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How many accident you need to realise that you need Health Cover? It

takes just one visit to a hospital to make us realize how vulnerable we are,

every passing second. For the rich as well as poor, male as well as female

and young as well as old, being diagnosed with an illness and having the

need to be hospitalized can be a tough ordeal. Heart problems, diabetes,

stroke, renal failure, cancer the list of lifestyle diseases just seem to get

longer and more common these days. Thankfully there are more speciality

hospitals and specialist doctors but all that comes at a cost. The super

rich can afford such costs, but what about an average middle class person.

For an illness that requires hospitalization/ surgery, costs can easily run

into five digit bills. A Sundram Health Insurance policy can cover such

expenses to a large extent. Read why Sundram Health Insurance is more

important these days compared to Old days Health is a human right, which

has also been accepted in the constitution. Its accessibility and

affordability has to be insured. While the well-to-do segment of the

population both in rural & urban areas have acceptability and affordability

towards medical care, at the same time cannot be said about the people

who belong to poor segment of the society. It is well known that more than

75% of the population utilizes private sectors for medical care

unfortunately medical care becoming costlier day by day and it has

become almost out of reach of the poor people. Today there is need for

injection of substantial resources in the health sectors to ensure

affordability of medical care to all. Sundram Health Insurance is

an important option, which needs to be considered by the policy makers

and planners. As mentioned earlier, the cost of Sundram Health Insurance

depends on the sum assured , age, current health condition and your

previous medical history. Higher the sum assured, higher the premium. So

what is the ideal Sundram Health Insurance cover requirement? There is

no standard answer or thumb rule for this. If we agree that Sundram Health

Insurance is important, one has to look at his/ her own lifestyle, health

condition, age/ life stage, family history of illnesses and affordability.

Keep in mind that most insurance companies limit the sum assured to a

maximum of 5 lakhs. Also note that many Sundram Health Insurance

policies provide additional benefits such as daily allowance, ambulance

charges, etc. for hospitalization. Not only are such benefits superfluous,

they tend to drive the premiums higher. So it is best to avoid such plans

and stick to something basic and simple.

Sundram Health Insurance is a form of group insurance, where individuals

pay premiums or taxes in order to help protect themselves from high or

unexpected healthcare expenses. Sundram Health Insurance works by

estimating the overall "risk" of healthcare expenses and developing a

routine finance structure (such as a monthly premium, or annual tax) that

will ensure that money is available to pay for the healthcare benefits

specified in the insurance agreement. The healthcare benefit is

administered by a central organization, which is most often either a

government agency, or a private or not-for-profit entity operating a health


The concept of Sundram Health Insurance was proposed in 1694 by Hugh

the Elder Chamberlen from the Peter Chamberlen family. In the late 19th

century, "accident insurance" began to be available, which operated much

like modern

disability insurance. This payment model continued until the start of the

20th century in some jurisdictions (like California), where all laws

regulating Sundram Health Insurance actually referred to disability

insurance. Patients were expected to pay all other health care costs out of

their own pockets, under what is known as the fee-for-service business

model. During the middle to late 20th century, traditional disability

insurance evolved into modern Sundram Health Insurance programs.

Today, most comprehensive private Sundram Health Insurance programs

cover the cost of routine, preventive, and emergency health care

procedures, and also most prescription drugs, but this was not always the

case. Insurance may be described as a social device to reduce or eliminate

risk of life and property. Under the plan of insurance, a large number of

people associate themselves by sharing risk, attached to individual

insurance plan that exclusively covers healthcare costs and is called

Sundram Health Insurance . Since the past two decades, there has been a

phenomenal surge in acceleration of healthcare costs. This has compelled

individuals to have a re-look on their actual monthly expenditures,

spending patterns and simultaneously allocate a proportion of their income

towards personal healthcare. This has resulted in individuals availing

healthcare insurance coverage not only for themselves but also for their

family members including their dependants. In short, healthcare insurance

provides a cushion against medical emergencies. The concept of

insurance is closely concerned with security. Insurance acts as a shield

against risks and unforeseen circumstances. In general, by and large,

Indians are traditionally r i s k - a v e r s e r a t h e r t h a n ri s k l o v e r s


Some major Sundram Health Insurance companies in India include

National Insurance Company, New India Assurance, United India

Insurance, ICICI Lombard, Tata

AIG, Royal Sundaram, Star Allied Sundram Health Insurance , HDFC

standard life, Bajaj Allianz Apollo, AG Sundram Health Insurance

Company among others. Indias fast growing demand for affordable health

cover is attracting greater business attention, with both life and non-life

insurance companies now entering the market with innovative new

protection and savings medical insurance products. This intense

competition for Sundram Health Insurance customers has only intensified

in recent months, with the introduction of new savings-linked and

investment-oriented Sundram Health Insurance schemes by some of the

countrys largest insurance groups.

Indias insurance sector first opened up to private and international

investors in 2001. Over the past ten years coverage rates across the

populous South Asian country have doubled and the domestic insurance

industry has overtaken several more developed financial markets in the

process. The overall number of insurance policies sold has increased

several times over, and combined premium income is now projected to

reach between US$350 to US$400 billion by 2020. Sundram Health

Insurance , in particular, has become as one of the countrys fastest

growing insurance lines, accounting for almost a third of new written

premiums last year. Sales of medical insurance products have been driven

by three key factors: a low penetration rate of about 5 percent at present,

surging treatment costs, and a lack of other social safety options across

most of India. With total expenditure on healthcare, through both Indian

government schemes and private sector activity, expected to exceed

US$200 billion by 2015, even more significant opportunities for the

countrys Sundram Health Insurance sector will likely emerge. Over the

next three years, Sundram Health Insurance has the potential to

become an INR300 billion market (US$6 billion), according to industry

The introduction and increased proliferation of private sector players in

Indias Sundram Health Insurance sector has worked to both develop

innovative new coverage products and increase service standards for clients

in the domestic market. Of particular note has been how the entrance of

several major life insurance brands, including Life Insurance Corporation

of India, Aviva Life Insurance and Max Life Insurance, has affected the

market recently. These life insurers offer largely savings-based health plans

that provide lump sum compensation to clients in case of a critical illness

or other malady specifically defined by a specific policy. These long-term

products have tenures that can last up to 20 years. When the policy expires,

customers are entitled to receive the fund value. Normally this is not a

cashless process as payment is reimbursed on submission of medical bills.

Most of these Sundram Health Insurance plans sold by life insurance

companies are unit-linked insurance products (Ulips), whereby returns are

determined by the performance of the stock market.

While life insurer health plans are tied to equity returns, medical insurance

policies sold through non-life companies tend to provide cashless

hospitalization cover for policyholders in the event of an illness or

accident. These plans, with premiums reviewed and renewed annually,

also offer customers a variety of additional value-added benefits such as

hospital cash allowance, home nursing allowance and recovery grants.

Some insurance companies offer these outpatient services as add-on covers

with their hospitalization plans, while others provide discounts through

certain affiliated

hospital networks. These products have so far proven to be the most

popular in India. Sundram Health Insurance policies sold through non-life

and dedicated medical insurers currently dominate the market, accounting

for roughly INR100-120 billion (US$1.9-2.3billion) of the countrys

INR150 billion (US$3 billion) Sundram Health Insurance sector. It is

expected that increased intra-market competition going forward will

enable successful insurers to meet the countrys changing healthcare


Despite the positive growth indicators, Indias Sundram Health Insurance

market still has many problems to contend with in order to match its true

potential going forward. The most important challenge for insurers

remains the low level of awareness concerning the value of obtaining

adequate coverage as a valuable savings and investment tool across much

of the country. This problem is slowly being addressed as more insurers

develop their product and distribution platforms to reach previously

untapped regions and client bases with more innovative and affordable

coverage products, including micro insurance and local bank.

Indian consumers already aware and enrolled in Sundram Health Insurance

schemes, the industry faces the continuing challenge of keeping them

happy. Customer satisfaction levels for Sundram Health Insurance in India

have consistently ranked below comparable levels elsewhere, with critics

frequently citing the low coverage of plans in terms of both the diseases

and number of hospitals covered. Unlike other homogenous general

insurance products, premiums for medical plans are based on the health of

an individual policyholder and this had lead to confusion

and fraud in the Indian market and increased policy cancellations from

customers who do not find any value in their Sundram Health Insurance


The Insurance Regulatory Authority of India (IRDA) has come to the

forefront in tackling these service standard issues recently. Speaking at the

first meeting of the India Sundram Health Insurance Forum in Hyderabad

last Thursday, IRDA chairman J Harinarayan said the industry must now

work to improve communication with its customers, particularly with

regard to Sundram Health Insurance policy documentation, as a third of all

consumer complaints this year have been directed towards health insurers.

