Health Insurance Market Penetration in India

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					Health Insurance Market Penetration in India




                       Student : Narendra Rapeti
                       Guide : Dr. Lalitha Subramanian
                       Panel : Dr. Brijesh Purohit
                       Madras School of Economics
Dissertation

   Why am I doing this study?
   Who shall be interested in this study?
Contents

   Chapter 1- Introduction of private health insurance
              India’s insurance market
              Objective of the study
   Chapter 2- Health Insurance
              Key stake holders
              Health insurance plans
   Chapter 3- Penetration of health insurance in recent past
   Chapter 4- An analysis
              Statistical inferences on health data provided by TAC
              Key issues and concerns
              Addressing way-outs
              Conclusion
Chapter 1 – Introduction of private health
insurance
   India’s insurance market
     History – till 1972

     GIC and its subsidiaries – from 1972 till 1999

     IRDA Act, 1999 – TAC from 2003

   Objective of the study
       To study the health insurance market penetration in India with the help of
        latest available data presented by Tariff Advisory Committee ( TAC) on
        their website and also the data reported by IRDA on their website to
        bring out valuable insights to the sector. In a way to
       Understand to the updated situation
       Project and identify the areas or issues which need to be addressed and
       Provide suggestions and recommendations to tackle the situation for the
        future
Chapter 2 – Health Insurance –Key Stake Holders


                                         Distribution channel partners


                                                                         Media / Telecom
                      Health Providers

                                                                                            Customer


 NGOs / SHGs / MFIs
                                             Health Insurance
                                                                                               Government
                                                 Industry



                                                                                 Insurance companies
                             TPAs
                                                  IRDA - regulator
Chapter 2 – Health Insurance – Plans


                 Health Insurance Plans


                                          Community Based /
     Private            Social
                                           Micro Insurance
Chapter 3 – Penetration of health insurance
Chapter 3 – Penetration of health insurance
Key Market Indicators
Insurance Penetration
Insurance Density
Chapter 4 – An Analysis

                      Table 1. ACTUAL DATA - Source: Tariff Advisory Committee, Data Repository




                                                                               Claims
                                                              Premium          Payable                    Underwriting
                       No. of       No. of       No. of         Paid in           in                            Balance
 Time      Year       Policies     Members       Claims       Rs (crore)      Rs (crore)    Claim Ratio   Rs (crore)


  1     2003 - 2004   2265451      8361629       360088          944             785              83%          159


  2     2004-2005     2059449      8987239       555273          987             948              96%           39


  3     2005-2006     3828495      16345575      1016785         1947           1777              91%          170


  4     2006-2007     3110475      17907430      1060047        2,820           2,198             78%          622


  5     2007 -2008    3790838      24121625      1436998        2,758           2,904             105%         -146
Key Observations
   1. Table 1 encloses the data related to Paid Claims and not the Incurred
    Claims.
    Why are the Incurred claims data which is crucial and important not
    reported?
    How far are the Paid Claims data a good approximation to Incurred
    Claims data?
   2. Table 1 contains data of 7 variables over a period of 5 years, which may
    not be large enough to be used for accurate future predictions.
    Are the data heads recorded for future analysis sufficient?
    Who recommended the current format of the data set, Table 1?
   3. The data enclosed in Table 1, is gathered from TPAs and then
    consolidated.
    Do the data gathered from TPAs represent the whole health insurance
    business for the corresponding year?
Key Assumptions

   1. Assuming that the Paid Claims data represents Incurred Claims.

   2. Linear fit is a good approximation for projecting the future values.

    Therefore, we now proceed forward to project the actual data in Table 1
    by fitting linear trend and then estimating the future values. The projected
    values are recorded in Table 2, given below.
Cont..
                                      Table 2 - Linear Fit


                                             Premium          Claims                    Underwriting
            No. of     No. of    No. of      Paid in Rs      Payable in                 Balance in Rs
  Year     Policies   Members    Claims       (crore)        Rs (crore)   Claim Ratio      (crore)

 2003-04   2265451    8361629    360088          944            785          83%            159

 2004-05   2059449    8987239    555273          987            948          96%             39

 2005-06   3828495    16345575   1016785        1947           1777          91%            170

 2006-07   3110475    17907430   1060047        2,820          2,198         78%            622

 2007-08   3790838    24121625   1436998        2,758          2,904        105%            -146

 2008-09   4241482    27276755   1683416        3530           3369          98%            161

 2009-10   4704070    32234249   1953454        4177           4030          99%            147

 2010-11   4799719    35921128   2179152        4597           4558         105%             39

 2011-12   5416833    40734244   2489013        5068           5166         112%             -97

 2012-13   5733656    44618484   2728337        5733           5719         110%             13

 2013-14   6088286    49112008   2994294        6210           6319         116%            -109

 2014-15   6459223    53259884   3258110        6718           6881         120%            -163

