Health Insurance Market Penetration in India

Student : Narendra RapetiGuide : Dr. Lalitha SubramanianPanel : Dr. Brijesh PurohitMadras School of Economics

Dissertation

Why am I doing this study? Who shall be interested in this study?

Contents

Chapter 1- Introduction of private health insurance India’s insurance market Objective of the study

Chapter 2- Health Insurance Key stake holders Health insurance plans

Chapter 3- Penetration of health insurance in recent past

Chapter 4- An analysis Statistical inferences on health data provided by

TAC Key issues and concerns Addressing way-outs Conclusion

Chapter 1 – Introduction of private health insurance India’s insurance market

History – till 1972 GIC and its subsidiaries – from 1972 till 1999 IRDA Act, 1999 – TAC from 2003

Objective of the study

To study the health insurance market penetration in India with the help of latest available data presented by Tariff Advisory Committee ( TAC) on their website and also the data reported by IRDA on their website to bring out valuable insights to the sector. In a way to

Understand to the updated situation Project and identify the areas or issues which need to be

addressed and Provide suggestions and recommendations to tackle the

situation for the future

Chapter 2 – Health Insurance –Key Stake Holders

Health Insurance Industry

Government

Distribution channel partners

NGOs / SHGs / MFIs

Media / Telecom

Customer

Insurance companiesTPAs

Health Providers

IRDA - regulator

Chapter 2 – Health Insurance – Plans

Health Insurance Plans

Private SocialCommunity Based /

Micro Insurance

Chapter 3 – Penetration of health insurance

Chapter 3 – Penetration of health insurance

Key Market Indicators

Insurance Penetration

Insurance Density

Chapter 4 – An Analysis

Table 1. ACTUAL DATA - Source: Tariff Advisory Committee, Data Repository

Time YearNo. of

PoliciesNo. of

MembersNo. of Claims

Premium Paid in

Rs (crore)

Claims Payable

in Rs (crore) Claim Ratio

Underwriting Balance

Rs (crore)

1 2003 - 2004 2265451 8361629 360088 944 785 83% 159

2 2004-2005 2059449 8987239 555273 987 948 96% 39

3 2005-2006 3828495 16345575 1016785 1947 1777 91% 170

4 2006-2007 3110475 17907430 1060047 2,820 2,198 78% 622

5 2007 -2008 3790838 24121625 1436998 2,758 2,904 105% -146

Key Observations

1. Table 1 encloses the data related to Paid Claims and not the Incurred Claims.

Why are the Incurred claims data which is crucial and important not reported?

How far are the Paid Claims data a good approximation to Incurred Claims data?

2. Table 1 contains data of 7 variables over a period of 5 years, which may not be large enough to be used for accurate future predictions.

Are the data heads recorded for future analysis sufficient? Who recommended the current format of the data set,

Table 1? 3. The data enclosed in Table 1, is gathered from TPAs and

then consolidated. Do the data gathered from TPAs represent the whole

health insurance business for the corresponding year?

Key Assumptions

1. Assuming that the Paid Claims data represents Incurred Claims.

2. Linear fit is a good approximation for projecting the future values.

Therefore, we now proceed forward to project the

actual data in Table 1 by fitting linear trend and then estimating the future values. The projected values are recorded in Table 2, given below.

Cont..Table 2 - Linear Fit

YearNo. of

PoliciesNo. of

MembersNo. of Claims

Premium Paid in Rs

(crore)

Claims Payable in Rs (crore) Claim Ratio

Underwriting Balance in Rs

(crore)

2003-04 2265451 8361629 360088 944 785 83% 159

2004-05 2059449 8987239 555273 987 948 96% 39

2005-06 3828495 16345575 1016785 1947 1777 91% 170

2006-07 3110475 17907430 1060047 2,820 2,198 78% 622

2007-08 3790838 24121625 1436998 2,758 2,904 105% -146

2008-09 4241482 27276755 1683416 3530 3369 98% 161

2009-10 4704070 32234249 1953454 4177 4030 99% 147

2010-11 4799719 35921128 2179152 4597 4558 105% 39

2011-12 5416833 40734244 2489013 5068 5166 112% -97

2012-13 5733656 44618484 2728337 5733 5719 110% 13

2013-14 6088286 49112008 2994294 6210 6319 116% -109

2014-15 6459223 53259884 3258110 6718 6881 120% -163

2015-16 6896682 57645732 3528740 7280 7468 122% -188

2016-17 7224516 61813383 3782467 7824 8040 125% -216

2017-18 7617507 66166955 4051202 8329 8623 130% -294

Cont..