According to IRDA data, of the 92,898 complaints levied at the non-life

sector so far in 2012, 38,891, or 37.5 percent have been focused on

Sundram Health Insurance issues. If one-third of complaints are from

the health side, I will conclude that the nature of communication on

Sundram Health Insurance policies and the understanding of the policy by

the consumer are areas of concern. Probably, the lack of clarity is reflected
in the increasing number of complaints, IRDA chairman J Harinarayan

said, adding that good communication is the responsibility of the

insurance company and not of the policy holder. An insurance policy, as a

contingent contract, has to be specific and unambiguous. With a reach of

just about 2% of the countrys 1.2 billion population, India offers a huge

potential in Sundram Health Insurance market. There are over 30 Sundram

Health Insurance products in the category offered by both life and non-life

insurers. While ICICI Lombard, Bajaj Allianz and Reliance General are

some of the prominent general insurers in the Sundram Health Insurance

space, Apollo DKV, Star Health & Allied Insurance are the standalone

players. Sundram Health Insurance s annual premium collections are over

Rs 6,000 crores. Despite the high growth,

the business is a huge challenge for insurers because of the high losses

over soaring medical expenses

A survey showed massive dissatisfaction with the healthcare system in

India. The interesting find about Sundram Health Insurance in India was

how people perceived Sundram Health Insurance in India. It is seen as an

instrument to protect savings. It is not aimed at protecting the asset that is

health. This is probably common to developing markets, where people

tend to place wealth ahead of health. On a macro level, very few

households in India have contingency plans to meet their health expenses.

Health risks in India are perceived differently than the western population.
Prior planning in health issues is yet to be a major priority The industry is

also becoming tech-savvy with facilities to buy certain types of insurance

products online and payment of premium through Internet. The insurance

penetration level in India is very low when compared with the global

average. This has brought about a plethora of distribution channels such as

agents, brokers, bancassurance (bank insurance model) avenues, soliciting

insurance through Internet or direct mailing. Many banks, financial

institutions and insurance intermediaries saw a huge opportunity in

marketing insurance products. Insurance brokers play a vital role in

bringing together insurance companies and the insured, and their role

assumes importance when a claim arises. Research includes awareness of

Sundram Health Insurance , preference of Sundram Health Insurance

consumption pattern ,new services offered by insurance sectors, claim

settlement procedure, and major issues of Sundram Health Insurance .

Sundram Health Insurance policy does not always cover every possible

health problem someone might encounter in the future. There are certain

terms and conditions

agreed to by the insured (person who is taking the plan), and the insurer

(entity that is providing the plan) and the entire procedure happens

according to what has been agreed to in the contract .

The best time to avail a Sundram Health Insurance plan is when the

insured is still in a good physical condition. The normal logic among

young people is that since they are rarely afflicted by physical ailments

they do not need such a plan. In reality people can fall prey to a disease or

other physical problem at any time

- nobody can be absolutely sure of a life fully free of such issues. Normally

as someone gets older the problems increase and the possibilities of some

major disease are always there. A problem with trying to get a medical

insurance during old age is that since there are more chances of a medical

condition the premium is often high or the insurer is not ready to cover the

individual in question.


When a person experiences a bad shock to health, their medical expenses

typically rise and their contribution to household income and home

production (e.g. cooking or childcare) declines (e.g. Wagstaff and

Doorslaer, 2003; Gertler, Levine & Moretti, 2003; Gertler and Gruber,

2002). According to the WHO, Each year, approximately 150 million

people experience financial catastrophe, meaning they are obliged to

spend on health care more than 40% of the income available to them after

meeting their basic needs. (WHO Factsheet N320, 2007)Low income and

high medical expenses can also lead to debt, sale of assets, and removal of

children from school, especially in poor nations. A short-term health shock

can thus contribute to long-term poverty (e.g. Van Damme et al, 2004;

Annear et al, 2006). At the same time, because households often cannot

borrow easily, they may instead forego high-value care. When they do

access care it will often be of low quality (Das, Hammer and Leonard,

2008), which can lead to poor health outcomes.

Theory suggests that Sundram Health Insurance can address some of these

problems. By covering the cost of care after a health shock, insurance can

help to smooth consumption, reduce asset sales and new debt, increase the

quantity and quality of care sought, and can improve health outcomes.

Unfortunately, rigorous evidence on the impact of insurance is scarce, and

there are even fewer studies on the effects of insurance in developing

countries. One reason for the lack of evidence is that it is difficult to find a

valid control group for the insured. We cannot simply compare the

outcomes of

insured and uninsured households, since Sundram Health Insurance status

is typically strongly correlated with other household characteristics. For

example, rich and well educated households typically have both better

health (Asfaw, 2003) and better Sundram Health Insurance coverage

(Jtting, 2004; Cameron and Trivedi, 1991), but the positive correlation

between health and insurance status tells us nothing about the impact of

insurance. On the other hand, those in poor health may be more likely to

pay for Sundram Health Insurance (Cutler and Reber, 1998; Ellis, 1989),

but finding that the insured tend to be sicker would not imply that

insurance causes illness.

Below we review past evidence on the impacts of Sundram Health

Insurance , focusing on studies where Sundram Health Insurance status is

plausibly exogenous, or where studies have attempted to eliminate bias due

to self-selection. A majority of the rigorous studies are based on United

States data. We follow Levy and Meltzer (2004, 2008) in both our choice

of U.S. studies and in our main conclusions.


Understanding who chooses to purchase voluntary Sundram Health

Insurance is important for understanding both how well targeted the

insurance product is and the financial viability of the insurance program.

As explained below, the latter will be particularly sensitive to the existence

of adverse versus positive selection. The extent of adverse selection or

positive selection into insurance has important repercussions for an

insurance providers ability to cover its costs. Standard insurance theory

predicts that insurance markets will suffer from adverse selection, which

occurs when less healthy people or people who are more risky with their

health are more willing to purchase Sundram Health Insurance .



5.1 Current status of private Health Insurance

5.2 Awareness of Health Insurance
5.3 Need to spread Health Insurance


The escalating cost of medical treatment today is beyond the reach of a

common man. In case of a medical emergency, cost of hospital room rent,

the doctor's fees, medicines and related health services can work out to be

a huge sum. In such times, health insurance provides the much needed

financial relief. An investment in health insurance scheme would be a

judicious decision. The health insurance scheme could either be a personal

scheme or a group scheme sponsored by an employer. Some of the existing

health insurance schemes currently available are individual, family, group

insurance schemes, senior citizens insurance schemes, long-term health

care and insurance cover for specific diseases.

Figure no.5.1 Types of Health Insurance plan



a) ESIS( Employees state Insurance Scheme)

b) Central Government Health Scheme

(CGHS) C) Self-Employed Womens

Association (SEWA)



a) Individual policy

b) Group Mediclaim policy (also known as GMC).



Community-based funds refer to schemes where members prepay a set

amount each year for specified services. The premium are usually flat rate

(not income-related) and therefore not progressive. Making profit is not the

purpose of these funds, but rather improving access to services. Often there

is a problem with adverse selection because of a large number of high-risk

members, since premiums are not based on assessment of individual risk

status. Exemptions may be adopted as a means of assisting the poor, but

this will also have adverse effect on the ability of the insurance fund to

meet the cost of benefits. Community based schemes are typically

targeted at poorer populations living in communities, in which they are

involved in defining

contribution level and collecting mechanisms, defining the content of the

benefit package, and / or allocating the schemes, financial resources

(International Labour Office Universities Program 2002 as quoted in

Ranson K & Acharya A2003).

Such schemes are generally run by trust hospitals or nongovernmental

organizations (NGOs). The benefits offered are mainly in terms of

preventive care, though ambulatory and in-patient care is also covered.

Such schemes tend to be financed through patient collection, government

grants and donations. Increasingly in India, CBHI schemes are negotiating

with the for profit insurers for the purchase of Custom designed group

insurance policies. However, the coverage of such schemes is low,

covering about 30-50 million. A review by Bennett, Cresses et al. indicates

that many community-based insurance schemes suffer from poor design

and management, fail to include the poorest-of-the poor, have low

membership and require extensive financial support. Other issues relate to

sustainability and replication of such schemes.


This scheme established in 1992, provides health, life and assets insurance

to women working in the informal sector and their families. The enrolment

in the year 2002 was 93 000. This scheme operates in collaboration with

the National Insurance Company (NIC). Under SEWAs most popular

policy, a premium of Rs 85 per individual is paid by the woman for life,

health and assets insurance. At an additional payment of Rs 55, her

husband too can be covered. Rs 20 per member is then paid to the National

Insurance Company (NIC) which provides coverage to a maximum of Rs 2

000 per person per year for

hospitalization. After being hospitalized at a hospital of ones choice

(public or private), the insurance claim is the responsibility for enrolment

of members, for processing and approving of claims rests with SEWA.

NIC in turn receives premiums from SEWA annually and pays them a

lump sum on a monthly basis for all claims reimbursed.


Chennai, Tamil Nadu was established in 1963. It offers sliding premium

with free care to the poorest. The benefits include discounted rates on both

outpatient and inpatient care, with the VHS functioning as both insurer and

health care provider. In 1995, its membership was 124 715. However, this

scheme suffers from low levels of cost recovery due to problems of

adverse selection.


