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One of the fastest growing industries in the service sector is health insurance. With the entry of the private players and foreign collaboration, penetration of health insurance has gone up. Introduction of new products and channels of distribution along with the penetration of private insurance companies in hitherto uncovered markets are the contribution factors for growth. This article describes the various changing trends in health insurance sector.
In 1818, a British company - Oriental Life Insurance set up the first insurance firm in India followed by the Bombay Assurance Company in 1823 and the Madras Equitable Life Insurance Society in 1829. Though all these companies were operating in India, they were meant only for insuring the life of Europeans living in India. Later, some of these companies started providing insurance to Indians with approximately 20% higher premium than Europeans as Indian lives were treated as 'sub-standard' during those days. Bombay Mutual Life Assurance Society was the first company established in 1871, which started selling policies to Indians at a 'fair value'.
Insurance business was brought under the Indian Company Act in 1866. There were no specific regulations, but the Swadeshi Movement in 1905 gave birth to dozens of indigenous life insurance and provident fund companies. In the year 1937 the Government of India set up a consultative committee, which finally gave birth to the Insurance Act, 1938. In October 2000, the Insurance Regulatory and Development Authority (IRDA) issued license papers to three companies, HDFC Life Standard, Royal Sundaram Alliance Insurance Company and Reliance General Insurance. At the same time, 'in-principle approval' was given to Max New York Life, ICICI Prudential Life Insurance Company and IFFCO Tokio General Insurance Company. Today, we have 22 life insurance companies including LIC that are successfully operating in India. The growth of the sector can easily be judged by Figure 1.
Figure 1: Indian Insurance Market ($ bn) : 2001-12
According to a study by McKinsey, total life insurance market premiums in India are likely to be doubled and reach a figure of Rs.3.88 - 4.85 Lakh Crores (US$80-100 billion) by 2012. (Source: Insurance Chronicle, (pp.65-70).
CHANGING COMPETITIVE ENVIRONMENT
At the time of opening up of the insurance sector in India, the share of private insurer was very less. As shown in Figure 2, the total share of private insurers was just 2% in 2001-02.
Figure 2: Market Share of Public and Private Insurance Companies
(Source: Insurance Chronicle, (pp.65-70).
Private players gave a tough competition to public sector companies. However, within a short period because of the innovative and customized products, novel distribution channels and aggressive marketing strategies which they employed, the market share of private insurers went up and by the financial year ending 2008, the total share of the private insurers reached an all-time high of 40%. Though the market share of LIC decreased, it continued to grow even after the cut-throat competition from the private players.
As shown in Table 1, total revenue generated in 2008-09 by LIC was Rs.1,59,783.99 crores against just Rs.66,561.42 crores generated by all 21 private players. It shows that even after opening up of the insurance industry and heavy competition from the private players, LIC observed a continuous growth in its revenue generation. One more observation is that there has been a slowdown in the premium for private insurers in 2009 (32.34) when compared to previous year 2008 (88.76).
INVESTMENTS OF THE INSURANCE SECTOR
As on March 31, 2009, the total investments of insurance sector were Rs.9,75,258 crore, recording an increase of 18.61 per cent over the previous year (Rs.8,22,249 crore on March 31, 2008, (Source: IRDA Annual Report 2008-09 URL: http://irdaindia.org/annualreport09/annual_rep_eng_09.pdf). While life insurers reported 19.63 per cent growth in investments, non-life insurers registered only 4.64 per cent growth. In both life and non-life insurance business, private sector insurers reported larger increase in investments than the public sector insurers. This could be because of lower base of private sector companies in the previous year.
Table-1: Total Investments of the Insurance Sector
Note: Figures in brackets indicates growth in percent over the previous year.
Source: Annual Report 2008-09, IRDA.
HEALTH INSURANCE IN INDIA
Health insurance was introduced only in 1912 when the first Insurance Act was passed. The current version of the Insurance Act was introduced in 1938. Since then there was little change till 1972 when the insurance industry was nationalized and 107 private insurance companies were brought under the umbrella of the General Insurance Corporation (GIC). Private and Foreign entrepreneurs were allowed to enter the market with the enactment of the IRDA in 1999.
