investment plan. widowed daughter and dependent parent. If critical illness occurs. but you should ideally add this layer to the latter. Most hospital cash plans might also inconvenience you as they offer the benefit after discharge from the hospital. dependent children up to 25 years or even unmarried. such as cancer.and.

the prespecified amount which is the sum insured is paid as compensation. 1996). until 48 consecutive months of coverage have elapsed. Mediclaim Policy. Also. however. say.Life insurance companies. Some will even throw in a life cover for good measure. these are long-term. These are Ashadeep Plan II and Jeevan Asha Plan II by Life Insurance Corporation of India and various policies by General Insurance Corporation of India as under: Personal Accident Policy. defined benefit plans . Bhavishya Arogya Policy and Dreaded Disease Policy (Srivastava 1999). after the date of inception of the first policy.This is a common problem area since there was no standard definition of pre-existing illness earlier.Community Health Insurance CHI is “any not-for-profit insurance scheme that is aimed primarily at the informal sector and formed on the basis of a collective pooling of health risks. Raj Rajeshwari Policy. ailment or injury or related condition for which the insured had signs or symptoms.Covers from life insurers: . Cancer Insurance Policy. and/or was diagnosed and/or received medical advice/treatment. It is estimated that about 30 million employees may be covered under such employer managed health services (Ellis et al. or even 10 years. In June 2008. General Insurance Corporation (GIC) and its four subsidiary companies and Life Insurance Corporation (LIC) of India have various health insurance products. Jan Arogya Policy. five. Note on Pre-existing diseases . have started offering health plans." Employer provided insurance schemes There are several government and private employers such as Railway and Armed forces and public sector enterprises that run their own health services for employees and families. having a fixed premium for. prior to inception of the first policy. Most of these are. including: ‘micro health insurance’ ‘local health insurance’ and ‘mutuelles’ . The health care demand is rising in India now days. irrespective of the actual amount of expenses incurred. Still there is a scope of rise up to 35 per cent in near Member organization (NGO or cooperative)-based systems . the General Insurance Council said "the benefits (of health insurance) would not be available for any condition. It is estimated that only 10 per cent of health insurance market has been tapped till today.” Various other terms are used in reference to community health insurance. Overseas Mediclaim Policy. Most of the types of plans discussed above are on offer. and in which the members participate in its management. three. too.

and targeted at residents of the surrounding area. the voluntary organization is the insurer. BAIF. While in some it is the existing self help groups (SHGs). The size of the target population (i. the hospital plays the dual role of providing health care and running the insurance programme. RAHA) used community health insurance as a measure to increase solidarity among its members – “one for all and all for one. women from self help groups (BAIF. purchasing care from providers and insurance from insurance companies. ACCORD and Navsarjan). in others it is a union (SEWA. DHAN. the schemes are initiated by a hospital. . while purchasing care from independent providers. e g. dalits (Navsarjan Trust). And finally in Type III (or Intermediate design). Most of them use existing community based organizations to piggyback the health insurance programme. Navsarjan Trust and RAHA explicitly state that the health insurance scheme was developed to prevent the individual member from bearing the financial burden of hospitalization. and (2) Protecting the poor from indebtedness and impoverishment resulting from medical expenditures. Buldhana. There are five programmes under this type. there appears to be three basic designs. Health insurance was also seen by some organizations as a method of encouraging participation by the community in their own health care.They are generally targeted at low-income populations. In two others it is the cooperative movement (Yeshasvini and Buldhana). The objectives range from “providing low cost health care” to “protecting the households from high hospitalization costs. especially the more activist organizations (ACCORD. As opposed to social health insurance. In India. to members of work cooperative or microfinance groups. Often.e. membership is almost always voluntary rather than mandatory. farmers (MGIMS. This seems to be a popular design.” BAIF. In Type II (or Insurer design). Most of the insurance schemes have been started as a reaction to the high health care costs and the failure of the government machinery to provide good quality care. (ACCORD. There are two programmes under this type. Karuna Trust. community health insurance (CHI) has emerged as a possible means because of: (1) Improving access to health care among the poor. the voluntary organization plays the role of an agent. Yeshasvini. In Type I (or HMO design). In recent years. And finally. RAHA). depending on who is the insurer (see the Figure). working among the poor. VHS). DHAN) and poor self-employed women (SEWA). the population from which they aim to draw members) ranges from a few thousands to 25 lakh. DHAN. especially among the recent CHIs.” Most of these are based in rural or semi urban areas. and the nature of the ‘communities’ around which they have evolved is quite diverse: from people living in the same town or district.