Social insurance is an earmarked fund set up by government with explicit

benefits in return for payment. It is usually compulsory for certain groups

in the population and the premiums are determined by income (and hence

ability to pay) rather than related to health risk. The benefit packages are

standardized and contributions are earmarked for spending on health

services The government-run schemes include the Central Government

Health Scheme (CGHS) and the Employees State Insurance Scheme



Since 1954, all employees of the Central Government (present and retired)

some autonomous and semi-government organizations, MPs, judges,

freedom fighters and journalists are covered under the Central Government


Scheme (CGHS). This scheme was designed to replace the cumbersome

and expensive system of reimbursements. It aims at providing

comprehensive medical care to the Central Government employees and the

benefits offered include all outpatient facilities, and preventive and

promotive care in dispensaries. Inpatient facilities in government hospitals

and approved private hospitals are also covered. This scheme is mainly
funded through Central Government funds, with premiums ranging from

Rs 15 to Rs 150 per month based on salary scales. The coverage of this

scheme has grown substantially with provision for the non-allopathic

systems of medicine as well as for Allopathy. Beneficiaries at this moment

are around 432 000, spread across 22 cities.

The CGHS has been criticized from the point of view of quality and

accessibility. 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).


The ESIS programmed has attracted considerable criticism. A report based

on patient surveys conducted in Gujarat found that over half of those

covered did not seek care from ESIS facilities. Unsatisfactory nature of

ESIS services, low quality drugs, long waiting periods, impudent behavior

of personnel, lack of interest or low interest on part of employees and low

awareness of ESI procedures, were some of the reasons cited.


Apart from the government-run schemes, social security benefits for the

disadvantaged groups can be availed of, under the provisions of the

Maternity Benefit (Amendment) Act 1995, Workmens Compensation

(Amendment) Act 1984, Plantation Labour Act 1951, Mine Mines Labour

Welfare Fund Act 1946, Beedi Workers Welfare Fund Act 1976 and
Building and other Construction Workers (Regulation of Employment and

Conditions of Service) Act, 1996.

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. The National Health Policy 2002 acknowledges

this and aims to evolve a policy structure, which reduces such inequities

and allows the disadvantaged sections of the population a fairer access to

public health services. Ensuring more equitable access to health services

across the social and geographical expanse of the country is the main

objective of the policy.

6) Voluntary health insurance schemes or private-for-profit schemes

In private insurance, buyers are willing to pay premium to an insurance

company that pools people with similar risks and insures them for health

expenses. The key distinction is that the premiums are set at a level, which

provides a profit to third party and provider institutions. Premiums are

based on an assessment of the risk status of the consumer (or of the group

of employees) and the level of benefits provided, rather than as a

proportion of the consumers income.

In the public sector, the General Insurance Corporation (GIC) and its four

subsidiary companies (National Insurance Corporation, New India

Assurance Company, Oriental Insurance Company and United Insurance

Company) and
the Life Insurance Corporation (LIC) of India provide voluntary insurance


The Life Insurance Corporation offers Ashadeep Plan IIand Jeevan Asha Plan

II. The General Insurance Corporation offers Personal Accident policy, Jan

Arogya policy, Raj Rajeshwari policy, Mediclaim policy, Overseas

Mediclaim Policy, Cancer Insurance policy, Bhavishya Arogya policy and

Dreaded Disease policy. Of the various schemes offered, Mediclaim is the

main product of the GIC.

The Medical Insurance Scheme or Mediclaim was introduced in

November 1986 and it covers individuals and groups with persons aged 5

80 yrs. Children (3 Months 5 yrs) are covered with their parents. This

scheme provides for reimbursement of medical expenses (now offers

cashless scheme) by an individual towards hospitalization and domiciliary

hospitalization as per the sum insured. There are exclusions and pre-

existing disease clauses. Premiums are calculated based on age and the

sum insured, which in turn varies from Rs 15 000 to Rs 5 00 000. In

1995/96 about half a million Mediclaim policies were issued with about

1.8 million beneficiaries. The coverage for the year 2000-01 was around

7.2 million.

Another scheme, namely the Jan Arogya Bima policy specifically targets

the poor population groups. It also covers reimbursement of hospitalization

costs up to Rs 5 000 annually for an individual premium of Rs 100 a year.

The same exclusion mechanisms apply for this scheme as those under the
Mediclaim policy. A family discount of 30% is granted, but there is no

group discount or agent commission. However, like the Mediclaim, this

policy too has had only limited success. The Jan Arogya Bima Scheme had

only covered 4 00

000 individuals by 1997.

The year 1999 marked the beginning of a new era for health insurance in

the Indian context. With the passing of the Insurance Regulatory

Development Authority Bill (IRDA) the insurance sector was opened to

private and foreign participation, thereby paving the way for the entry of

private health insurance companies. The Bill also facilitated the

establishment of an authority to protect the interests of the insurance

holders by regulating, promoting and ensuring orderly growth of the

insurance industry. The bill allows foreign promoters to hold paid up

capital of up to 26 percent in an Indian company and requires them to have

a capital of Rs 100 crore along with a business plan to begin its operations.

Currently, a few companies such as Bajaj Alliance, ICICI, Royal

Sundaram, and Cholamandalam among others are offering health

insurance schemes. The nature of schemes offered by these companies is

described briefly.

a) Individual policy-

One may obtain a health insurance policy through two different ways:

individually or through group insurance. In individual insurance, a person

gets to talk with the health insurance providers one-on-one, in order to get

themselves a deal that would have most of their requirements fulfilled.

Individual health insurance is such that one is able to choose what s/he

wants, and is not saddled with any and everything. Many people prefer to

go for individualized health insurance because they get to choose what

they want to be covered for. In complete honesty they have surrender any

knowledge of

their family history in terms of illness so that their cases can be assessed

thoroughly. In the case of an individual policy, the risks of being rejected

before commencement of the policy are higher. This is because of the

possibility of the smallest of things affecting any clause in the policy.

Sometimes insurance companies do this to save on expenses and payments

that may not really be required.

b) Group Health Insurance Policy

In contrast to this is a group insurance policy because there are fewer

chances; insurance companies do not usually reject paying up dues to

people in a group insurance policy. Group insurance policies tend to be

more successful and less prone to obstacles; often in-depth checkups are
not conducted as they are with individual health policies. The reason

behind this is that insurance companies are suspicious of individuals who

approach them; they feel that there must be a particular reason for them

approaching them. This is sometimes true, and so, individuals tend to be

scrutinized much more than group members.



India has lessons to learn from the experience of Chile. India too has a dual

system of carea private fee-for-service based sector where the money is

paid out-of-pocket by individual households and a tax-based public

sector where the providers are salaried. Utilization of insurance under both

these systems is partly restricted and rationed by the affordability of the

individual household and availability of the budget. On the other hand,

insurance as a means of financing is a far more sophisticated mechanism,

requiring a comprehensive understanding of the failures that characterize

health insurance markets.

For example, a problem such as asymmetry in information puts the patient

and the insurer at a disadvantage due to their inability to resist or challenge

medical opinion regarding an existing condition or future treatment.

Besides, in the absence of knowledge of prices, the provider can short

change the two by overcharging. Second, cashless insurance creates

disincentives to control

costs as it appears to be a free good for the patient and the provider, often

resulting in excessive treatment by the provider (induced demand) and

frivolous use by the patient taking treatment even for a condition which he

would normally have ignored or cured with a home remedy (moral

hazard). Third, it is only the patients who know their health status. Since it

is normally
those in need of health care who tend to subscribe to health insurance, this

puts the risk on insurance agencies to resort to extensive processes of

risk selection, such as medical examination, before being given admittance

as an enrollee and focusing on low risk groups, such as the young or

healthy. Risk

selection in individual- based policies however results in increasing the

loading fee and consequently the cost of premium. This is one reason for

the attractive group discounts being as high as 67%. For these reasons,

private commercial health insurance is known to select its customersthe

young, healthy, rich, malesleaving the bad risks to the governmentold,

poor, young women in the reproductive age group, and the ill.

Health insurance in India is usually associated with the Mediclaim policy

of the GIC, which was introduced in 1986 as a voluntary health insurance

scheme offered by the public sector. The premium based on the age, risk

and the benefit package opted for, ranged from a minimum premium of Rs

201 for those more than 25 years of age, to a maximum benefit of Rs

15,000 with discounts for group memberships. In 2001, there were 78 lakh

persons covered under Mediclaim. The subscribers are usually from the

middle and upper class, especially since there is a tax benefit in

subscribing to Mediclaim.

The standard Mediclaim policy covers only hospital care and domiciliary

hospitalization benefits. Most medical conditions are reimbursed though

there are important exclusions, such as pre-existing diseases, pregnancy

and child birth, HIV/AIDS, etc. Hospitals with more than 15 beds and

registered with a local authority can be identified as providers.

The Insurance company (or the TPA, where applicable) administers the

scheme. Being an indemnity scheme, the patient pays the hospital bills and

submits the necessary documents to the company. The company in turn

reimburses the patient.

There is also uncertainty about the amount reimbursed, there are times

when the patient is reimbursed only partially, the usual reason being the

insufficiency of documentation. The policy is not renewed automatically

and is dependent on the timely payment of premium. Ellis et al. observed

that the GIC was more interested in whether the claim pertained to an

existing disease or whether the facility was qualified or not, but spent little

time on detecting fraud. With claims exceeding 30% a year, more than the

household spending, it reflects the problem of moral hazard which requires

close monitoring.

