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Healthcare Insurance Sector in India

Santhosh - Analyst

Contents
Introduction

Market Size & Forecasts

Market Drivers

Market Restraints Competitive Structure

Value Chain Impact Analysis

Recommendations

Introduction
Healthcare Insurance Market in India in unique and has a strong growth potential than the other insurance markets. The study covers all the fundamental aspects of the healthcare insurance market in India.

The Topics covered in this study are

• Market size – future forecast (reasons for the fc)
• Key drivers/resistors of the market • Split between public and private healthcare insurance markets in India • Competitive landscape – w.r.t private players • How does public healthcare insurance work in India • How does public healthcare insurance affect the healthcare scenario in India • The healthcare insurance value chain – private compared with public • Impact of healthcare insurance sector’s growth on the pharmaceutical market in India • Strategic recommendations

Market Size & Forecasts
India Health Insurance Market (2002-2008)

Source:IRDA

The Indian healthcare insurance industry was worth INR 5,125crores with a compounded annual growth rate of approximately 37 percent between 2002 and 2008. The market penetration is only around 2 percent of the total population in India. The Health Insurance Industry is one of the fastest growing segments among other non-life insurance segments.

Market Size & Forecasts
Total Revenue Forecast for Indian Healthcare Insurance Market - 2008-2015
70000 60000 50 45 40 35 30 25 30000 20000 10000 0 2008 2009 2010 2011 2012 2013 2014 2015 20 15 10 5 0

Premium in INR (Crores)

50000 40000

Year Revenues Growth Rate

The Indian healthcare insurance industry is worth INR 60,497 crores with a compounded annual growth rate of approximately 42.3 percent between 2008 and 2015. The market penetration is will be 3 folds higher in 2015. The main factors of growth are increased awareness. According to World Bank Report, 99% of Indians will face financial crunch in case of any critical illness. Hence the need for Health Insurance.

Growth Rate

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.

Market Drivers (Cont…)

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 to double (discretionary spending ) between 2005 and 2025. is expected

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.

Source:Mckinsey

Market Drivers (Cont…)
Salient Demographic Features that support the growth of Health Insurance in India:
 Adult literacy rate in India is 61.3% and the youth literacy rate in India is 73.3% and is expected to increase in the future.  The Disease rates in India is increasing. India has one of the highest heart disease and diabetes rates in the world.  It is home to one-sixth of the world’s population occupying less than 3 % of the world’s area.

Population of India (in Millions)
Year
2000 2005 2010 (P) 2015 (P) 2020 (P)

Under 15
361 368 370 372 373

15-64
604 673 747 819 882

65+
45 51 58 65 76

Total
1010 1080 1175 1256 1331

Source: Institute of Economic Growth

The

Indian population will have

an increase

in

population by 2010. Specifically, the age group between 15-64 will experience high growth levels. This will support the health care insurance market to grow in tandem.

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

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5

10

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10

Competitive Structure
Health Insurance Companies’ Landscape
Public Sector: New India, Oriental, National, United India Private Sector: ICICI Lombard, Reliance, Bajaj Allianz and others

Non-life insurance companies

Health Insurance Companies

Specialized Health insurance companies

 Star Health and Allied Insurance  Apollo DKV insurance

Life Insurance broadly addresses four needs: saving, protection, retirement and investment.

Life Insurance Companies

Main players:  LIC  Private players etc

Competitive Structure (Cont…)
Market Share of Key Players in Health Insurance Companies (2008)

Market Leader : New India Insurance Market Structure : Oligopolistic Competition Top players : New India ICIC Lombard United India National Oriental Market Size : Increasing

Source:IRDA

Health insurance forms a low proportion of the total business for life insurance companies in India (0.2 percent of the individual regular premium for FY2008), it forms a significant proportion of the business for non-life Insurance companies (approx.18 percent of the total Gross Written Premium for FY2008)

Competitive Structure (Cont…)
Healthcare Insurance Premium – Company wise analysis Public Vs Private Health Insurance Companies Market – India (2008)

By Analysis www.healthinsuranceindia.org

Private Healthcare Companies have doubled their market share since 2004. The public sector companies are increasingly losing their market share.. The public health insurance companies accounts for 62% while the private sector accounts to 38% of the Indian Health Insurance market in 2008.

Inference:
 The total premium income of Private health insurance portfolio in 2008 grew by 57.03% to INR 1941.50 crores from 2007.  The total premium income of Public health insurance portfolio in 2008 grew by 61.3 % to INR 3183.50 crores from 2007.  In 2008, there wasn’t a significant change in the market share for public and private sector.

Competitive Structure (Cont…)
Market Share of Key Players in Private Health Insurance Sector (2008)
Market Leader : ICICI Lombard Market Structure : Oligopolistic Competition Top players : ICIC Lombard Reliance Bajaj Alliance Market Size : Increasing

By Analysis

Present Scenario
Niche Star Health Apollo DKV Royal Sundaram IFFCO Tokio TATA AIG Market Boomers Market Leaders ICICI Lombard

Futuristic Scenario : Perfect Competition
Niche Star Health Apollo DKV Market Leaders ICICI Lombard Reliance Bajaj Allianz Royal Sundaram IFFCO Tokio TATA AIG Market Followers
By Analysis

Reliance Bajaj Allianz Market Followers

New Players Others Market Boomers

The market in the current scenario is oligopolisitc in nature and there is a fair possibility in future that the market will have large number of firms with homogenous product offering ending with Perfect Competition.