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and if anything happened. Without it. with proliferation of various health care technologies and general price rise. really? Over the last 50 years India has achieved a lot in terms of health improvement. . just because you didn't buy affordable health insurance. They could be so high that you simply can't pay them. As per the statistics of the total health expenditure in India. increasing cost of care and changing epidemiological pattern of diseases. To save money. your children need health care throughout their young lives. Certainly. Your family. A very rapidly growing private health market has developed in India. Against this. it is better to work with a health insurance agent who can help you compare plans and costs to find the best one for you and your family's needs. The Gaps & improvements area in Health Insurance Health insurance is an expense. This private sector bridges most of the gaps between what government offers and what people need. Remember. and it seems like kids are always getting into scrapes that require a trip to the emergency room. worth Rs 3 lakh crore. but the importance of health insurance really helps defray that expense. Public spending in health care is very low at 17% and the National Health Policy has recognized this More than 86% of healthcare financing is through unplanned or.000 crore. The government and people have started exploring various health financing options to manage problems arising out of growing set of complexities of private sector growth. your entire family is vulnerable. In case of government funded health care system. If you take care of a family. and ruin your financial future. The proportion of insurance in health care financing in India is extremely low. the cost of care has also become very expensive and unaffordable to large segment of population. non-contributory spending 86% from outof-pocket expenses 83% from private sector spending Health care financing in India. Vietnam and Sri Lanka in health indicators (Satia et al 1999). However. Think about another importance of health insurance. your costs are going to be a lot higher than you might have anticipated. to be sure. which is a great opportunity to be tapped. But can you afford to be without it. it can be difficult to come up with the money for individual health insurance. the spending on hospitalization accounts for Rs 1 lakh crore in the country. It doesn't make sense to go bankrupt. which means that a majority section of the Indian populace does not have an insurance cover. the quality and access of services has always remained major concern. and bankruptcy is your only recourse. medical expenses are higher than ever. the existing level of health insurance premium was worth only Rs 6. would you want to live with the guilt that having no health insurance could create? The importance of health insurance cannot be overrated. you owe it to them to get health insurance. so if you have to be hospitalized for any reason. But still India is way behind many fast developing countries such as China.

In Andhra Pradesh. "During the data collection. it was found that the disease burden of diabetes in poor families is less." Some of the main reason.5 crore people. which can benefit the industry as a whole. as to why there has been restraint in the growth of Health Insurance. A much wider database would make all the difference.The Insurance industry should share data with each other. Limited reach . One reason is that people from lower socio-economic classes have to do more physical work and their diet is not rich which is responsible for inducing lifestyle diseases. Inadequate healthcare infrastructure 2. during the last decade is jotted down:1. as the data of people who have made claims is available. the data is collected right at village level with a target of 2. The IRDA is in the process of establishing a data warehouse that will contain information in detail about health insurance. which is not adequate.

Significant underwriting losses for Health Insurance business in India 4. with a brief description of the change that are required. It is difficult to speak to anybody with expert knowledge. Pillars of Change I am jotting down the same. Lack of standardization and Accreditation norms in healthcare industry in India 5. need to tackle to raise the confidence level of the customers and also gain positive word of mouth feedback & references. the traditional model is more generic and there is a need to reinvent the messages based on target groups to achieve the business objectives. 1. Consumer Awareness We need to create the Awareness Increase exposure through media (TV. 2. New modern private insurance companies are indulging in moneymaking businesses with little interest in insurance. There has been some resistance (observed) from the Health Insurance Companies. These changes need to be brought about at the industry level. Radio and Internet). which the industry should look at. which is adding to the suspicion of customers before making any decision to enroll with a health insurance policy or scheme. where all the companies should make combined efforts. Most insurance companies now use ‘call centers’ and staff attempt to answer questions by reading from a script. The doubts raised by customers are as follows:DOUBTS OF CUSTOMERS 1. necessary to evolve the Health Insurance market. Insurance policies contain too many exclusion clauses.3. We can call these the ‘Pillar of Changes’. In addition. Insufficient data on Indian consumers & disease patterns resulting in difficulty in product development and pricing. if we want to move towards the next plat-form in Health Insurance. These are some of the main short-coming which the Health Insurance companies. there are some inherent changes. . In this case. in India. 3.

