Health Insurance In India - A General Overview

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Health insurance has emerged as one of the fastest growing segments in the non-life insurance industry with 30 per cent growth in 2010-11. For the purpose of regulation, health insurance companies are classified as non-life companies. 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.

Health Insurance in India General Overview

A survey showed massive dissatisfaction with the healthcare system in India. The interesting find about health insurance in India was how people perceived 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.

At Nascent Stage

With a reach of just about 2% of the country’s 1.2 billion population, India offers a huge potential in health insurance market. There are over 30 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 health insurance space, Apollo DKV, Star Health & Allied Insurance are the standalone players.

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.

The brokers are becoming professional risk managers. There is also a likelihood that banks would soon be allowed to sell products of more than one company, as regulations governing bank distribution are being reviewed by the regulator.

The Need of Health Insurance

Health treatment nowadays is very costly. More than the disease it is the cost of treatment that takes its toll. To get rid of health worries health / medical insurance is the answer. But over 70 per cent of these spends are out of pocket which leads to lot of hardships. According to a survey by NSSO (National Sample Survey Organization), 40 per cent of the people hospitalized have either had to borrow money or sell assets to cover their medical expenses.

A significant proportion of population may have had to forego treatment all together. Hence it is imperative that the health insurance coverage is increased. Increasing incidence of lifestyle diseases such as obesity, diabetes mellitus, hyperlipidemia, hypertension and cardiovascular diseases to name a few, and rising medical costs, further emphasize the need for health insurance. Health insurance policy not only covers expenses incurred during hospitalization but also during the pre as well as post hospitalization stages like money spent for conducting medical tests and buying medicines. The cover will be to the extent of the sum insured.

Second Biggest Segment

Health insurance premium collections touched Rs 6,625 crores in 2008-09 compared with Rs 5,125 crores in the previous year. Health insurance is now the second biggest segment after motor which contributes nearly 40 per cent of the total premium. Health contributes about 22 per cent of the total premium. It is also emerging as a significant line of business for many insurance companies which now have products in health insurance.

Apart from increased public awareness the growth in the segment was also being driven by the Central and State governments taking up large-scale insurance programmes such as the Rajiv Arogyasri Scheme in Andhra Pradesh and the Kalaignar Scheme in Tamil Nadu (which has now been scrapped with the new government introducing fresh health insurance inititatives). Life Insurance Corporation of India (LIC) is targeting to provide health cover to close to 10 million families in the 1 year of the operation / launch of the product and expects over Rs 4000 to 5,000 crores of revenues.

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