Second, it was also observed that the GIC sets premium on the filing of

claims and not actual amounts settled, giving it a cushion year on year as

settled claims amounts are always lower than those filed, an amount that

remains unadjusted. During 1994, 4.4% of the insured persons made a

claim, of which only 75% of claims were settled. The claims ratio was

45%. However, of late, the claims ratio is growing at a fast rate, allegedly

because of collusion between the patients, insurance agents and hospitals.

From the above discussion, five features that characterize the Health
Insurance system in India emerge:

1. By and large, the system offers traditional indemnity, under which the

insured first pay the amount and then seek reimbursement. Under

indemnity, all known diseases or health conditions are excluded and

therefore such policies typically have a large number of exclusions. This

also means that those most in need of insurance, i.e. The sick, get excluded

for any financial risk protection against the diseases they are suffering


2. It is a fee-for-service-based payment system. Such a system of payment

is advantageous for the provider since he bears no risk for the prices he can

charge for services rendered by him. Combined with the asymmetry in

information, such a system usually entails increased costs.

3.Policies provide a ceiling of the assured sum. Such a system, and that too

within a fee-for-service payment system, results in short changing the

insured as he gets less value for money, as the provider and the insurer

have no obligations to provide quality care and/or over provide/over

charge services so long as the amounts are within the assured amount of

the insurance policy.

4.The system is based on risk-rated premiums. This again puts the risk on

the insured as the premium is fixed in accordance with the health status

and age. Under such a system, women in the reproductive age group, the
old, the poor and the ill get to pay higher amounts and are discriminated


5.The system is voluntary, making it difficult to form viable risk pools for

keeping premiums low.


Insurance may be described as a social device to reduce or eliminate risk

of life and property. Under the plan of insurance, a large number of people

associate themselves by sharing risk, attached to individual insurance plan

that exclusively covers healthcare costs and is called Health Insurance.

Since the past two decades, there has been a phenomenal surge in

acceleration of healthcare costs. This has compelled individuals to have a

re-look on their actual monthly expenditures, spending patterns and

simultaneously allocate a proportion of their income towards personal

healthcare. This has resulted in individuals availing healthcare insurance

coverage not only for themselves but also for their family members

including their dependants. In short, healthcare insurance provides a

cushion against medical emergencies.

The concept of Insurance is closely concerned with security. Insurance

acts as a shield against risks and unforeseen circumstances. In general, by

and large, Indians are traditionally risk-averse rather than risk lovers by



Indian Health Insurance is primarily classified into 2 categories:

Cashless Hospitalize

Medical Reimbursement

Cashless hospitalization is a specialized service provided by an insurer

wherein an individual is not required to pay the hospitalization expenses at

the time of discharge from the concerned hospital. The settlement is done

directly by the insurance company (or insurer). However, prior approval is

a must from the

TPA (Third Party Administration ) before availing the benefits under this

option cashless hospitalization can be of two types

Planned hospitalization: This is a planned hospitalization wherein the

insured is aware of the hospitalization in advance. This duration period

may vary from case to case. Examples include: FTND (Full Term Normal

Delivery), Chemotherapy treatment for carcinoma (cancer), for cataract

surgery, tonsillectomy (removal of tonsils).

Emergency hospitalization: It is a sudden hospitalization that may be

either an emergency or due to unforeseen circumstances. In short,

hospitalization is not anticipated in advance. Examples include RTA (Road

Traffic Accident), Myocardial infraction (heart attack) acute appendicitis.


Re-imbursement means to repay or to compensate. Thus, Medical Re-

imbursement means to repay the products/services availed during

hospitalization and more importantly after the completion of the treatment

Under this procedure, the insured has to bear the entire expenses incurred
during hospitalization. After getting discharged from hospital, the

insured/policy holder can claim medical reimbursement. For availing

benefits under this option, the insured has to approach the concerned TPA

under which he/she is covered, fill the requisite form and satisfy all the

requirements as mentioned. This includes submission of TPA card, policy

paper, discharge summary, prescriptions, diagnostic laboratory reports,

OPD treatment details etc. A sum is granted as reimbursement for

treatment expenses.

A recent survey conducted in 2008 showed that only 3% of the entire Indian

population has availed some sort of insurance policy and enjoys benefits

included under its coverage. This miniscule percentage constitutes both

PSUs (Public Sector Undertakings) and Private insurance companies.

Since, the general public are by and large ignorant about the benefits of

availing healthcare insurance policies, there lies an urgent need to educate

the masses regarding the importance of Healthcare insurance and the

benefits derived on account of itThere are numerous reasons for not

availing health insurance. There is a lack of knowledge regarding the

existing insurance products/services in the markets. On top of it, there are

numerous misconceptions about Insurance prevalent in the Indian Markets.

Also there are numerous fly-by-night agents out to fleece the gullible

Indian public. In India, public funded healthcare is available only to a

miniscule section of BPL (Below Poverty Line) groups, low-income

groups and to government employees. The Indian Government has

formulated Employee State Insurance Scheme (ESIS) that focuses on the

public healthcare policy for low-income groups. The government

employees can avail Central Government Health Scheme (CGHS) that

offers medical treatment at a subsidized cost.

With the opening up of insurance sector for private participation,

numerous players have entered the healthcare segment, but inspite of the

entry of private sector, penetration of insurance coverage in India is

abysmally low. Recently a legislature has been passed in the Indian

Parliament allowing 49% of FDI in insurance industry.


The condition of health insurance in India is not up to mark. 85% of Indian

population does not use health insurance to finance their medical

expenditure. These people pay for their medical expenditure from their

pocket. As a result, many of these uninsured individuals either end up with

poor quality healthcare

or have to bear financial hardships. The financial stress that is engendered

due to rising medical expenses is believed to affect the lifestyle of all

family members for years. If the same continues, how will the people of

India pay their medical expenses in the future? How will the efforts of

medical care providers be fruitful, when there will be no one to avail

medical treatment?
Thus, there is a need to increase the number of insured individuals in India.

Working in this direction, every individual, every medical care provider

and every health insurance company should play an active role. It is only

then possible that people would be able to avail quality healthcare in times

of medical emergency. Insurers have designed plans, but people should be

encouraged to buy them so that the overall condition of medical care

insurance in the country can be improved. The products and offerings

brought by different medical insurance providers vary from each other.

The only point that should be brought to light is that people should buy

these products to remove inconveniences from quality medical treatment.

These products offer much relief to them and their family members at the

time of medical emergency. There is no need for an insured individual to

scramble for the arrangement of funds at the last hour. Hence, the

Government and all the associated bodies should all offer their support in

spreading health insurance awareness so that Indian citizens are aware of

the right to seek quality healthcare without any financial thought.

Health of its citizen is one of the top priorities of a nation. A nation with

Healthy people would be able to pursue its agenda with dexterity and

execute those with fine see. Total Health care boost economic growth ,

reduces poverty and

lowers mortality rate. The success of many countries lies in their special

effort to cover the entire population with a scheme of health insurance that
keep them protected against unforeseen health hazards through insurance

coupled with wellness program . The Health insurance converge is well

established straightway . In India as also in many other countries with low

per capita, the burden of having to pay for unplanned and expenditure for

medical treatment is very acutely affecting large population. The total

health expenditure in India is around 5% of gross domestic products(GDP)

in which bulk funding comes from private household as mentioned above.

The Government should educate people about the rise of medical costs and

the importance of these products. Regulators should bring change in the

guidelines, allowing only the right players to enter the health insurance

market. Health insurance providers should design products, according to

health needs of target customers and encourage people to buy them. The

combined efforts of all these bodies will surely bring some improvement.



In the Indian non-life insurance industry, health insurance is the second

largest segment. It has picked up pace in previous fiscals, and is set to

reach new heights in the coming few years as public and private insurers

are coming up with various schemes to cover the untapped insurance

market. As per our latest findings, the Indian health insurance industry is

one of the most prolific ones in the world. As the healthcare costs and

awareness are rising in the country, we expect the segment to grow with
gross premiums scaling up at a CAGR of around 32.5% during 2010-11 to

2013-14. Indias health insurance

landscape has undergone tremendous changes in the last few years with the

launch of several health insurance schemes, largely initiated by central and

state governments. We observed that a significant share of coverage has

been achieved through central and state government-sponsored health

insurance schemes. Besides, private and public health insurers have

introduced a large number of plans and schemes to cover an individual and

his family against critical ailments like heart failure, stroke and kidney


As a chunk of population in India is living with HIV/AIDS, the private

health insurance companies are cashing in on the big opportunity by

designing special policies for such people. India could soon see a national

medical insurance policy for people living with HIV (PLHIV). The

National Aids Control Organization is planning to make insurance

'inclusive and universal for PLHIV', we observed while studying and

analyzing trends in the Indian health insurance industry.

During the health insurance market analysis, researcher found that there

are around 28 active third party administrators (TPAs) in India, and the

TPA infrastructure in the country has witnessed a strong growth with the

rising penetration of health insurance. The TPAs are recognized as

valuable service providers in the health insurance services delivery chain.

Our comprehensive report also identified that emergence and growth of

health insurance have given rise to a need for maintaining and optimizing

claims processing and management. It aims at enhancing services, offered

by health insurance companies, for the maximum benefit of the insured.