the Standardization & Accreditation of Hospitals of Healthcare Delivery System has become the focus.. In addition varying treatment cost & bargaining is adding to the woes of the health industry. absence of good and effective number of physicians. 4. poor medical equipment and over all. less number of hospitals. Whatever data is currently available.3 percent between 2008 and 2015. the health sector i. The focus of accreditation is on continuous improvement in the organizational and clinical performance of health services. The market penetration is only around 2 percent of the total population in India. 3300 crores in 2006-2007.  Opportunities in Health Insurance According to recent news report Health insurance continues to be the fastest growing segment with annual growth rate of 55%. mainly due to service costs being out of reach of many people. Health Premium has risen to Rs. the primary health care system has been managed mainly by the shallow structure of government health-care facilities and other public health care systems in a traditional model of health funding and provision. companies & health-care institutions need to share them among themselves.125crores with a compounded annual growth rate of approximately 37 percent between 2002 and 2008. Worldwide. it is unable to justify the demand for health security by over 200 million of the health insurable population in India. in India. the Govt. makes it difficult to judge the quality of health service being provided by health-care institutions.497 crores with a compounded annual growth rate of approximately 42. is making is difficult for the Health Insurance companies to properly design & price products. Healthcare Infrastructure Till now. Standardization of Health care costs and Accreditation norms Lack of standardization & accreditation.e. Data & Information Exchange On account of insufficient & properly managed data availability on Indian customers & disease related information. the poor budget of government towards the health program. The Indian healthcare insurance industry was worth INR 5. not just the achievement of a certificate or award or merely assuring compliance with minimum acceptable standards. But. low rate of education programs.2. 3. The main factors of growth are increased awareness. The Health Insurance Industry is one of the fastest growing segments among other non-life insurance segments. In India health care delivery system has remained largely fragmented and uncontrolled. . The market penetration is will be 3 folds higher in 2015. The Indian healthcare insurance industry is worth INR 60.

increasing disease state.000) population is significantly increasing in the next future.000 and 04. There is a clear indication that seekers ( annual income between INR 2. Shift to lifestyle-related diseases  New modern private insurance companies are indulging in money-making businesses with little interest in insurance.  Healthcare spending could contribute 6. India has one of the highest heart disease and diabetes rates in the world.S W O T Analysis of the Health Insurance Opportunity in India Strengths (Future Growth Factors) Weakness (Gaps in the Industry & System)  India is now the second fastest growing major economy in the world. population).00.1% of GDP in 2012 and employ around 9 million people.00. Threats (Areas needing immediate concern) Opportunities (Untapped Potential)    Increasing awareness of Health Insurance as rising healthcare costs have increased need for health insurance Supporting Demographic Profiles (Prospering Middle Class.    .000 and 10.999) and strivers ( annual income between INR 5.  Inadequate healthcare infrastructure  Limited reach  Significant underwriting losses for Health business in India  Lack of standardization and Accreditation norms in healthcare industry in India  Insufficient data on Indian consumers & disease patterns resulting in difficulty in product development and pricing. The Disease rates in India are increasing.00.99.  Third largest economy in the world  Indian healthcare has emerged as one of the largest service sectors in India. It is difficult to speak to anybody with expert knowledge. Most insurance companies now use ‘call centers’ and staff attempt to answer questions by reading from a script.  Healthcare spending in India is expected to rise by 15% per annum. There will be a direct proportionality of this increase to healthcare spending parity.  Insurance policies contain too many exclusion clauses.

In order to encourage foreign health insurers to enter the Indian market the government has recently proposed to raise the foreign direct investment (FDI) limit in insurance from 26% to 49% . 3. India has one of the highest heart disease and diabetes rates in the world.999) and strivers ( annual income between INR 5. There will be a direct proportionality of this increase to healthcare spending parity. The spending on Healthcare is increasing YOY from 2005 to 2025. 8. . Hence the need for Health Insurance In the next four years (by 2014). 99% of Indians will face financial crunch in case of any critical illness. 10.000 and 04. The under-mentioned factors will play important role. trend of upward revision in respect of Group Health policies) 5.3% and is expected to increase in the future. According to World Bank Report. The prospering middle class in India supports this spending environment.00.As per the recent reports from various agencies the Health sector has the potential to become a Rs.00. 9.00. The Disease rates in India is increasing. There is a clear indication that seekers ( annual income between INR 2.g. Increasing awareness of Health Insurance as rising healthcare costs have increased need for health insurance 2. 7. Government initiatives are always supportive to Healthcare Insurance Environment. a host of factors will be responsible in driving the future of Health Insurance. population).99. The average annual household consumption in healthcare (discretionary spending ) is expected to double between 2005 and 2025.000) population is significantly increasing in the next future. Salient Demographic Features that support the growth of Health Insurance in India: Adult literacy rate in India is 61. 1.000 and 10. 25000-crore industry by 2010. It is home to one-sixth of the world’s population occupying less than 3 % of the world’s area. De-tariffing of the general insurance industry (which has increased emphasis and efforts by insurance companies towards health insurance and other personal lines of business) 4. in driving the Health Insurance industry to the next platform. Supporting Demographic Profiles (Prospering Middle Class.3% and the youth literacy rate in India is 73. 6. Rationalization of premium rates (e. increasing disease state.

