Health Insurance Market Penetration in India

Student : Narendra Rapeti

Guide : Dr. Lalitha Subramanian
Panel : Dr. Brijesh Purohit
Madras 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

Distribution channel partners

Media /
Health Providers Telecom

Customer

NGOs / SHGs / MFIs

Health Insurance
Government
Industry

TPAs Insurance companies

IRDA - regulator
Chapter 2 – Health Insurance – Plans

Health Insurance Plans

Community Based /
Private Social
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

Claims
Premium Payable Underwriting
No. of No. of No. of Paid in in Balance
Time Year Policies Members Claims Rs (crore) Rs (crore) Claim Ratio 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

Premium Claims Underwriting

No. of No. of No. of Paid in Rs Payable in Balance in Rs
Year Policies Members Claims (crore) Rs (crore) Claim Ratio (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..
GROWTH FUN CTION - EXPON EN TIAL FIT - TABLE 3
Year N o. of N o. of N o. 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% 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 4493349 32422234 2203227 4426 4322 97% 104
2009-10 5323360 44431783 2882139 6317 6206 98% 112
2010-11 5501574 54877506 3675942 7777 8140 104% -363
2011-12 6776295 75522610 5307482 10422 11720 112% -1298
2012-13 7647569 99460493 7198628 15101 16605 109% -1503
2013-14 8645012 130596430 9508732 19583 22866 116% -3283
2014-15 9836703 171462366 13052023 26140 31848 121% -5707
2015-16 11483470 229755216 17964586 36097 45182 124% -9085
2016-17 12914784 300806429 24061174 48745 62771 128% -14026
2017-18 14804382 397596699 32710371 64826 87558 134% -22732
Cont…the projected alarming situation !!!

Underwriting Balance - TABLE 2

800

600

400
VALUE

TIME (in years )

200
Gross Profit
0
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15
-200

-400
TIME ( in years )
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