According to the study, health insurance portability is also gaining

popularity in India as it allows health insurance policyholders to switch

companies while retaining their no-claims benefit. The report also provides

an overview of the rural health insurance segment, and expects that the

number of uninsured rural households will decrease with time. Various

Insurance Regulatory and Development Authority (IRDA) acts and

amendments have also been studied to understand the regulatory

framework for the industry. The research also looks into profiles of various

players in public and private sectors to present the competitive landscape

and a balanced outlook of the Indian health insurance industry to clients.



8.1 Indian Health insurance Market

8.2 Growth Drivers
8.3 Market drivers
8.4 Market Restraints
8.5 Company wise Gross direct premium
8.6 Non life insurance claim settlement facts-Figure
8.8 Budget 2012


Indian Health Insurance Market (2004-2011)

Health Insurance is one of the India Largest sector, in terms of

revenue & employment & sector is expanding rapidly.

Health Insurance spend in India is currently poised to touch 8% of

GDP in 2012 (5.5 in 2009)
Private Sector accounts of total healthcare spending in India.

Fastest Growing segment in the Insurance Industry Presently

Growing at 32%
Health Insurance sector poised for immense growth
The Growth Chart







2004-05 2005-06 2006-07 2007-08 2008-09 2009-102010-2011

Figure 8.1.1 Indian Health insurance Market

Research has shown that Indians across all segments and age groups are

presently more prone to lifestyle-related ailments and diseases than

previous generations. This fact, undoubtedly negative, stands out as the root

cause for the potential growth of the health insurance sector. Jacob informs,

The growing percentage of middle class citizens in the country and the

increasing .healthcare cost is also adding to the growth of the health

insurance segment. Changing demographics, affluence and work-life

balance has brought about a paradigm shift in the attitude of people, who

demand for a better quality of healthcare. Health insurance as a mechanism

to finance this need, is therefore, finding greater acceptability. Thus, the

market has great prospects, but the need of the hour is to identify products

that will suit customers insurance needs and win their confidence. Biggest

target for the insurance companies in the next five years would be to cover

20 per cent of the Indian population. This is expected to be driven by

factors like entry of new competitors, increasing consumer awareness,

relaxation in income ceiling, low growth in public sector employment and

increased efforts of Non-government Organisation (NGO)/self-help groups.

He further adds, Over the past few years, many companies have entered

into the market, and the industry is seeing a lot more innovation with

product offerings for different segments including senior citizens,

corporate, low poverty line and affluent class. Information Technology (IT)

has also been one of the significant enablers of growth in the sector. Given
the current health insurance penetration levels in the country, at about three

to four per cent, there is a significant potential and a long way to go.

There will be the number of factors, which will lead to growth for the

Health Industry , Including Health Insurance . The Drivers of Growth

under mentioned:

India is now the second fastest growing major economy in the


Third Largest Economy in the World.

Indian Healthcare has emerged as one of the largest services

sector in India.

Healthcare spending in India is expected to raise by 15%per


Healthcare spending could contribute 6.1%of GDP in 2012

and employ around 9 million people

Along with these other reasons, as why the Health insurance will see a

major boom in the coming days in an account of many factors As under


Shift from socialized to private providers

Booming Economy and High literacy rate

Shift life style- related diseases

Easier Financing

Increasing life expectancy

Recognition by government priority section

The majority of health care services in India are provided by the private

sector & the private sector in India is one of the largest in the world,


80 percent of all qualified Doctors

75 percent dispensaries

60 percent of hospitals in India belonging to the private


With the booming economy and High literacy rates, the capacity to spend

along with the capacity of the people to pay has increased. As people

earning & education level increase with it will lead to more spending in

health care. The increase in purchasing power & education will lead to a

number of positive trends for the Health care industry as under-


When families move from middle income to rich, the


The top 33 per cent income earners in India accounted for

75 percent of total private expenditure on healthcare.

The proportion of households in the low income group

has declined significantly and the Great Indian Middle-

class has come

With Literacy the Per-capita expenditures on healthcare

rise with higher education level

Households that have higher education levels tend to

spend more per illness.

A Great Future of Health Insurance Industry of India

Source: S.K Sethi founder (

Table no.8.2.1 Great future of Health Insurance Industry

As People are conscious of health care and hence need for Health

Insurance is increasing year by year. Healthcare costs are increasing at

20% per year. People have started giving more importance to health

insurance with a life insurance. large number of people are now on the

verge of becoming buyer/ customer of health insurance.

Health Insurance industry achieve figure of 30% then the portfolio will

be Rs 64414 Cr. in 2017-2018.

Health Insurance industry achieve figure of 60% then the portfolio will

be Rs 223892 Cr. in 2017-2018

This is very much possible because of following facts:

a) People are conscious of health care and hence need for Health

Insurance is increasing year by year.

b) Healthcare costs are increasing at 20% per year. People have started

giving more importance to health insurance with a life insurance. We feel

large number of people are now on the verge of becoming buyer/

customer of health insurance.

c) There is talk of health insurance being made compulsory and we

understand PHD Chamber of Commerce is considering organizing a full

fledged workshop on this topic in near future. May be in the beginning

health insurance will be made compulsory either for senior citizens or

some specific weaker segment of our society- but sooner or later our

society/ government will go for it on full fledged basis as a part of its

social security programme and implement this proposal. This aspect will

become more and more important as the population of senior citizens will

increase substantially during 2012-2025 period.

In the light of these facts , Health Insurance has a great future in our

country and achieving figures of Rs. 223892 crores is going to be a


Increasing awareness Current Impact Future

of Health Insurance
(2008-2011) Impact

Raising Health care
cost Have increased the
need for the health

supportive demographic
profile(proposing middle
class, increasing dieses state

Detariffing of the general

company(which has
increased the efforts
towards health insurance
& other personal lines
of The business)

Rationalization of the
premium rates (e.g. trends
of the upward revision of 5 10 0

the group health policies)

10 5 10
Market Drivers Current Impact (2008-2011) Future Impact (2011-2014)

Increasing awareness of Health Insurance Rising healthcare costs have

increased need for health insurance Supporting Demographic Profiles

(Prospering Middle Class, increasing disease state, population) Detariffing

of the general insurance industry (which has increased emphasis and

efforts by insurance companies towards health insurance and other

personal lines of business) Rationalization of premium rates (e.g. trend of

upward revision in respect of Group Health policies) 0 5 10 0 5 10 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% , Government initiatives are

always supportive to Healthcare Insurance Environment. The spending on

Healthcare is increasing YOY from 2005 to 2025. The prospering middle

class in India supports this spending environment. The average annual

household consumption in healthcare (discretionary spending ) is expected

to double between 2005 and 2025. Source: Mckinsey There is a clear

indication that seekers ( annual income between INR 2,00,000 and

04,99,999) and strivers ( annual income between INR 5,00,000 and

10,00,000) population is significantly increasing in the next future. There

will be a direct proportionality of this increase to healthcare spending

parity. Market Restraints Current Impact (2008-2011) Future Impact

(2011-2014) Inadequate healthcare infrastructure Limited reach Significant

underwriting losses for Health Insurance 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 0 5 10 0 5 10.

8.4 Market Restraints

Inadequate Health care


Limited Reach

Significant underwriting losses

for Health Insurance business
in India

Lack of Standardization norms in

Healthcare insurance industries
in India

Insufficient data on Indian

consumer & diseases pattern
resulting in difficulty In product
development and pricing

0 5 10 0 5 10

Figure no. 8.4.3 Market Restraints

Market Restraints Current Impact (2008-2011) Future Impact (2011-2014)

Inadequate healthcare infrastructure Limited reach Significant

underwriting losses for Health Insurance 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 0 5 10 0 5 10



2009-10 2010-11 2009-10 2010-11

National 4625.18 6220.70 13.36 14.61

New India 6042.51 7097.14 17.45 16.67

Oriental 4736.71 5457.33 13.68 12.82

United 5239.05 6376.66 15.13 14.98

Public Total 20643.45 25151.83 59.63 59.07

Royal Sundaram 913.11 1144.00 2.64 2.69

Reliance 1979.65 1655.43 5.72 3.89

IFFCO Tokio 1457.84 1783.18 4.21 4.19

TATA AIG 853.80 1173.09 2.47 2.76

ICICIC Lombard 3295.06 4251.87 9.52 9.99

Bajaj Allianze 2482.33 2869.96 7.17 6.74

Cholamandalam 784.85 968.00 2.27 2.27

HDFC Ergo 915.40 1279.91 2.64 3.01

Future General 376.61 600.16 1.09 1.41

Universal Sompo 189.28 299.10 0.55 0.70

Shriram 416.93 780.89 1.20 1.83

Bharti AXA 310.82 553.90 0.90 1.30

Raheja QBE 1.32 4.90 0.00 0.01

SBI General 43.02 - 0.10

L & T General - 17.24 - 0.40

Private Total 13977.00 17424.63 40.37 40.93

Grand Total 34620.45 42576.45 100.00 100.00

Table no 8.5.2 Gross Direct Premium

The premium underwritten by 15 private sector insurers (other than the

insurers carrying on exclusively business) in 2010-11 was 17,425 crore

as against 13,977 crore in 2009-10. ICICI Lombard continued to be the

largest private sector non- life insurance Company, with market share of

9.99 per cent. It reported a marginal increase in market share up from 9.52

per cent in 2009-10, Bajaj Allianz , the second largest private sector non-

life insurance company , which underwrote a total premium of

2,870crore, saw decline in market share from 7.17 per cent in 2009-10 to

6.74per cent during the year under review. Of the 15 private insurers , 12

reported increase in premium underwritten and one insurer namely,

Reliance general witnessed a significant decline in premium underwritten

(reported a negative growth of 16.38 per cent). The other two insurers had

commenced their operations in 2010-11.