Third largest economy in the world Indian healthcare has emerged as one of the largest service sectors in India. the capacity to spend along with the capacity of the people to pay has increased. which will lead to growth for the Health industry. The top 33 per cent income earners in India accounted for 75 per cent of total private expenditure on healthcare. . The increase in purchasing power & education will lead to a number of positive trends for the Health care industry as under-mentioned:o o o o When families move from middle income to rich. as why the Health Insurance will see a major boom in the coming days is on account of many factors As under-mentioned:o o o o o o Shift from socialized to private providers Booming economy and High literacy rates Shift to lifestyle-related diseases Easier financing Increasing life expectancy Recognition by government priority section The majority of healthcare services in India are provided by the private sector & the Private sector in India is one of the largest in the world. 75 percent of dispensaries 60 percent of hospitals in India belong to the private sector With the booming economy and High literacy rates.There will be a number of factors. Healthcare spending could contribute 6. The Drivers of Growth are under-mentioned:Growth Drivers o o o o o India is now the second fastest growing major economy in the world. As people earning & education level increase with it will lead to more spending in health care. Along with these other reasons. With Literacy the Per-capita expenditures on healthcare rise with higher education levels.1% of GDP in 2012 and employ around 9 million people. having:   80 percent of all qualified doctors. Healthcare spending in India is expected to rise by 15% per annum. the highest growth in spending is recorded in healthcare. The proportion of households in the low –income group has declined significantly and the “Great Indian Middle-class” has come of age. including health insurance.

Measures taken by the government to stimulate market development in the healthcare sector are as follows:o o § Reduction in Import duty on medical equipment  § Depreciation Limit on medical equipment increased  § Customs duty reduced  § The Government has announced Income tax exemption of the  Income Tax for the first five years. asthma and cancer have become the most important segments & inpatient spending is expected to rise from 39% to nearly 50%. prevention of drug abuse etc. While estimating the potential of the Indian insurance market we are often tempted to look at it from the perspective of macro-economic variables like the ratio of premium to GDP (which is indeed comparatively low in India) but the fact is that the number of potential buyers of insurance in India is certainly attractive.cardiovascular. India’s disease profile is expected to follow the same pattern as in developed economies. . that there is a alarming increase in lifestyle-related diseases. Much of the demand may not be accessible because of poor distribution. this ignores the difficulties of approaching this population. large distances or high costs relative to returns. However. to hospitals set up in rural areas § US$ 56 million will be earmarked for HIV/AIDS control programme through the use of primary health centers. It has been noted in a number of researches & surveys.o Households that have higher education levels tend to spend more per illness The Demographics Middle Income Class in India to grow to 400 to 500 Million by 2015. The shift in disease profiles from infectious to lifestyle-related diseases is expected to raise expenditures per treatment. The government of India has also identified Healthcare as the priority section for focused attention. New entrants in other mass industries such as consumer products or retail banking have discovered this after burning their fingers. Lifestyle-related diseases are typically more expensive to treat than infectious ones. Diseases . Inarguably the potential market for insurance buyers is tremendous in India and offers great scope for growth.

the corporate segment. Yet. This is because penetration is already good here. Nevertheless. By: Dilpreet Singh. new distribution avenues and alliances will be imperative. If insurers are to take advantage of India’s large population and reach a profitable mass of customers. the scope for expansion is modest. The main thrust of a new insurer’s strategy should be to stimulate demand in areas that are currently not served at all. most new entrants have a tendency to target the business of existing companies rather than expanding the market. as a hole will not be a big growth area for new entrants. For example. This not only leads to intense competition for the new players and their much of their effort is spent on trying to capture existing customers by offering better service or other advantages. In both volumes and profitability.com Mobile: 9873552617 . The corporate are likely to shop around for the best rates. therefore. the benefits of this strategy are likely to be limited. which must find fresh avenues to reach existing and new customers. moving to rural India. companies receive good service because of their size and rates are tariff governed.Also. New Delhi. This is also true for the nationalized corporations. products and service. There would be substantial shifts in the distribution of insurance in India. Ltd. like targeting the chief wage earners and more importantly. Email: dilpreet111@gmail. 50% of the current demand for general insurance comes from the corporate segment. this is myopic. A better approach may be to examine specific niches where demand can be met or stimulated. Ass Regional Manager – Sales Training & Regulatory ICICI Prudential Life Insurance Co Pvt.

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