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Health

WHO definition of Health

Health is a state of complete physical, mental and social wellwellbeing and not merely the absence of disease or infirmity.

HEALTH INSURANCE

An insurance that pays the cost of medical, surgical and hospital expenses related to medical treatments of sudden,single episodes,fairly short-term and curable illnesses or injuries short(commonly known as acute conditions) OR, An insurance that protects an insured against financial loss resulting from medical treatment.

DEVELOPMENT OF INSURANCE IN INDIA

The Indian Life Assurance Companies Act,1912 was the first statutory measure to regulate life business. With a view of protecting the interest of the Insurance Public, the earlier legislation was consolidated and amended by the Insurance Act,1938. In 1993, the Government set up a committee under the chairmanship of Shri R.N.Malhotra to propose recommendations for reforms in the insurance sector. Following the Malhotra Committee report in 1999, the Insurance Regulatory and Development Authority (IRDA) was constituted as an autonomous body to regulate and develop the insurance industry.

DEVELOPMENT OF INSURANCE IN INDIA (Contd..)

Formal systems of Health Insurance in India began with the inception of Employees State Insurance Scheme (ESIS), to provide comprehensive health services through a network of own dispensaries and hospitals. The ESIS was soon followed by a scheme for the central government employees, the Central Government Health Scheme (CGHS), in 1954. A major innovation in the post-2000 period, is the availability of postcashless facility through the agency of TPA (Third Party Administrator) or through direct tie-ups of the insurers with the tiehospitals, where the insured need not make payments to the hospitals and the same is settled directly by the insurer with the hospital.
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Why is Health Insurance important?

Having health insurance is important for several reasons :

Rising medical costs Sharing of health related risk uncertain hospital bills Expensive/quality health care services Money value Sick Vs Healthy Family health insurance Tax benefit Productivity of workforce Removes some of the burden from the state Keeping pace with the customer needs while achieving profitability
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How much Health Insurance is required?

Ideally, it is an amount on average of around 1,50,000- 2,50,000 1,50,000It depends upon the current earning capacity of the person, without disturbing his routine expenses. Group discounts can be availed if all the family members are covered in a single policy.

STANDARD COVERAGE UNDER A HEALTH INSURANCE POLICY

Hospitalization Expenses:
 Room and Boarding expenses  Nursing Expenses  Fees of the Medical Practitioner  Expenses on account of anesthesia, blood, oxygen, operation theatre charges, surgical appliances, medicines and drugs, diagnostic material, X-ray, Dialysis, chemotherapy, radiotherapy, cost of pacemaker, cost of organs and similar expenses.
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STANDARD COVERAGE UNDER A HEALTH INSURANCE POLICY (Contd..)

Day Care Treatment:  The policy may cover expenses incurred towards technologically he advanced treatment that does not require hospitalization for 24hrs or more.
 

Domiciliary Hospitalization: Cover for treatment administered at home, subject to specific conditions PrePre- and Post Hospitalization: It covers the expenses of medical expenses for treatment up to 30 days before and up to 60 days after the hospitalization.
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Progression of Health Insurance business in India

Policy Growth Rate

Health Insurance Policies Procured by lines of business
2007-08
12,000,000

2008-09

,3 61 10, 66 2

Standalone Non-life

282% 67% 110% 70%

117% 23% 124% 29%

10,000,000

25 8,6 37 ,

Life
Standalone Total

8,000,000

6,000,000

96 5,1 66 ,

Non-life Life

4,000,000

2,000,000

356419
40,078

798588
332,541

169703

153,097

0 2006-07 2007-08 2008-09

% share of Health insurance policies sold

2006-07 2007-08 2008-09

Standalo ne Non-life Life Total

0.75% 96.10% 3.16% 100.00%

1.67% 94.43% 3.90% 100.00%

2.82% 90.41% 6.77%

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100.00%

Progression of Health Insurance business in India (cont.)