In case of public sector non life insurers, all four companies expanded their

business with an increase in respective premium collections. The market

share of these companies, other than for national, however, declined from

their previous year respective levels, which helped to improve its market
share to 14.61 percent in 2010-11(13.36 per cent in the previous year). It

reported growth of 34.50 per cent , which is higher than the industry

average for 2010-11, New India , with insurance premium of 7,097 crore

, remains the largest general insurance company in India with market share

of 16.67 percent.

8.6 Non- Life Insurance claims settlement facts figure

Year Outstand No.of Total No. of %of No. of % of

ing as on claims claims claims claims claims repudiat
April reported settlement settlement settled/ repudia ion
2010 during during during total ted repudiat
2010-11 2010-11 2010-11 claims ed /total
processe m
d process

2010 3331724 26598505 29930229 25535978 85.3 779645 2.6


Source- Irda

Table no. 8.6.3 Claim settlement Facts and Figures

From the total no claim processed during the year by the non-life

insurers, the percentage of claims repudiated at the industry level is only

2.6 percent.

As against this, the industry settled 85.3 per cent claims of the total

claims lodged and the balance 12.1 percent outstanding at the end of the

year. Overall the number of repudiated claims has been increasing. The

rise is due to the fact that the sector is expanding rapidly and business

volumes are increasing. The number of polices issued by non-life

insurance companies is increasing year on year, the same stood at 7.93

crores in the year 2010-11. The number of claims intimations would also

be more and there for an increase in claim repudiation numerical terms.

8.7 Budget 2012: Hike Sec 80D limits to boost health insurance

The market builds up a lot of expectations before the presentation of the

Budget, and both, the common man and industry have always been

anxious to understand its implications. Insurance is a vital service in a

growing economy, and helps regulated risk-taking by individuals and

enterprises. Still, penetration of general insurance in India is abysmally

low. The adoption of general insurance products such as health among

retail consumers will get only better with promising measures by the

government. Here are some proposed changes that can help the insurance

industry move to the next level of growth and consolidation. The measures

will also help the industry to render better service to their customers.
Considering extremely low penetration of GI products in our country, there

is a pressing need for concerted effort to make insurance all the more

affordable and an attractive proposition for the common man. Clearly,

abolition of the service tax will enable this process. Currently the service

tax stands at 10.3% including education cess and the Government should

consider waiving off the service tax on premiums paid. Alternatively, they

should at least exempt health insurance products from the purview of

service tax. This move will help to develop health insurance in the country

by aiding greater penetration

Currently, the qualifying amounts under Section 80D for self, spouse and

dependent children is up to Rs. 15,000/- and additional deduction up to Rs.

15,000 for the parents. Given the high cost of medical care and to

encourage more people to purchase health insurance, Section 80D limits

should be increased substantially from the current levels.



9.1 Reasons for poor penetration of Health Insurance
9.2 Major Issues In Health insurance
9.3 Major issues in handling of Health Insurance
9.4 Fraud in Health Insurance

9.1 Reasons for Poor Penetration of Health Insurance in India.

Penetration of health insurance has been slow and halting, despite the

huge market estimated to range between Rs 7.520 crores. Some reasons

that explain for the slow expansion of health insurance in the country are

as follows:

1. Lack of regulations and control on provider behavior

The unregulated environment and a near total absence of any form of

control over providers regarding quality, cost or 282 Financing and

Delivery of Health Care Services in India ata-sharing, makes it difficult for

proper underwriting and actuarial premium setting. This puts the entire risk

on the insurer as there could be the problems of moral hazard and induced

demand. Most insurance companies are therefore wary about selling health

insurance as they do not have the data, the expertise and the power to

regulate the providers. Weak monitoring systems for checking fraud or

manipulation by clients and providers, add to the problem.

2. Unaffordable premiums and high claim ratios

Increased use of services and high claim ratios only result in higher

premiums. The insurance agencies in the face of poor information also

tend to overestimate the risk and fix high premiums. Besides, the

administrative costs are also highover 30%, i.e. 15% commission to

agent; 5.5% administrative fee to TPA; own administrative cost 20%, etc.
Patients also experience problems in getting their reimbursements.

Including long delays to partial

3.Reluctance of the health insurance companies to promote their

products and lack of innovation

Apart from high claim ratios, the non-exclusivity of health insurance as a

product is another reason. In India, an insurance company cannot sell non-

life as well as life insurance products. Since insurance against fire or

natural disaster or theft is far more profitable, insurance companies tend to

compete by adding low incentive such as premium health insurance

products to important clients, cross-subsidizing the resultant losses. With a

view to get the non-life accounts, insurance companies tend to provide

health insurance cover at unviable premiums. Thus, there is total lack of

any effort to promote health insurance through campaigns regarding the

benefits of health insurance and lack of innovation to make the policies

suitable to the needs of the people.

4. Too many exclusions and administrative procedures

Apart from delays in settlement of claims, non-transparent procedures

make it difficult for the insured to know about their entitlements, because

of which the insurer is able to, on one stratagem or the other; reduce the

claim amount, thus demotivating the insured and deepening mistrust. The

benefit package also needs to be modified to suit the needs of the insured.

Exclusions go against the logic of covering health risks, though, there can
be a system where the existing conditions can be excluded for a time

periodone or two years but not forever. Besides, the system entails

equity implications.

5. Inadequate supply of services

There is an acute shortage of supply of services in rural areas. Not only is

there non-availability of hospitals for simple surgeries, but several parts of

the country have barely one or two hospitals with specialist services. Many

centres have no cardiologists for several non communicable diseases that

are expensive to treat and can be catastrophic. If we take the number of

beds as a proxy for availability of institutional care, the variance is high

with Kerala having 26 beds per 1000 population compared with 2.5 in

Madhya Pradesh.

6. Co-variety risks

High prevalence levels of risks that could affect a majority of the people at

the same time could make the enterprise unviable as there would be no

gains in forming large pools. The result could be higher premiums. In

India this is an important factor due to the large load of communicable

diseases. A study of claims (Bhat 2002) found that 22% of total claims

were for communicable diseases.


Health Insurance

Lack of

Lack of product

Lack of Product

Lack of customer
53 awarness

Increased in
Hospital tariff
(claim cost)


In India there has been many issues in handling the Health Insurance

because Lack of underwriting Discipline, Lack of product innovation,

Lack of

product awareness , increased competition, increased claim cost and many

more, because of this major problem customers did not get there product in

proper manner.

According to this graph it shows that the percentage of underwriting

discipline if very high so to reduce such type of problem government has

to take strict action against this issues , because it affect the loyalty of the

customer and

brand image of the company also. Insurance company is leading in product

innovation; a product is bundle of satisfaction that a customer buys. A

growth oriented firm always looks beyond the existing products or services

and there firm should respond to dynamic environment & offer new

services. So because of lack of product innovation customer are not ready

to purchase that product. Lack of product awareness among distributors, if

they are not in position to introduce the product to customer it will not be

in a position to understand the importance and uses of health insurance. it

is rightly said that awareness develop brand equity , due to awareness a

customer recognized the product and purchase the same , a customer is in

position to identify the product because of such awareness. The firm has to

fight competition, promotion will be focused on attracting new users and

retained repeat customers . The firm may improve service quality and new

features and offer low premium prices to attract money conscious



Employed dissatisfied
due to
delayed claim
sattlement 63%
Services from TPA
not up to 24%
Services from broker 22%
not up to
After sales
service 13%
Changes in regulation
(service 13%
tax being imposed)
0% 20% 40% 60% 80%
policy cancellation notice Series 1

changes in
Figure no.9.3.2 Major Issues in Handling Health Insurance

There are many Indian citizens who are dissatisfied with the services of

insurance providers. The main reason for their dissatisfaction is the rejection

health insurance claims. Majority of these people do not want to know the

cause behind the rejection, but instead show frustration for not being offered

the required coverage or reimbursement. Research shows that many of these

claims get rejected because of a wrong choice made by an individual at the

time of choosing a health insurance plan.

People should understand their health insurance plans before buying to

avoid these confusions. One important point that everybody should keep in

mind is

the associated waiting period. This is the time period before which there is

no coverage offered for the particular ailment. If a person claims for the

same illness before the waiting period elapses, he/she would not be offered

the coverage. The other important point that a person should ponder over is

to go through the exclusions section. It will help in informing him/her

about the uncovered perils.

The single grievance that any dissatisfied health insurance consumer

would have is that of slow settlement of claims, or that of disputed claims.

