Health Insurance: Prospective to Public Sector Companies


Dr. Om Prakash Singh 2 Ruchi Lalwani 3 Saurabh Sen

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. India is way behind many fast developing countries such as China, Vietnam and Sri Lanka in health indicators. The penetration of health insurance in India has been low. It is estimated that only about 3% to 5% of Indians are covered under any form of health insurance. In terms of the market share, the size of the commercial insurance is barely 1% of the total health spending in the country. Health insurance is thus really a minor player in the health ecosystem. In case of government funded health care system, the quality and access of services has always remained major concern. A very rapidly growing private health market has developed in India. This private sector bridges most of the gaps between what government offers and what people need. The new economic policy and liberalization process followed by the Government of India since 1991 paved the way for privatization of insurance sector in the country. Health insurance, which remained highly underdeveloped and a less significant segment of the product portfolios of the nationalized insurance companies in India, is now poised for a fundamental change in its approach and management. The Insurance Regulatory and Development Authority (IRDA) Bill, recently passed in the Indian Parliament, is the important beginning of changes having significant implications for the health sector. This paper presents review of health insurance situation in India.

1 2

Professor, Banaras Hindu University, Varanasi Research Scholar, Banaras Hindu University, Varanasi 3 Research Scholar, Banaras Hindu University, Varanasi


The General insurance business in India.HISTORY OF INSURANCE SECTOR The business of life insurance in India in its existing form started in India in the year 1818 with the establishment of the Oriental Life Insurance Company in Calcutta. Some of the important milestones in the general insurance business in India are given in the table 2. can trace its roots to the Triton Insurance Company Ltd. LIC Act. 5 crore from the Government of India. Table 2: milestone’s in the general insurance business in India 2 . Some of the important milestones in the life insurance business in India are given in the table 1. Table 1: milestone’s in the Life Insurance Business in India Year 1912 1928 Milestones in the life insurance business in India The Indian Life Assurance Companies Act enacted as the first statute to regulate the life insurance business The Indian Insurance Companies Act enacted to enable the government to collect statistical information about both life and non-life insurance 1938 1956 businesses Earlier legislation consolidated and amended to by the Insurance Act with the objective of protecting the interests of the insuring public. 245 Indian and foreign insurers and provident societies taken over by the central government and nationalised. LIC formed by an Act of Parliament.. 1956. with a capital contribution of Rs. on the other hand. viz. the first general insurance company established in the year 1850 in Calcutta by the British.

. the private players are active in the liberalized environment. With many more joint ventures in the offing. nine private non-life insurers and six public sector companies. There are now 29 insurance companies operating in the Indian market – 14 private life insurers. Most of the private insurance companies have formed joint venture partnering well recognized foreign players across the globe. But it can be also defined broadly by including all financing arrangements where consumers can avoid or reduce their expenditures at time of use of services. Health Insurance scene in India Health insurance can be defined in very narrow sense where individual or group purchases in advance health coverage by paying a fee called "premium". 107 insurers amalgamated and grouped into four companies viz. the insurance industry in India today stands at a crossroads as competition intensifies and companies prepare survival strategies in a detariffed scenario.broader 3 .. a wing of the Insurance Association of India. frames a code of conduct for ensuring fair conduct and sound business practices The Insurance Act amended to regulate investments and set minimum solvency margins and the Tariff Advisory Committee set up. The insurance market have witnessed dynamic changes which includes presence of a fairly large number of insurers both life and non-life segment. the New India Assurance Company Ltd.Year 1907 1957 Milestones in the general insurance business in India The Indian Mercantile Insurance Ltd. For years now. The health insurance existing in India covers a very wide spectrum of arrangements and hence the latter. GIC incorporated as a company. 1968 1972 The insurance sector was opened up for private participation four years ago. the first company to transact all classes of general insurance business General Insurance Council. the Oriental Insurance Company Ltd. and the United India Insurance Company Ltd. 1972 nationalised the general insurance business in India with effect from 1st January 1973. The General Insurance Business (Nationalisation) Act. set up. the National Insurance Company Ltd.

It is estimated that the Indian health care industry is now worth of Rs. In many other low and middle income countries contribution of social health insurance is much higher. The share of public sector companies in health insurance premiums was 76% and that of private sector companies was 24% for the period 2005-06. Many global insurance companies have plans to get into insurance business in India. 96. The schemes run by member-based organizations cover about 5 per cent of population in various ways. 1000 as premium per annum. detailed planning and effective insurance marketing is likely to assume significant importance. Health insurance is very well established in many countries. The Insurance Regulatory and Development Authority (IRDA) is the governing body responsible for promoting insurance business and introducing insurance regulations in India.000 crore annually. In India only about 2 per cent of total health expenditure is funded by public/social health insurance while 18 per cent is funded by government budget. Based on ownership the existing health insurance schemes can be broadly divided into categories such as: • • • • Government or state-based systems Market-based systems (private and voluntary) Employer provided insurance schemes Member organization (NGO or cooperative)-based systems Government or state-based systems include Central Government Health Scheme (CGHS) and Employees State Insurance Scheme (ESIS).interpretation of health Insurance is more appropriate. But in India it is a new concept except for the organized sector employees. Out of one billion population of India 315 million people are estimated to be insurable and have capacity to spend Rs. health insurance has a wider scope in present day situations in India. Health insurance premiums collected over 2005-06 registered a growth of 35% over the previous year. The share of insurance market in above figure is insignificant. Given the health financing and demand scenario. Market research. There are various types of health coverages in India. However. It is estimated that employer managed systems cover about 20-30 million of population. it requires careful and significant effort to tap Indian health insurance market with proper understanding and training. Market-based systems (voluntary and private) have Mediclaim scheme which covers about 2 million of 4 .000 crore and expected to surge by 10.

