The Hindu Business Line : ‘Only 3.5 crore are covered by health insurance’

Over the last few years, medical costs have grown by leaps and bounds and it has gone out of reach for the Indian middle and lower income class. But despite that, the penetration of health insurance in our country is abysmally low.

In an interview with Business Line, Mr Binay Agarwala, Senior Vice-President and Head-Health Business and Corporate Strategy, ICICI Prudential Life Insurance, shares his views on why people are not forthcoming as far as health insurance is concerned. He also shares his insights on what prompted the health insurance companies to raise the premium for senior citizen by such a huge margin last year.

Excerpts from the interview:

Why is health insurance required? In India, what per centage of population is covered under health insurance?

India spends around 5 per cent of its GDP on health.

But over 70 per cent of these spends are out of pocket (from the savings of the hospitalised party). Out of pocket spending leads to lot of hardships. According to a survey by NSSO (National Sample Survey Organisation), 40 per cent of the people hospitalised 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 and rising medical costs further emphasise the need for health insurance.

Over 85 per cent of the Indian population does not have any form of health coverage including Employees State Insurance Scheme, Central Government Health Scheme, health cover provided by employer, etc. Health insurance coverage is estimated at around 35 million.

So, how does one decide his health cover requirements?

Before selecting any health plans, an individual should take into consideration the different kinds of medical expenses he or she may incur and then look at the various health insurance plans that are available. Medical expenses can be broadly classified under three heads:

Day-to-day medical expenses : This includes regular medicines and routine check up costs. They generally do not impact an individual’s budget significantly and the person can use his or her savings to pay for them.

Hospitalisation and surgery expenses

Expenses of treatment of critical illnesses: These include treatment costs, incidental costs and loss of income.

A person ideally needs to have a combination of hospitalisation cover and critical illness cover. The amount of cover is very important and the customer should take into consideration his own lifestyle needs, with respect to the kind of hospital and the type of room he would prefer, while deciding the sum assured for a policy.

Further, the customer also needs to check whether the plan offers him guaranteed long-term coverage and pre-existing coverage after a specified number of years.

How often are premiums hiked in India?

There is no clear trend that has emerged in the Indian context regarding increase in premiums.

However, post the de-tariffing of certain lines of general insurance business in January 2007; the health insurance industry has witnessed a correction in the premiums.

For senior citizens, the health insurance premiums were hiked by 120-150 per cent last year. Can you share with us the reason for such a hike?

The context of increasing premiums post de-tariffing impacted all age groups including the older age segments. One major correction was witnessed last year since insurers had not revised rates for a long period of time and they also had to revisit their pricing models in the new regime of de-tariffied markets.

How have medical costs increased over the past few years? Can you provide us with some example?

In 2005-06 the total private expenditure on healthcare was around Rs 1,35,000 crore. It had grown at a 5-year CAGR of 15.9 per cent. Internationally, healthcare expenditure is increasing at 2-3 times the normal inflation.

Last year, the total premium collected by the health segment was over Rs 5,000 crore. In the next five years, what is the contribution that life insurance companies are expecting from the health insurance segment?

Health insurance segment is still in nascent stage in the country and thus has immense potential to grow in the next few years. The large retail distribution and the wide geographic reach of life insurers should help in increasing the penetration of health insurance.

Most life insurers have also taken the lead to offer innovative products in the critical illness and defined benefit hospitalisation space. While it is too early to comment on the premiums, we can expect life insurance companies to have a strong presence in health insurance in the years to come.

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