In order to overcome the concept of Third Party Administrators was

introduced which was essentially for outsourcing claim settlement. The

cashless model of hospitalization also depends on the TPAs, where policy

holders are allowed to avail medical treatment at any of the networked

hospitals without having to pay cash upfront. However, TPAs are also a

source of discontentment among consumers. The survey shows that their

quality of service and infrastructure needed to improve, and that the

service form hospitals was really not up to the mark.

Most of the brokers are not provided the services up to mark, after selling

the policy they are not taking care about the after sale service procedure

The study revealed that the satisfaction levels in health insurance plans

was the least. Indicating that the health insurance segment needs to

consolidate its services and bring down the dissatisfaction levels of

consumers who use the service. because of the half knowledge of the

customer ,the policy can get not approve and customer get the cancellation

notice from company,

There is much confusion with regard to cashless hospitalization facility.

People should remember that this facility can be availed only in network

hospitals and

thus, going to non-network hospitals to seek treatment on cashless basis

does not make any sense. The common cause behind all these problems is

that people do not read the terms and conditions of their health insurance

policy carefully and thus, face problems at the time of claim settlement.

Many of these people do not look into their healthcare needs while buying

insurance, which is the other important point to be pondered over.


As Indias insurance industry matures, fraud risk management is going to

be a major concern for insurers and business leaders. Insurers will need to

continuously reassess their processes and policies to manage and mitigate

the risk of fraud. Fraud risk in the insurance value chain can emanate from

internal and external factors External fraud risk can arise at various stages,

e.g., registration of clients, underwriting, reinsurance and the claims

process The severity of fraud can range from a slight exaggeration to

deliberately causing loss of insured assets.

In the insurance industry, fraud has always been considered a sensitive

issue. The million dollar question continues how to reduce fraud , these

companies to prove that fraudulent activities exist, for instance, knowing a

claim is fraudulent is one thing, but proving this to be fraudulent is a

different matter. Fraudulent claims and surrenders received by insurers,

which also adds up our survey According to Researcher survey report,

there are various types of insurance frauds, which occur in all the areas of

insurance e.g., as claims and surrenders, fake documentation, mis-selling,

collusion between parties, etc. All insurance fraud can be classified under

the categories of soft and hard fraud, as describe below:

Different types of frauds affecting Insurance


Collusion Differe
between nt
Parties of
Fake Document Compa

0% 10% 20% 30% 40%

Source: Fraud Investigation & Dispute Services

Figure no.9.4.4 Frauds affecting Health Insurance companies

Hard fraud : This occurs when people unlawfully obtain money from
insurance companies by a reporting a false injury or accident

Soft fraud: This happens when people either lie to their insurance
companies or hide certain information for their financial gain.

Today when Indias insurance industry is working toward reducing cost,

one of its main focus areas to control or reduce costs is by proactively

arresting fraud, which can be achieved through an effective Fraud risk

assessment (FRA) program.

Some essential characteristics of a FRA programs includes:

Effective policy holder and vendor due diligence process

Effective claims validation

Mystery shopping, i.e. gathering market intelligence relating to tied and

corporate agents, brokers etc.
Channel reviews pertaining to tied agency ,bancassuarce and tele calling

Contract compliances review including review of adverting expenses,

intellectual property (IP) compliance etc.
Effective fraud analytics and electronic dashboard.

In its quest to restrict unfair practices, IRDA has formulated the insurance

regulatory and development authority (Protection of policyholders

Interests) regulations 2002, To counter the increase in the number and

complexity of frauds, IRDA has announced draft regulations for open

market consultation, to reduce Unfair practices and the Information

gap in domestic insurance.

The Insurance Regulatory and development authority (IRDA) has put in

place a significant regulation to bring about transparency in the selling

process by stipulating that All Insurance companies (Life and

General)have to resolve complaints from policy holders within 14 days

and any failure to do so will attract penalty . Any failure on the part of

insurers to follow this procedure and time frame will attract penalties by


Some of the proposed Regulation:

An amendment of IRDAs regulations to protect policyholders interests

and issuances of key feature documents for insurance products

Guidelines on distance marketing and sale process verifications of

insurance products
Standardization of terms and conditions on unit-linked insurance products
IRDAs acquisition for the distribution of insurance products

In its bid to check financial fraud , IRDA has made it mandatory for all

to obtain recent photograph of new customer





Survey has been done to know the Awareness, Preference and

consumption pattern of health insurance. By using Questionnaire method.


Q.1 Do you have any Insurance Policy?

(a) Yes (b) No

Yes No


Figure no.12.1

Parameters Percentage

Yes 54%

No 46%

Table no.12.1
Analysis:-The analysis shows that green symbolize of Insurance 68%

Respondents having Insurance Policy 32% Respondents dont have any

kind of Insurance Policy.

Q.2 Are you aware about Health Insurance?

(a)Yes (b) No

Yes No


Figure no. 12.2

Parameters Percentage

Yes 68%

No 32%

Table no.12.2


The condition of health insurance in India is not up to mark. Most of the

respondent does not use health insurance to finance their medical

expenditure. These people pay for their medical expenditure from their

pocket. As a result, many of these uninsured individuals either end up with

poor quality healthcare or have to bear financial hardships. The awareness

about Health insurance is very low due to many reasons.

Q.3 If yes, do you know benefits of health insurance?

Yes No


Figure no.12.3

Parameters Percentage

Yes 64%

No 36%

Table no.12.3


Because of lack of product benefit customer are not ready to purchase that

product. Lack of product awareness among distributors ,if they are not in

position to introduce the product to customer it will not be in a position to

understand the importance and uses of health insurance. it is rightly said

that awareness develop brand equity , due to awareness a customer

recognized the product and purchase the same , a customer is in position to

identify the product because of such awareness.

Q.4 Do you have any Health Insurance Policy?

(a) Yes (b) No

Yes No








Figure no 12.4

Parameters Percentage

Yes 54%

No 46%

Table no 12.4


54% Respondents having Health Insurance policy. 46% Respondents dont

have Health Insurance policy. Because lack of awareness about Health

Insurance and major issues in handling of Health Insurance 50%people not

having Health Insurance.

Q.5 If yes, which companies plan do you avail?

(a) ICICI Lombard

(b) Bajaj

Alliance (c )

Star Allied

(d) New India

Assurance (e)Others






20.00% Compani




ICICI Allied New India Others
Lombard Alliance Assurance
Figure no.12.5

Parameters Percentage







Table no.12.6


Indias largest Pvt. Sectors Bank, which is also in Health insurance,

ICICI Lombard is one of the best health insurance company and Star

Allied Health Insurance company approximately equally preferred by the

consumers , It has been successfully able to sustain in this competitive

market. The company offer attractive products as per expectations of the

customers .Although the premium amount is high but customers still opt
this companies Insurance product. It has created as his own brand image.

only because of quality services. In case of New India Assurance company

and Bajaj Allianz the most target audience are middleclass and lower

middle class , as the companies premium amount is less than other

insurance company.
Q.6 How did you get this health Policy?

(a)Employer Provides (b) Own purchase (c) Family Provides

Health Policy

% Health
% Own
Purchase Employer Family Provides

Figure no. 12.6

Parameters Percentage

Employer Provider 15%

Own Purchase 57%

Family Provider 28%

Table no.12.6

The Analysis shows that 57% respondents purchased own Health

Insurance .Single premium provide lots of extra lifetime facility, as

compare to family floater plan customer will get maximum sum assured.

very few companies are provide health insurance for their employee and in

case of family floater company charge more premium as per the age of the

family member.
Q.7 How much premium do you pay annually?

(a) 1000- 5000 (b) 5001- 10000 (c) 10001 15000 (e) Above 15000









1000- 5000 5001- 10000 10001 15000 Above 15000

Figure no.12.7

Parameter Percentage

5000 33%

5001-10000 35%

1001-15000 25%

Above 15000 10%

Table no.12.7

Most of the respondents having insurance policy between the range of

1000-15000 ,Insurance companies offered insurance policy as per the age

of the customer but one most important thing researcher found that as the

premium amount is increase automatically customer will get better

coverage and benefit but some middleclass and lower-class customers not

able to pay more amount for premium.

Q.8 Why did you purchase this health insurance plan?

(a) Health Expenses recover

(b) Tax benefits

(c) Recover Future uncertainty

Health insurance plan


% Health
insurance plan
Health Tax benefits Recover Future
Expenses uncertainty

Figure no.12.8
Parameters Percentage

Health expenses
Recover 44%

Tax Benefit 21%

Recover future
Uncertainty 33%

. Table no. 12.8


The main concern of any insurer by purchasing any Health Insurance is to

cover their Health expenses ,the number of diseases increases day by day

and peoples are paying high amount for that so to recover that expense

people preferred Health Insurance. and most of the customers purchase

health plan for the tax benefit and recover the future uncertainty.
Q.9. Kindly Rate The Following Factors Important To You In Opting
Health Insurance (More than one)

b) Service of Insurer ( ) ( ) ( ) ( ) ( )

d) Network Coverage of Hospital ( ) ( ) ( ) ( ) ( )

e) Premium Amount ( ) ( ) ( ) ( ) ( )

f) Coverage Amount ( ) ( ) ( ) ( ) ( )

g) Coverage of Diseases ( ) ( ) ( ) ( ) ( )

h) Number of claims allowed per year ( ) ( ) ( ) ( ) ( )

Important Factors

0% Factors
figure no.12.9

Parameters Percentage

Service of Insurer 30%

Network Coverage Hospitals 20%

Premium Amount 30%

Coverage of Diseases 10%

Number of claim allowed per year 10%

Table no.12.9


For the continued development of the health insurance market, and also to

protect the long-term interests of the insured persons, the prices of health

insurance products should continue to be affordable to ensure wider

acceptance and increased reach, while on the other, the insurance industry

requires that this line of business remains commercially viable and better

after sale service.