The penetration of health insurance in India has been low before the year 2003. It was estimated that only about 3% to 5% of Indians are covered under any form of health insurance. The market share of the commercial insurance was barely 1% of the total health spending in the country. The Indian health insurance scenario is a mix of mandatory Social Health Insurance (SHI), voluntary private health insurance and Community-Based Health Insurance (CBHI). Health insurance is thus really a minor player in the health ecosystem. Health Insurance sector is one of the fastest growing sectors in India and there are various health care insurance products being launched in India. Health care costs are rising and the growing awareness about the importance of preventive care has led to growing demand in health insurance products. In the financial year 2003, the health insurance market stood at Rs.1,160 Crores, in the year 2008, it had crossed Rs.5,000 Crores, that is, a growth of more than 4 times in 5 years. (Source: http://www.healthinsuranceindia.org/ market_share_of_health_ins_india.asp).
Despite the growth, there is still a large need for health insurance in India. As many as 75% people in India are without employer providing coverage and over 85% people are not insured at all. (Source: http://www.healthinsuranceindia.org/ market_share_of_health_ins_india.asp).
WILLINGNESS TO JOIN THE HEALTH INSURANCE IN INDIA
Based on the different types of services, costs and additional benefits, people make their choice to join in the health insurance. Some of the services, costs and additional benefits rendered by the Health Insurance in India are listed in table 2.
Table 2: Services and Benefits provided by the Health Insurance in India
Types of Services
Types of Costs
Types of Additional Benefits
Chronic illness benefits
Reproductive and maternity care
Hospital cash plan
Drugs &Diagnostic tests
Mental health care
Specialist consultation cost
Expenses on drugs
Cost of dental and mental health care
Permanent disability benefits
Reimbursement of wage or income loss
GROWTH TRENDS IN HEALTH INSURANCE (Source: IRDA Annual Report 2008-09, page 32, URL: http://irdaindia.org/annualreport09/annual_rep_eng_09.pdf)
The health insurance business has witnessed increased focus and attention from all stakeholders; not only insurers and IRDA, but also healthcare providers and other entities associated with the ecosystem. This increasing attention and awareness was due to rising healthcare costs. Recent detariffing of the general insurance business forced the insurance companies to focus on health insurance and other personal lines of business. Rationalization of premium rates in respect of individual mediclaim policies in 2007 which were unrevised for many years and upward revision of rates in all group health policies have also contributed to growth in premiums. Availability of products for senior citizens and children helped in popularizing health insurance.
Health insurance has become one of the fastest growing segment in the non-life insurance industry. It has grown by 30 per cent during 2008-09. It is also emerging as a significant line of business for life insurance companies. Many life insurance companies now have products in health insurance. During the last seven years, health insurance premium has grown from Rs.675 crore in 2001-02 to Rs.6625 crore in 2008-09.
Number of persons covered under the health insurance has also seen a steady increase over the years; however it is small vis-à-vis the potential. In the absence of specific financial protection against high medical expenses, the financial impact of hospitalization is more pronounced.
The Central and state governments have recently initiated large scale health insurance programmes in association with insurance companies to protect the vulnerable groups. Prominent amongst the government sponsored insurance schemes are the Rajiv Aarogyasri scheme of Andhra Pradesh, the Kalaignar scheme of Tamilnadu and the centrally-sponsored Rashtriya Swasthya Bima Yojana.
Table 3: Total Premium in Health Insurance 2004-2009 (Rs. crores)
Standalone Health Insurers
Source: Annual Report 2008-09, IRDA. Page 32
VOLUNTARY HEALTH INSURANCE SCHEMES OR PRIVATE-FOR-PROFIT SCHEMES
In private insurance, buyers are willing to pay premium to an insurance company that pools people with similar risks and insures them for health expenses. The key distinction is that the premiums are set at a level, which provides a profit to third party and provider institutions. Premiums are based on an assessment of the risk status of the consumer (or of the group of employees) and the level of benefits provided, rather than as a proportion of the consumer's income. In the public sector, the General Insurance Corporation (GIC) and its four subsidiary companies (National Insurance Corporation, New India Assurance Company, Oriental Insurance Company and United Insurance Company) and the Life Insurance Corporation (LIC) of India provide voluntary insurance schemes. The Life Insurance Corporation offers Ashadeep Plan II and Jeevan Asha Plan II. The General Insurance Corporation offers Personal Accident policy, Jan Arogya policy, Raj Rajeshwari policy, Mediclaim policy, Overseas Mediclaim policy, Cancer Insurance policy, Bhavishya Arogya policy and Dreaded Disease policy (Srivastava 1999 as quoted in Bhat and Malvankar, 2000).