Value Chain
Insurers

Private Companies Public Companies

IRDA - regulator

Payers

Intermediaries

Providers

Employers Government Mediclaim Policy Holders NGO/SHG/MFI

TPAs Distribution Channel Partners HMO PPO

Hospitals Diagnostic Centers Doctors Nursing Homes

Customers (Individuals, Patients)

Private: Private Companies, TPAs, Distribution Channel, TPA’s, PPO, HMO, Healthcare Providers, Private Employers Public : Public Companies, Healthcare Providers, Government Employers

Impact Analysis – Public Sector

Health Insurance Landscape

Health Insurance Plans
 Private  Social/Government EHIS, RSBY (CGHS, etc)  Community Based/ Micro insurance Some of the leading health insurance plans in India with good coverage options and tax saving schemes are Health Guard, Star package, Silver Health Policy, Insta Insure, Star package, Health Advantage Plus and Family Floater Plan. Insurance and other organized forms of payment for health services, including ESIS, CGHS and other such employer schemes, presently cover <15% of all people in the country. (Membership: 47 million under ESIS, 4 million under CGHS, and upwards of 100 million under government-sponsored, group and individual plus commercial coverage health under insurance,

schemes of Defence, Railways, PSUsesp. steel and coal etc)

Impact Analysis – Public Sector (Cont…)
The social/community insurance is has the highest coverage till date. Even in case of entry of private players in the market, this segment will have tremendous potential due to diversified coverage (Rural India). There has been strong evidence of growth on adoption of insurance plans in the rural India. If similar plans introduced, there would be a raise in the penetration of the Indian market. For the healthcare sector, this is significant in terms of more number of patients. Hence there would be requirements from the healthcare sector to adjust to infrastructure mandates

Healthcare Impact:  Impact: on Quality of Healthcare services (service quality would increase)  Impact on healthcare infrastructure (Quality would definitely increase)  Increase healthcare insurance penetration

Impact Analysis – Pharmaceutical Industry
Healthcare Insurance Growth’s Impact on Pharmaceutical Industry
Reimbursement
Reimbursement is the sales price that a payer for a drug ultimately pays, net of any rebates or discounts it receives. Reimbursement is important to pharmaceutical companies because any rebates or discounts that impact the price of a drug to a payer also impact pharmaceutical company revenue and profits (along with quantity). Generally speaking, as a payer’s negotiating power increases, either through government legislation or concentration of buyers, reimbursement levels go down.

Payer Mix
Payer mix represents the percentage of prescriptions that are reimbursed by a private health insurance plan, government funded health plan or paid for in cash by an individual. Payer mix is relevant because on average pharmaceutical companies receive very different revenues for the same drug depending on whether it is ultimately reimbursed by a private health plan, government funded plan or paid for in cash.

Utilization
Utilization is defined as the quantity of pharmaceuticals consumed. It is necessary to evaluate potential impact on overall utilization of pharmaceuticals (both brand and generic drugs) as well as any potential bias towards utilization of generics over branded pharmaceuticals.

Impact Analysis- Pharmaceutical Industry (Cont…)
Net Effect on Pharmaceutical Companies

Factors

As

the

health

insurance

penetration

increases, reimbursement will also increase. As the volume of drug sale or utilization of

Reimbursement

drugs grows, reimbursement increase with a positive impact. A partnership environment strategically would be in

Payer Mix

advantage for pharmaceutical companies to offer discounts and increase their volume sales. Branded Generic

Utilization
The growth of healthcare insurance market
By Analysis

in India will have a Pharmaceutical

positive impact on
Industry. India’s a pharma is

With the growing Health Insurance market in India, the overall utilization of drugs would subsequently increase. However, generic drug utilization would be higher than that of the branded drugs due to the factor that India is still in nascent stages health insurance penetration. Assuming that the penetration is more in middle class, the premium they opt will be lesser and hence generic drugs would have an definite advantage.

Pharmaceutical

market

emerging market with growth potential more than 10%. Alongside with the growth of insurance market, the pharmaceutical market may grow at a faster phase more than 15% within the next few years.

Recommendations
Create the Awareness
Increase exposure through media (TV, Radio and Internet). In this case, the traditional model is more generic and there is a need to reinvent the messages based on target groups to achieve the business objectives.

Product Mix & Quality
There is a demand for new products in the market with optimal pricing. Preventive care, out patients coverage and long term care needs to be addressed with utmost flexibility in options such as continuity/renew-ability and portability.

Comprehend the nuances of the market
Companies should understand the nitty-gritty of the market to increase their market share.  Fraud Control  Cost & Inflation Factors  Localization Trends  Quality Standards – Region wise.  Managing the divergent expectations of the insurer, the insured and the provider

Research Methodology

The Research Methodology Followed (Secondary Research – Internet) • • • • • Define Marketing Problem and Opportunities Obtain background information on industry, markets, customers and competition Locate appropriate resources/collect data Organize and analyze data Present Finding