Premium Growth Rate

Health Insurance Premium Procured by lines of business (In lakhs)

Standalone
700,000.00

2007-08

2008-09

1297% 55% 222% 61%

243% 23% 278% 34%

609,037

Non-life
600,000.00

496,901
500,000.00

Life Total
Standalone Non-life Life

400,000.00

319,757

300,000.00

% share of health Premium

2006-07
53,509 15,594 33875

200,000.00

2007-08

2008-09

100,000.00

1,116

2788

8968

Standalone Non-life

.34% 98.79% .86% 100%

2.99% 95.29% 1.72% 100%

7.68% 87.45% 4.86% 100%

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0.00

2006-07

2007-08

2008-09

Life Total

Journey of Life health insurance products since 2003..

Subject Term Premium Guaranteed Diseases Covered Death Benefit Coverage Type Max. Entry age Max. Maturity age

Observations 1 to 30 years From 1 year to 5 years From 5 to 100. Focus on rampant diseases With introduction of Sec 80(D), most products do not have death benefit Only life assured to Dependent members Non linked to linked 50 to 65 years 65 to 75 years
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Opportunities in Health Insurance

Total Expenditure On Health As % Of Gross Dom estic Product

16.00% 14.00% 12.00% 10.00%

% 8.70% 8.20% 10.00%

15.30%

8.00% 6.00% 4.00% 2.00% 0.00%

A U S T R A LI A CANADA C HI N A IN D IA U N I T ED KI N D OM U SA
Source: 2009 WHO fact sheet based on 2006 data

4.60% 3.60%

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Opportunities in Health Insurance

Health Expenditure Ratios

100.00%

80.00%

75.00% 70.40% 67.70% 59.30%

68.55%

57.30% 54.20%
49.28%

60.00%

%
40.00%

45.80%

40.70% 32.30%

29.60%

25.00%

20.00%

18.22%

14.50%

12.70%

11.65%

12.90%

0.00%

AUSTRALIA

CANADA

CHINA

INDIA

UNITED KINDOM

USA

General government expenditure on health as % of total expenditure on health Private expenditure on health as % of total expenditure on health Private Out-of-pocket expenditure as % of expenditure on health

Source: 2009 WHO fact sheet based on 2006 data

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Opportunities in Health Insurance

Private Pre paid Plans as % of Private Expe nditure On He alth

70.00% 60.00% 50.00% 40.00%

%

6 6 .4 0 %

3 9 .10 %

30.00% 20.00% 10.00% 0.00% A S A IA U TR L C N D A A A C IN H A IN IA D K D M IN O UA S U ITE N D

5 .5 0 % 1.9 0 % 0 .8 0 % 8 .2 0 %

Source: 2009 WHO fact sheet based on 2006 data

. Given the health financing and demand scenario, health insurance has a wider scope in present day situation in India. However, it requires careful and significant efforts to tap Indian health insurance market.
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Current Health Insurance Scenario: India

Health Insurance Penetration in India

Uninsured 82.65%

Indian Railways 0.59% Pvt.Health Insurance 1.42% ESIS 3.19% CGHS 3.35% Community Insurance 4.19%

Pvt. sector Enterprise (Self Funded) 4.61%

Low penetration of Insurance and Low Govt. expenditure in India . . . Has resulted in high Out-of-Pocket spend Out-ofSource: Business World (India) Oct 2007
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2006

Australia

Canada

US

UK

China

India

Life expectancy (avg. # of years) # of Physicians per 1,000 people Healthy life expectancy (avg. # of years) Healthcare spend (% of GDP)

82

81

78

80

74

64.0

Healthy life expectancy of India indicates that there is higher need of health insurance from age 60. 60.