Of the various schemes offered, Mediclaim is the main product of the GIC. The Medical Insurance Scheme or Mediclaim was introduced in November 1986 and it covers individuals and groups with persons aged 5 to 80 yrs. Children (3 months to 5 yrs) are covered with their parents. This scheme provides for reimbursement of medical expenses (now offers cashless scheme) by an individual towards hospitalization and domiciliary hospitalization as per the sum insured. There are exclusions and pre-existing disease clauses. Premiums are calculated based on age and the sum insured, which in turn varies from Rs 15, 000 to Rs 5, 00, 000. In 1995/96 about half a million Mediclaim policies were issued with about 1.8 million beneficiaries (Krause Patrick 2000). The coverage for the year 2000-01 was around 7.2 million.
Another scheme, namely the Jan Arogya Bima policy specifically targets the poor population groups. It also covers reimbursement of hospitalization costs up to Rs 5, 000 annually for an individual premium of Rs 100 a year. The same exclusion mechanisms apply for this scheme as those under the Mediclaim policy. A family discount of 30% is granted, but there is no group discount or agent commission. However, like the Mediclaim, this policy too has had only limited success. The Jan Arogya Bima Scheme had only covered 400, 000 individuals by 1997.
The year 1999 marked the beginning of a new era for health insurance in the Indian context. With the passing of the Insurance Regulatory Development Authority Bill (IRDA) the insurance sector was opened to private and foreign participation, thereby paving the way for the entry of private health insurance companies. The Bill also facilitated the establishment of an authority to protect the interests of the insurance holders by regulating, promoting and ensuring orderly growth of the insurance industry. The bill allows foreign promoters to hold paid up capital of up to 26 percent in an Indian company and requires them to have a capital of Rs 100 crore along with a business plan to begin its operations.
Currently, a few companies such as Bajaj Alliance, ICICI Lombard, Royal Sundaram, and Cholamandalam are offering health insurance schemes. The nature of schemes offered by these companies is described briefly in Table-5.
Insurance offered by NGOs / Community-Based Health Insurance: Community-based funds refer to schemes where members prepay a set amount each year for specified services. The premia are usually flat rate (not income-related) and therefore not progressive. Making profit is not the purpose of these funds, but rather improving access to services.
Often there is a problem with adverse selection because of a large number of high-risk members, since premiums are not based on assessment of individual risk status. Exemptions may be adopted as a means of assisting the poor, but this will also have adverse effect on the ability of the insurance fund to meet the cost of benefits.
Such schemes are generally run by trust hospitals or Non-Governmental Organizations (NGOs). The benefits offered are mainly in terms of preventive care, though ambulatory and in-patient care is also covered. Increasingly in India, CBHI schemes are negotiating with the for-profit insurers for the purchase of custom designed group insurance policies. However, the coverage of such schemes is low, covering about 30-50 million (Bhat, 1999). A review by Bennett, Cresse et al., (as quoted in Ranson and Acharya, 2003) indicates that many community-based insurance schemes suffer from poor design and management, fail to include the poorest-of-theÂ poor, have low membership and require extensive financial support.
Other issues relate to sustainability and replication of such schemes. Following table 4 provides an overview of some non-profit social insurance schemes. Some of the schemes are described below (Ranson and Jowett, 2003).