Year No. of No. of No. of Premium Claims Claim Underwriting Policies Members Claims Paid in Payable in Ratio Balance

Rs (crore) Rs (crore) in Rs (crore)

2003-04 2265451 8361629 360088 944 785 83% 1592004-05 2059449 8987239 555273 987 948 96% 392005-06 3828495 16345575 1016785 1947 1777 91% 1702006-07 3110475 17907430 1060047 2,820 2,198 78% 6222007-08 3790838 24121625 1436998 2,758 2,904 105% -1462008-09 4493349 32422234 2203227 4426 4322 97% 1042009-10 5323360 44431783 2882139 6317 6206 98% 1122010-11 5501574 54877506 3675942 7777 8140 104% -3632011-12 6776295 75522610 5307482 10422 11720 112% -12982012-13 7647569 99460493 7198628 15101 16605 109% -15032013-14 8645012 130596430 9508732 19583 22866 116% -32832014-15 9836703 171462366 13052023 26140 31848 121% -57072015-16 11483470 229755216 17964586 36097 45182 124% -90852016-17 12914784 300806429 24061174 48745 62771 128% -140262017-18 14804382 397596699 32710371 64826 87558 134% -22732

GROWTH FUNCTION - EXPONENTIAL FIT - TABLE 3

Cont…the projected alarming situation !!!

Underwriting Balance - TABLE 2

-400

-200

0

200

400

600

800

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15

TIME ( in years )

VA

LU

E TIME (in years )

Gross Profit

Cont..

Issues and Concerns Low level of awareness among consumers about health

insurance products and their benefits Limited Influence over healthcare delivery mechanism -

Limited healthcare delivery network with top few cities Low health insurance penetration and lack of

affordability of the consumers in the tier 2/3 cities and rural areas to support the investment in healthcare infrastructure in these areas

Insufficient data on consumers & disease patterns, absence of standardization of healthcare costs & significant levels of frauds leading to under-pricing of insurance products, difficulty in product development & pricing and higher value of claims

Addressing some way-outs for issues and challenges

Creating awareness on Rights & Responsibilities Data Pool – Regulator as a repository Standardization of Cost

TPAs Health Providers

Increased Tax benefit Gradation of Health service providers Pool for Senior Citizen Compulsory Health Benefits for organized sector Government role on mass healthcare initiatives

The road ahead…

There are several other challenges in the health sector—from the perspective of policyholder, insurers and the Authority. With a view to promoting health insurance in the country and looking for possible solutions to bring in as many people as possible into the insurance net, the IRDA has, over the last few years, given special thrust to addressing various issues concerning health insurance. These initiatives not only develop health insurance in the country but also address the concerns of the policyholders of health insurance. The grievance redressal system set up by the Authority enables a detailed analysis of policyholder grievances and health insurance stands out as a major area of concern from the customer viewpoint. It was in this backdrop that the IRDA set up The National Health Insurance Working Group towards the end of 2003. This provided a platform for stakeholders of the health insurance industry to work together to suggest solutions to various relevant issues. Some of the Working Group’s recommendations were implemented and some are under examination.

Conclusion 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-à-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.

Personalities I met during the dissertation work

Shri G.V. Rao (ex-CMD Oriental Insurance Company Limited)

Shri Ramakrishnan (ex-Actuary LIC ) Shri K.K. Rao ( Dy. G. M United India Insurance

Company Limited

References

IRDA Annual Report 2006 -07 http://irdaindia.org Tariff Advisory Committee http://tacindia.org IRDA Hand Book http://irdaindia.org Private Health Insurance in India: Promise and Reality,

prepared by Bearing Point, Inc. for the United States Agency for

International Development

THANK YOU !!! – Questions Please