Telecom model can work for health insurance

Aman Gupta | Updated on September 30, 2011 Published on September 24, 2011

To penetrate rural markets, health insurers should introduce innovative products at various price points.

From 350 million in 1947, India today has the world's second-largest population with more than 1.21 billion people. Yet, six decades after Independence, healthcare access is still one of India's biggest challenges, not just for Indians in the rural regions, but even for those in the urban areas.

This is primarily because healthcare facilities are unevenly distributed, trained healthcare personnel are in perennial paucity and the availability and quality of drugs and diagnostic tools are always in doubt. As a result, more than one million Indians die annually, the majority being women and children.

Worldwide, health insurance plays a key role in improving healthcare access. Adequate levels of health insurance attract investment in healthcare, such as in hospitals, laboratories, durable equipment, and consumables. Even in India, an innovative public health insurance scheme designed for BPL families — Rashtriya Swasthya Bima Yojana (RSBY) — attracts many entrepreneurs to establish hospitals for the rural poor in India's hinterland.

RSBY notwithstanding, less than 15 per cent Indians have some form of health insurance, mostly under government-sponsored schemes. Barely 2.2 per cent have private health insurance. Of this, rural health insurance is less than 10 per cent. With massive under-penetration, India's health insurance sector is an excellent opportunity-in-the-making expected to expand at a CAGR of 15 per cent till 2015.

Penetrating rural areas

In penetrating rural markets, the insurance sector should seek inspiration from telecom companies. When venturing into rural markets, telcos faced immense hurdles because infrastructure was non-existent in the late 1990s.

Undaunted, they first built mobile networks in these regions. They also studied the needs of their customer base and customised products for rural markets, making a slew of cheap handsets with useful features and introducing rock-bottom tariffs that even the rural poor could afford.

Instead of awaiting customers at their portals and letting the markets evolve over decades, they went to the customers' doorsteps with irresistible products and prices. Today, even barefoot farmers and fakirs brandish cell phones! Insurance companies could well emulate telecom's success story to penetrate rural regions.

To begin with, insurers should understand the customer needs and expectations, and streamline services in many areas, including cost control, customer service, claims management, pricing and product innovation, among others. Indeed, product innovation could play a lead role in promoting penetration. Secondly, insurers focus only on in-patient (hospitalisation) policies, whereas the real business of healthcare lies in outpatient coverage.

Products should, therefore, include preventive healthcare such as routine checkups and regular tests, including eye and dental treatment. It's only upon hospitalisation, however, that an insurance claim becomes tenable. Pricing is another crucial issue that makes or mars measures to penetrate rural markets. Since majority of Indians possess limited purchasing power, insurers should introduce innovative products at varied price points with well-differentiated offerings — just like the telcos did.

Some public and private insurers have already introduced innovative products with premiums as low as Re1 per day and Rs10 per month, catering to individuals as well as to community insurance needs.

Pre-existing disease

One of the most contentious issues for would-be purchasers of health insurance is the pre-existing disease clause.

This refers to any disease the customer had prior to the policy purchase, whether he was aware of it or not, and which may not have been disclosed to the insurer. In India, customers may already have diabetes or hypertension without knowing it. If the customer is later hospitalised for this disease, the insurer could reject his claim on the premise of ‘pre-existing disease', leaving him outraged. One solution is for all insurers to cover pre-existing diseases by charging additional premium, as some insurers do. Since this hasn't happened, IRDA could resolve the issue by prescribing standard norms for insurers.

Another major bugbear for customers is the issue of exclusions, with many ailments — including critical ones — not being covered. More often than not, customers are not aware of the exclusions, since these are usually hidden in the fine-print. Insurers should ensure exclusions are minimal and customers are informed upfront about these in clear terms, rather than having them hidden in the fine print.

What can propel growth

Controversial clauses apart, multiple factors could propel growth in health insurance if the insurers capitalise on them. These include: Increasing awareness among people about health insurance, soaring healthcare costs in the past decade, low levels of insurance penetration, rising incomes and higher savings, growing urbanisation as well as burgeoning rates of endemic and lifestyle diseases, among others. Effective July 1, 2011, insurance portability is another factor that may push higher growth by allowing current customers to migrate to an insurer of their choice.

With healthcare costs doubling within a decade, insurance is imperative for all sections of society. The Government should promote all efforts to facilitate better access to healthcare. Abolishing tax on health insurance or raising tax exemption limits to control treatment costs could be a good start. The Government should abandon its myopic view about losing revenues and focus on the big picture. Abolishing healthcare taxes will improve healthcare accessibility and affordability, ensuring better health for people and higher returns for the exchequer from enhanced employee productivity.

The exchequer's double-digit loss in healthcare taxes will then be well compensated by five-figure increases in productivity and output across all sectors. In the final analysis, India will witness a marked improvement in healthcare access for all its citizens.

(The author is Principal Advisor, India Health Progress. The views are personal.)

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Published on September 24, 2011
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