Table-4: Non-Profit Social Insurance Schemes in India
Type of insurance
ACCORD/ ASHWINI Health Insurance Scheme
Tamil Nadu (Gudalur)
Aga Khan Health Services
Apollo Hospital Association (AHA)
Tamil Nadu (Madras)
ASSEFA (Association of Sarva Sewa Farms)
Tamil Nadu (Madurai)
Cattle Insurance Health Insurance
Cooperative Development Federation (CDF)
Andhra Pradesh (Hyderabad)
Death Relief Fund
Goalpara Cooperative Health Society
West Bengal (Shantiniketan)
Kottar Social Service Society (KSSS)
Tamil Nadu (Kanyakumari)
Mallur Health Cooperative
Mathadi Hospital Trust
Medinova Health Card Scheme
West Bengal (Calcutta)
Health Insurance (with NIA) Accidental Insurance (with LIC) Nutrition Legal Aid Drugs Fight Against Corruption
Organization for Development of People (ODP)
Tamil Nadu (Mysore)
Health Insurance Accidental Insurance (with NIC)
Pragati Thrift and Credit Society
Death Relief Fund
Raigarh Ambikapur Health Association (RAHA) Medical Insurance Scheme
Madhya Pradesh (Raigarh District)
Saheed Shibsankar Saba Samity (SSSS)
West Bengal (Burdwan)
Seba Cooperative Health Society
West Bengal (Calcutta)
Health Insurance (with GIC)
Self Employed Women's Association (SEWA)
Integrated Insurance Scheme Health Insurance Life Insurance (with LIC) Accident (with NIA) Asset Insurance Maternity Benefit
Kasturba Hospital Scheme, Sewagram
Maharashtra (Wardha District)
Social Work and Research Centre (SWRC)
Society for Promotion of Area Resources Centre (SPARC)
Health Insurance Accident Housing (with OIC)
Students Health Home
West Bengal (Calcutta)
Trivandrum District Fishermen's Federation (TDFF)
Craft &Gear Fund (loan basis) Contingency Fund (death, accidents, loss of work)
Urmal Rural Health and Research Development Trust
Rajasthan (Bikaner &Jodhpur)
Voluntary Health Services Medical Aid Plan
Kalaignar Insurance Scheme
Source: Patrick Krause (2000), 'Non-profit Insurance Schemes for the Unorganized Sector in India', Social Policy Division 42, Working Papers No. 22 e, GTZ
In the year 2009, comparatively the growth of health insurance in India has improved due to the penetration of the private health insurance players. In order to compete in the health insurance market, the private players have introduced lots of new schemes with various tangible and intangible benefits. Table 5 provides a wider comparison among the different schemes provided by the health insurance.
Table 5: Family Health Insurance Schemes - Comparison
Reliance General Insurance
Health Wise policy
Family Health Optima
Chola Family Insurance Plan
Â Pre &Post Hospitalization Expenses
30 days prior and 60 days after hospitalization
Â 60 days prior and 90
days after hospitalization
30 days prior and 60 days after hospitalization.
Reliance Standard: 30 days prior andÂ 60 days after hospitalization,
Reliance Silver: 60 days prior &90 days afterÂ hospitalization
30 days prior and 7% of the hospitalization expenses in Post hospitalization, max up to Rs. 5000
Â 60 days prior and 90
days after hospitalization
Room &Boarding Expenses
Covered, No limit
Covered, No Limit
Reimbursement up to 1.5%
It ranges from Rs. 500-Rs. 1500 depending on the city
Rs. 1500-Rs. 3000
Covered after 4th year
Covered after 4th year
Covered after 4th year
Reliance Silver - Covered after 2nddÂ year
Reliance Standard- Covered after 4th year
Senior most family member: 19 - 60 years (Renewable till of 70 years)
Others members: Less than 19 years
18 yrs - 55 yrs (Renewable till of 70 years)
Children 3 yrs - 5 yrs if both the parents are insured, 6yrs - 18 yrs if one parent is insured.
Self, Spouse and dependant parents up to the age ofÂ 50 years and children(91 days- 18 yrs)
3 months - 65 years.
5 months - 60 years
Up to 55 yrs for proposer
Â and 65 for parents
Over 3500 network hospitals in India
hospitals in India
Â Over 2000 hospitals in India
Over 4,300 hospitals in India.
Over 1300 hospitals in India
Sum assured increases by 5% every claim free year up to a maximum of 50% of original sum assured.
