A booster for health cover

No one can deny that we are in the midst of an incredibly exciting time for healthcare in India. Increasing government funding, rising standards of care and an overall boom in the opportunities for access to necessary treatments are all coming together.

In fact, India is already boldly taking its place as one of the leading healthcare markets in the world, forecasted to be one of the top 10 pharmaceutical markets by 2017, with a projected market size of $25 billion, and a CAGR between 11-13 per cent for the period 2012-17. ( See Table 1 ).

One of the most important areas in this rapidly evolving market is health insurance. Until only a few years ago, health insurance was almost never proactively bought by individuals; instead it existed only as a critical illness rider amidst basic life insurance policies, or within group policies directed at corporations to be included as part of an overall benefit package for employees.

Of course the need is clear: According to a World Bank Study in 2011, health spending is one of the leading causes of poverty in India, with around 63 million individuals (11.9 million households) pushed to below the poverty line by healthcare expenditures in 2004. For as the quality and standard of care rises, so do the expenses of the average patient. A sustainable health insurance system is absolutely critical.

Fortunately, this process is underway. Spurred in large part by proactive government-sponsored education, awareness and incentive programmes (e.g. RSBY), the importance and value of the health insurance industry in India is on a significant upward trajectory. As of 2010, over 300 million people (25 per cent of the population) had some form of health insurance – an astonishing 445 per cent increase from 2004.

Even more astonishing are World Bank estimates that by 2015, 50 per cent of the population (or approximately 630 million people) will be able to access a health insurance programme.

But India’s nascent and fragmented insurance market is facing serious issues that require thoughtful solutions.

Need for change

Until 2001, there were four main health insurance companies in India (United India, Oriental, National and New India) – all government owned, and all based on business models in which “health” represented only a small fraction of focus and revenue.

Of course, as consumer demand and corporate incentives grew, so too did the competition. Suddenly, there was not one segment offering health insurance, but three; general insurance, life insurance and “health-only” insurance.

But volume is only the first part of real growth, and companies across the market spectrum have started to realise that a lack of product innovation, an inconsistent pricing system and poor claim control are significant obstacles to achieving sustainable market share and bottom-line profitability. These, then, are the priorities that must be addressed.

Priority 1: Responding to competition with innovation: The arrival of new entrants, coupled with an increasingly aware consumer population has placed a burden on companies to manage – and differentiate – their portfolio.

We are increasingly seeing the need for companies to develop policies that address a wider, and more relevant, set of patient needs.

The growth of India’s health insurance industry has brought forth some compelling business models and significant opportunities. While life insurance companies are working to strengthen their health insurance portfolio, stand-alone health insurance companies are taking steps to bring in variety in their suite of products.

Established players like ICICI Lombard, Bajaj Allianz and others are gaining momentum by combining their brand names with strategic foreign partnerships in the health insurance space.

Meanwhile, new entrants like India First Life and Edelweiss Tokio Life (in the life insurance segment), Max Bupa and Religare Health Insurance (in the standalone health insurance segment), and Liberty Videocon and L&T Insurance (in the general insurance segment) are catching up.

But, as patients across India will attest, though there is a myriad of options in insurers, there is almost no variation across offerings.

In truth, coverage today is focused primarily on people, rather than diseases, and upon arrival at a hospital, patients are often faced with unexpected wait periods or a surprising number of issues their policy does not cover. For example, pre-existing diseases or any out-patient procedure/treatments are not covered, while pregnancy or maternal care are covered only to a limited extent.

Success will require a proactive approach to capturing new customers.

Priority 2: Building an appropriate pricing structure: Across all levels of the population, people are beginning to understand that insurance is a necessary step to ensuring the affordability of better standards of care. This has resulted in a relatively high “willingness to pay”. The onus, then, is on health insurance companies to build relevant, appropriate pricing models.

A critical obstacle in the development of better pricing structures is the lack of reliable data. Unfortunately, pan-India data has not been available until quite recently. Companies, then, have been forced to reference data from other markets in the design and pricing of their products.

Not surprisingly, this has contributed to faulty pricing and staggering losses, which in turn have weakened the appetite for many players to venture into new product categories ( outpatient care, long-term care, disease-based). Companies will need to invest in a more in-depth, data-driven understanding of the Indian healthcare market.

Priority 3: Stabilising and legitimising the claims process: Health insurance companies today (across all segments) are burdened with inconsistent relationships with unregulated stakeholders -- from providers to patients.

The Secretary-General of the General Insurance Council estimates that 15 per cent of insurance claims processed in India are fraudulent (patient fraud, inflated medical bills, underwriting lapses, process gaps, and so on). Even more shocking is the estimate that around Rs 800 crore is lost on inaccurate or falsified claims – every year .

Such losses stem from different causes. There is no standardised methodology among care providers for inputting claims and classifying expenditures, and treatments and services are recorded without any common rubric or reference.

Furthermore, as there is no governing body in India to regulate fraud or malpractice (such as the Health Insurance Portability and Accountability Act in the US, which has made insurance fraud a criminal offense), there are no systemic incentives for compliance.

Moving Forward

Both, existing and new players need to acknowledge that there is huge gap between the objective of universal health insurance in India and the current state.

Ultimately, such a gap stems from an overall lack of understanding on the part of insurers to understand their customer and – ultimately – build relevant, and profitable, products.

Without doubt, the industry needs a careful balance of stabilisation and innovation across the board as well as a continued focus on managing public perception. Efforts are also needed to consolidate data across stakeholders and transform it into accurate, actionable information and customer-focused products.

(The author is Head – Payer, IMS Health India.)

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