Q.10 How Well Do You Think, You Are Covered By Your Current
Health Insurance Policy?

a) Definitely well-covered

b) Probably well-covered

c) Not well-covered

d) Probably not well-covered

Coverage by current insurance policy

% Coverage by current


figure no.12.10
Parameters Percentage

Definitely Well-Covered 32%

Probably Well-Covered 25%

Not Well- Covered 28%

Probably not well-covered 15%

Table no.12.10


43% respondents says that their health insurance plan not well covered and

probably not well covered the percentage is quite high. people should

understand their health insurance plans before buying to avoid these

confusions. One important point that everybody should keep in mind is the

associated waiting period. This is the time period before which there is no

coverage offered for the particular ailment. If a person claims for the same

illness before the waiting period elapses, he/she would not be offered the

Q.11 Which according to you is the most important aspect that every

health insurance plan should cover?

a) Hospital care

b) Preventive care

c) Maternity

d) Health specialists

e) Choice of doctors

Plan Cover

% Plan

Figure no.12.11
Parameters Percentage

Hospital care 34%

Preventive care 8%

Maternity 13%

Health specialist 27%

Choice of Doctors 18%

Table no.12.11


Most of the respondents says that they want better coverage of hospitals

and coverage of maternity also because many of the reasons doctors are

taking decision for suzerain so its not affordable for common men and they

want their own family doctors for treatment so this are the main things that

researcher found.




This paper makes an attempt to understand the awareness, preference and

consumption pattern of Health insurance plan.

The result of this study shows that the annual premium is the most

important factor that influences the decision or choice of health Insurance

plan. This means that households having higher income have higher

probability of buying healthcare plan. Thus, less income groups may not

opt for health insurance plan. Thus there is a need to develop more

products that cater to need of larger and all levels of income groups. Apart

from annual premium, hospital network and disease coverage or coverage

of services hold importance in making choice of healthcare plan. Thus,

insurance company should provide larger network of hospitals and services

in their plans in order to satisfy their customer fully. Accessibility of

service provider and company reputation also moderately influence the

decisions. The decision made for choosing the plan is mainly influenced

by self perceptions. Family and relatives and past experience hold second

position for assisting in the choice of plan. Most people would prefer to

buy healthcare plan from private insurance companies for they provide

better services and innovative products. Thus, there is large scope for

private insurance companies to grow.

The legal and regulatory framework of private health insurance,

particularly because it operates in the voluntary market, should continually

balance competing goals of access, affordability and quality of healthcare

and provide health coverage to a larger fraction of the population with

varying risk

characteristics and ability to pay. Regulations, aside from their aim of

providing protection of health insurance policyholders and beneficiaries,

can be potent tools to promote access to healthcare, control pricing of

health coverage vis--vis healthcare providers and enhance quality of

healthcare. Allowing the participation of other entities that provide health

coverage, such as Hospital and/or Professional entities, and self-insured

health insurance schemes of Mutual Benefit Associations and

Cooperatives would further increase the reach and depth of private health

insurance. Licensing standards for compliance which are enforced on

health care provider facilities as well as self-regulation in the medical

profession and within provider groups are necessary for continuing

improvement of healthcare quality. Private health insurance cannot grow if

reasonable consumer expectations relating to access, cost and quality of

healthcare remain promises rather than realities.

The analysis clearly shows that there is demand for cash less health

insurance scheme but the customers want reduction in number of

exclusions and inclusion of pre-existing diseases. They want the TPAs to

be efficient and perform up to the expectation of the policyholders and

insurers. Even though the insurers are providing need based plans but more

should be done to meet the needs arising out of changing lifestyles of

people. The population of elderly people, in India, is rising and they would

require institutional care, which is totally missing. The plans need to

include pregnancy related expenses, inclusion of chronic and debilitating

diseases, HIV and AIDS, TPAs need to be more efficient in claims

processing and providing better networking for the policyholders. These

challenges can be overcome by setting up and stand-alone health insurance

companies that are run on-profit objective. In most the countries life

insurance companies underwrite health insurance. In India, life insurers

should be allowed to underwrite health insurance. The tax benefits

available at present should be hiked and continued with. The health plans

should be wide based in order to include outpatient care along with in-


To create the awareness of health insurance is very important, the

Government and all the associated bodies should all offer their support in

spreading health insurance awareness so that Indian citizens are aware of

the right to seek quality healthcare without any financial thought. and it

will help to increase the awareness of health Insurance among the people.

The Health Insurance recommendations, some of the keys ones are as


Lowering The Limit Of Capital Requirement:

The capital requirement for health insurance companies be reduced to Rs

25 crore from the current Rs 100 crore. Present Rs 100-crore requirement

is a deterrent since a larger capital requirement will bring in additional cost

associated with such capital.

Raising The FDI Limit:

The foreign direct investment (FDI) limit be raised to 51 % from the

existing %. This could attract global health insurance players and

encourage them to take a long-term perspective of their investments in the


Grading And Accreditation Of Health Providers:

The grading and accreditation of hospitals and health providers in a post-

tariff regime. The parameters used to evaluate the hospitals would include

medical specialties (evaluated on the availability of equipment,

qualification and adequacy of medical personnel). The provision of a

database is something that could be taken up by the Tariff Advisory

Council in active collaboration with the IRDA.

Advertisement Of Health Insurance:

Large efforts should be laid towards developing health insurance as an

alternative and acceptable method of personal finance risk management

tool. The whole aim should be to divert towards popularizing health

insurance as aconcept in rural areas under the guidance of the ministry of

finance and the IRDA.

The Research also recommends that

(1)Life insurance companies to develop underwriting guidelines and sell

health insurance policies because of their wide distribution network.

(2) Multiple health insurance products should be offered at various price

points to customers.

(3) IRDA should engage the services of the Ministry of Health and Family

Welfare, Indian Medical Council, Indian Medical Association, healthcare

associations and other bodies.

Other Recommendations

Abolition of the service tax on health insurance products. It has also been

suggested that income tax holidays be accorded to the health insurance

companies for 10 years from the date of incorporation.

Introduction of a common pool for terminally ill people/people who do

not have access to any kind of health insurance.

Fraudulent claims, when discovered and proved, should be treated as

criminal offence and subject to strict legal action including imprisonment.

Systems of co-payment, co-insurance and voluntary deductibles to be used

(1) Make health insurance more viable,

(2) Control frauds

(3) Refrain customers wanting to avail luxury facilities.


Name of Respondent: -
Date: -
(a) Male (b)
Female Age (in
(a) 18 - 25 (b) 26 35 (c) 36 - 45 (d) above
45 Qualification
(a) 12th (c) Graduate (d) Postgraduate (e)
Professional Monthly Income (in Rs.)
(a) Below 10,000 (b) 10,001-20,000 (c) 20,001-30,000 (d) above
30,000 Occupation
(a) Student (b) Private Employee (c) Govt. Employee

(d) Business Man

Q.1 Do you have any Information regarding Insurance?

(a) Yes (b) No

Q.2 Are you aware about Health Insurance?

(a)Yes (b) No

Q.3 If yes, do you know benefits of health insurance?

(a) Yes ( b ) No
Q. Do you have any Health Insurance
4 Policy?
(a) Yes (b) No
Q. If yes, which companies plan do you
5 avail?

(a) ICICI Lombard

(b) Bajaj

Alliance (c )

Star Allied

(d) New India Assurance

(e) Others
Q.6 How did you get this health Policy?

(a)Employer Provides (b) Own purchase (c) Family Provides

Q.7 How much premium do you pay annually?

(a) 1000- 5000 (b) 5001- 10000 (c) 10001 15000 (e) Above 15000

Q.8 Why did you purchase this health insurance plan?

(a) Health Expenses recover

(b) Tax benefits

(c) Recover Future uncertainty

Q.9 Kindly Rate The Following Factors Important To You In Opting

Health Insurance (More than one)

(a) Service of Insurer ( ) ( ) ( ) ( ) ( )

(b) Network Coverage of Hospital ( ) ( ) ( ) ( ) ( )

(c) Premium Amount ( ) ( ) ( ) ( ) ( )

(d) Coverage Amount ( ) ( ) ( ) ( ) ( )

(e) Coverage of Diseases ( ) ( ) ( ) ( ) ( )

(f) Number of claims allowed per year ( ) ( ) ( ) ( ) ( )

Q.10 How Well Do You Think, You Are Covered By Your Current
Health Insurance Policy?

(a) Definitely well-covered

(b) Probably well-covered

(c) Not well-covered

(d) Probably not well-covered