Limit shall be increased by 5% every year,
max up to 10 years
5% on every claim renewal max up to 50%
10-15% long term discount, if policy is taken for 2 or more years
10% for covering 3
or more family members
Reliance Silver: up to Rs 750
Reliance Standard: up to Rs 500
10% discount on
Â Premium on the renewal of the policy in the claim free year
5% for 2 People,
10% for 3 or more people
Covered No Limit
charges (up to Rs 1000)
Covered from Rs 500 to Rs1000
750, max up to 1500
Coverage for expenses incurred
on it to nearest hospital up to Rs 1000/-
Above 55 years
Above 45 years
Above 50 yrs
Above 45 yrs
Above 60 yrs
Cost of Health Check up
Â Free health check-up coupon for any one insured family member.
Yes, reimburse max up to Rs 1000/- after 4 claim free years
Yes, reimburse max up to Rs 750/- after 5 claim free years
Free Check up after 4 claim-free renewals.
Reimburse the expenses incurred
Â for general health and
Â eye exam
(Rs. in Lakhs)
2 - 4
0.5 - 10
1.5 - 5
2 - 5
1 - 5
2 - 10
The preceding sections of this paper portrayed the health insurance scenario in India. Given the situation, there are few issues of concern or barriers towards implementing a social health insurance scheme in India. These are enumerated below along with the possible way ahead. India is a low-income country with 26% population living below the poverty line, and 35% illiterate population with skewed health risks (Source: Social Health Insurance - Health Insurance in India : Current Scenario, 2009, page.79-97). Insurance is limited to only a small proportion of people in the organized sector covering less than 10% of the total population.
Currently, there is no mechanism or infrastructure for collecting mandatory premium among the large informal sector. Even in terms of the existing schemes, there is insufficient and inadequate information about the various schemes. Data gaps also prevail. Much of the focus of the existing schemes is on hospital expenses. There continues to be lack of awareness among the people about health insurance. In spite of existing regulation in some States, the private sector continues to operate in an almost unhindered manner. The growth of health insurance increases the need for licensing and regulating private health providers and developing specific criteria to decide upon appropriate services and fees.
Health insurance per se, suffers from problems like adverse selection, moral hazard, cream-skimming and high administrative costs. This is coupled with the fact that in the absence of any costing mechanisms, there is difficulty in calculating the premium. There is also a need to evolve criteria to be used for deciding upon target groups, who would avail of the SHI scheme/s and also to address issues relating to whether indirect costs would be included in health insurance. Health insurance can improve access to good quality health care only when health care institutions are able to provide adequate facilities and skilled personnel at affordable cost.
Given this scenario, the challenge for Indian policy-makers is to find ways to improve upon the existing situation in the health care sector and to make equitable, affordable and quality health care accessible to the population, especially the poor and the vulnerable sections of the society. It is in a way inevitable that the state reforms its public health delivery system and explores other social security options like health insurance. Implementing regulations would be the best mechanism to control provider behavior and costs. This could be done by developing mechanisms where government and households can together pool their funds. This could be one way of controlling provider behavior.
There is an urgent need to document global and Indian experiences in social health insurance. Different financing options would need to be developed for different target groups. The wide differentials in the demographic, epidemiological status and the delivery capacity of health systems are a serious constraint to a nationally mandated health insurance system. Given the heterogeneity of different regions in India and the regional specifications, one would need to undertake pilot projects to gather more information about the population to be targeted under an insurance scheme and develop options for different population groups.
Health policy-makers and health systems research institutions, in collaboration with economic policy study institutes, need to gather information about the prevailing disease burden at various geographical regions to develop standard treatment guidelines. This would help them to undertake costing of health services for evolving benefit packages to determine the premium to be levied, subsidies to be given, map the health care facilities available and the institutional mechanisms which need to be in place for implementing health insurance schemes. Skill-building for the personnel involved and capacity-building of all the stakeholders involved would be a critical component for ensuring the success of any health insurance programme. The success of any social insurance scheme would depend on its design, implementation and monitoring mechanisms which would be set in place and it would also call for restructuring and reforming the health system and developing the necessary prerequisites to ensure its success.