2.5

1.9

2.6

2.3

1.4

0.6

74

73

70

72

66

60

8.7

10

15.3

8.2

4.6

3.6

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Critical question is hence how to improve the access to health care and financial protection of the poor . The most obvious solution will be to improve the health insurance penetration How to improve Health insurance penetration!!!?
Regulator/Government
Enhance customer awareness Enhance client confidence - real value benefits in the event of a claim Effective supervision Compulsory percentage of total business towards health Compulsory savings towards health Tax incentives to employers for promoting group health coverage

Insurer
Clients confidence - warrantable claim will be paid out in a reasonable time frame New clients have to be reached Value for money Design products as per clients needs Product transparency Cost efficiency affordability Wellness programmes

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Recent initiatives  Committee to formulate regulations  Pure health insurance products  Allowing the formation of an stand alone health insurance company  Standalone health insurance companies  Renewability  Senior citizens

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Challenges in Health Insurance

Increase in health care cost Ageing population Acute shortage of trained personnel ranging from doctors to health care administrators New emergence and resurgence of old diseases

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Issues & Challenges

faced by Insurance Companies
Key Issues
Limited Influence over healthcare delivery mechanism High claim ratio

Description
 Limited healthcare delivery network with
top few cities Insufficient data on consumers & disease patterns, absence of standardization of healthcare costs & significant levels of frauds leading to under-pricing of insurance underproducts and higher value of claims Low level of awareness among consumers about health insurance products and their benefits Insufficient data on Indian consumers & disease patterns and limited control of healthcare delivery network resulting in limited product and pricing innovation
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Low level of consumer awareness Limited product development

Issues & Challenges

faced by TPAs
Key Issues
Limited influence over healthcare delivery network Funding support

Description
Varying treatment costs across providers due to limited bargaining power  Lack of standardization & accreditation in most healthcare facilities leading to difficulty in judging the authenticity of procedures & costs Limited funding support from the Insurance company impacting the claims disbursement time Delays and issues in claims processing leading to negative perceptions by insurance companies & consumers about TPAs

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Issues & Challenges

faced by RE-INSURERS REKey Issues Description Insufficient data on Indian consumers & disease patterns resulting in difficulty in product development & pricing

Limited Data Availability

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Impediments to providing Health Insurance.

Lack of Data Moral Hazard/Adverse Selection Complex nature of the product Medical Inflation New treatments Unnecessary treatments Difficulty in pricing Government provision of health care Long term nature Changing life style MisMis-selling/fraud

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How to mitigate/address these impediments

Insurer Designing a less complex products Transparency in the product features Clarity in policy terms, conditions & exclusions Efficient back-office support for underwriting and claims processing backHigher Reinsurance Need for quicker services. Eg: Toll free no.s, cashless, quick response Expense analysis on a regular basis Product innovation Efficient training of sales force

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How to mitigate/address these impediments

Policyholder Pay attention to policy conditions Read the exclusions and limitations very carefully Compare premium costs, deductibles, co-payments coTake an informed decision TPA Proper infrastructure Speedy claim settlement process Less paper work

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How to mitigate/address these impediments

Regulator/Government Come out with health insurance regulations Centralized data base for health insurance experience statistics Provider rating Cap on renewal premiums Ensure that a decent portfolio of health coverage represent the rural sector Guard against ill effects of privatization Further tax incentives Compulsory savings towards health care Should emphasize the need to employ actuarial methods in various aspects of life and non-life nonbusinesses

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Management outlook Risk appetite of the company needs to be considered in pricing This aspect needs to be quantified in reinsurance arrangement, investment profile and capital structure of the company Reserving Is reserving purely a mathematical exercise? An Actuary needs to understand the behaviour of claims and constantly devise tools/methods for claims reserving purpose Employing a professional with required knowledge and experience is a must

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In the light of the above, the recent initiative by the Regulator to focus more on risk based pricing which involves the availability of the strong data base and also various analysis regarding pricing, to measure the underwriting impact, testing the profitability of products etc. , etc. emphasizes the need to employ actuarial methods in various aspects of life and non-life businesses. nonbusinesses. In addition, one should bear in mind that the an insurance product is not bought but sold in many cases. One major cases. reason that can be attributed to this is the lack of customer awareness (other reasons could be complex nature of the product, presence of many players in the market, customers ignorance etc.,) etc. Therefore, it is very important to enhance the customer awareness, which is currently at a low level. To achieve this level. means, the Government, Insurer and the Regulator has to play a very important role as discussed above. above.
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