Health Insurance, of late, has been in the news increasingly. Most recently it was the Health Insurance Portability with which the Insurance Regulator claims to score a huge benefit for consumers. While the Portability guidelines are only skeletal in nature, whether it would actually do something for the consumer or not is yet to be seen. Other reasons why health insurance has been in the news is the increasing importance it is gaining, both as an important project from the government as well as an important protection step by consumers who are finding themselves being surrounded by increasingly better healthcare, which of course comes at a much higher cost.
So what does health insurance look like today in India? To answer this question, it would be prudent to take a step backwards and figure out where does health insurance fit into the bigger picture.
Health Insurance is part of the growing healthcare industry, which itself is seeing robust growth. Growth of the healthcare industry is being driven by the following factors primarily
- Availability of quality healthcare
- Increased awareness
- Government initiatives
- Rise in number of patients visiting India for treatment, and
- Rise and growth of the middle income group in India, whose potential and size is the subject matter of major plans for many companies around the world
Let me present you with some data on how big the healthcare sector in itself is. Healthcare industry in India represents around 5% of the Indian GDP. 12% of the $77 million venture capital investments in the July – September 2009 quarter were in the healthcare sector. To further grasp how healthcare industry in India is on a growth path, consider this – the Indian healthcare industry jumped from $22.8bn in 2005 to $35bn in 2009 (CAGR of 15.3%). It is expected to rise at a CAGR of 22% and reach $77bn by 2012.
So coming back to the bigger picture, where does health insurance fit in into the healthcare industry? In 2010, health insurance was about 5% of the total healthcare market. And the rate of growth of health insurance is even faster than that of the healthcare industry, averaging a CAGR of 42% from 2003-04 to 2009-10. According to data released by Insurance Information Bureau, health insurance premiums almost doubled in 2009-10 compared to the previous fiscal. (Please do not for a moment assume that premium growth necessarily translates into more profitability for insurers – that probably would need another article by itself to explore).
The surprising fact to note is that despite this explosive growth in health insurance premium, the overall population covered by health insurance in India is quite low. Only around 10% of the Indian population is covered by some form of health insurance, which includes various government and employer covers; the retail penetration of health insurance is at an abysmal low of less than 3%. This presents a unique opportunity for health insurance per se – a growth supported by an increasing healthcare market as well as an expanding customer base. The potential is huge.
On one side lies a market which is so underpenetrated (less than 3% retail penetration), on the other side lies the explosive growth in healthcare expense (which is fuelled by the increased cost of better medical care), accompanied by government’s agenda to increase health insurance coverage (as on December 23,2010, a total of 2,23,54,462 smart cards have been issued across 27 states under the Rashtriya Swasthya Bima Yojana), coupled with increased awareness amongst the consumers that health insurance is a real need today, especially for the burgeoning middle class.
*The author works as a Senior Manager in the Product Management Vertical of a global provider of insurance, annuities and employee benefit programs and manages the Health Insurance portfolio for them in India