28 New Business Out of India No. There are many employers who reimburse costs of medical expenses of the employees with or without contribution from the employee.39 crores. This is a unit linked health insurance product with a facility of withdrawal linked to domiciliary treatment. to devise and market Health Insurance products and services. Still there is a scope of rise up to 35 per cent in near future.91.population. 97357 Health Insurance policies were sold for a premium income of Rs. It is estimated that about 20 million employees may be covered by such reimbursement arrangements. of Sum Annual Policies Assured (in Crores) Premium Receivable (in crores) - 5 . the portfolio of health insurance (which is technical in nature) could be made highly competitive. Table 3. It is estimated that only 10 per cent of health insurance market has been tapped till today. The product is comprehensive in its scope to address varied Health Insurance needs. of Sum Policies Assured (in 2007-08 2008-09 101895 97437 Crores) 3756.New Business by the LIC Year New Business in India No. It is estimated that about 30 million employees may be covered under such employer managed health services. There are several government and private employers such as Railway and Armed forces and public sector enterprises that run their own health services for employees and families. 2008. The health care demand is rising in India now days. By developing a competent IT infrastructure and by entering into partnership with Third Party Administrator and banks.69 3798.72 Annual Premium Receivable (in crores) 109. During the year 2008-09. The first Health Insurance product “Health Plus” was launched on 4th February.72 105. 2007-08 started a new Health Insurance Dept. To tap the vast potential available for Health Insurance business in India LIC in the year.

70 205.17 New Business Out of India - In-Force Business 250000 Amount in crores 200000 150000 100000 50000 0 2007-08 Years 2008-09 New Business in India New Business in India New Business in India Table 4.72 crores. The premium received by the corporation was also decreased by Rs.69 crores to Rs. of Policies Table 3 shows the details of new business by the LIC in India. 109. 3756. It represents that the number of policies sold by the corporation has been decreased by 97437 from 101895 policies whereas the sum assured has a slight increase from Rs.52 7216.Linked Plan .28 crores from Rs. In-Force Business New Business in India Year 2007-08 2008-09 101895 198266 3743.72 crores. 105.New Business 108000 Amount in Crores 106000 104000 102000 100000 98000 96000 94000 92000 2007-08 Year 2008-09 New Business in India Annual Premium Receivable (in crores) New Business in India Sum Assured (in Crores) New Business in India No.75 109. 3798.Health Plus in India 6 .

37987160000 in 2008 to Rs.Year Number of Sum insured Yearly policies (Rs) and annuities Renewal per annum Premium (Rs) 1052823000 1758356538 (Rs) 3798716000 0 7216750000 0 Health Plus in India 2007-08 2008-09 97437 198266 80000000000 70000000000 60000000000 50000000000 Amount in Rs 40000000000 30000000000 20000000000 10000000000 0 Number of policies (Rs) Sum insured and annuities per annum (Rs) Yearly Renewal Premium (Rs) 2007-08 Year 2008-09 Table 4 exhibits that there is an increase in all the aspects of linked plan in India in regard to health insurance. The number of policies increased to 198266 in 2009 from 97437 in 2008. The Sum insured and annuities per annum also increased from Rs. Given that government has liberalized the insurance industry. health insurance is going to develop rapidly in future. 1758356538 in 2009. The challenge is to see that it benefits the poor and the weak in terms of better coverage and health services at lower costs without the negative aspects of cost increase and over use of procedures and technology in provision of health care. 72167500000 in 2009. 1052823000 in 2008 to Rs. The Yearly Renewal Premium also increased from Rs. 7 . Conclusion India has limited experience of health insurance.

Progress and Challenges of Health Sector: A Balance Sheet. Health Insurance for Informal Sector: Case Study of Gujarat. Oct. Ahmedabad.References Gumber A. Mavalankar D. 30. 1999. Report of the one day workshop on 'Health Insurance in India'.. 30. Indian Institute of Management. 2000. Ahmedabad October 1999 Working Paper 99-10-08 8 . IIMA 1999. Bhat R. Sep. Indian Institute of Management. Kulkarni V. Satia J. Economic and Political Weekly.

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