 2015-16   6896682    57645732   3528740        7280           7468         122%            -188

 2016-17   7224516    61813383   3782467        7824           8040         125%            -216

 2017-18   7617507    66166955   4051202        8329           8623         130%            -294
Cont..
                   GROWTH FUNCTION - EXPONENTIAL FIT - TABLE 3
 Year       No. of     No. of   No. of   Premium Claims        Claim   Underwriting
            Policies   Members  Claims   Paid in    Payable in Ratio   Balance
                                         Rs (crore) Rs (crore)         in Rs (crore)


  2003-04    2265451     8361629     360088     944     785     83%         159
  2004-05    2059449     8987239     555273     987     948     96%          39
  2005-06    3828495     16345575   1016785    1947    1777     91%         170
  2006-07    3110475     17907430   1060047    2,820   2,198    78%         622
  2007-08    3790838     24121625   1436998    2,758   2,904    105%        -146
  2008-09    4493349     32422234   2203227    4426    4322     97%         104
  2009-10    5323360     44431783   2882139    6317    6206     98%         112
  2010-11    5501574     54877506   3675942    7777    8140     104%        -363
  2011-12    6776295     75522610   5307482    10422   11720    112%       -1298
  2012-13    7647569     99460493   7198628    15101   16605    109%       -1503
  2013-14    8645012    130596430   9508732    19583   22866    116%       -3283
  2014-15    9836703    171462366   13052023   26140   31848    121%       -5707
  2015-16    11483470   229755216   17964586   36097   45182    124%       -9085
  2016-17    12914784   300806429   24061174   48745   62771    128%      -14026
  2017-18    14804382   397596699   32710371   64826   87558    134%      -22732
Cont…the projected alarming situation !!!


                                 Underwriting Balance - TABLE 2

          800

          600

          400
  VALUE




                                                                         TIME    (in years )
          200
                                                                         Gross Profit
            0
                 1   2   3   4   5   6   7   8   9   10 11 12 13 14 15
          -200

          -400
                                     TIME ( in years )
Cont..
Issues and Concerns
   Low level of awareness among consumers about health insurance products
    and their benefits
   Limited Influence over healthcare delivery mechanism - Limited healthcare
    delivery network with top few cities
   Low health insurance penetration and lack of affordability of the
    consumers in the tier 2/3 cities and rural areas to support the investment in
    healthcare infrastructure in these areas
   Insufficient data on consumers & disease patterns, absence of
    standardization of healthcare costs & significant levels of frauds leading to
    under-pricing of insurance products, difficulty in product development &
    pricing and higher value of claims
Addressing some way-outs for issues and
challenges
   Creating awareness on Rights & Responsibilities
   Data Pool – Regulator as a repository
   Standardization of Cost
     TPAs

     Health Providers

   Increased Tax benefit
   Gradation of Health service providers
   Pool for Senior Citizen
   Compulsory Health Benefits for organized sector
   Government role on mass healthcare initiatives
The road ahead…

   There are several other challenges in the health sector—from the perspective of
    policyholder, insurers and the Authority. With a view to promoting health
    insurance in the country and looking for possible solutions to bring in as many
    people as possible into the insurance net, the IRDA has, over the last few years,
    given special thrust to addressing various issues concerning health insurance.
    These initiatives not only develop health insurance in the country but also address
    the concerns of the policyholders of health insurance. The grievance redressal
    system set up by the Authority enables a detailed analysis of policyholder
    grievances and health insurance stands out as a major area of concern from the
    customer viewpoint. It was in this backdrop that the IRDA set up The National
    Health Insurance Working Group towards the end of 2003. This provided a
    platform for stakeholders of the health insurance industry to work together to
    suggest solutions to various relevant issues. Some of the Working Group’s
    recommendations were implemented and some are under examination.
Conclusion
   The legal and regulatory framework of private health insurance, particularly
    because it operates in the voluntary market, should continually balance competing
    goals of access, affordability and quality of healthcare and provide health coverage
    to a larger fraction of the population with varying risk characteristics and ability to
    pay. Regulations, aside from their aim of providing protection of health insurance
    policyholders and beneficiaries, can be potent tools to promote access to
    healthcare, control pricing of health coverage vis-à-vis healthcare providers and
    enhance quality of healthcare. Allowing the participation of other entities that
    provide health coverage, such as Hospital and/or Professional entities, and self-
    insured health insurance schemes of Mutual Benefit Associations and
    Cooperatives would further increase the reach and depth of private health
    insurance. Licensing standards for compliance which are enforced on health care
    provider facilities as well as self-regulation in the medical profession and within
    provider groups are necessary for continuing improvement of healthcare quality.
    Private health insurance cannot grow if reasonable consumer expectations relating
    to access, cost and quality of healthcare remain promises rather than realities.
Personalities I met during the dissertation work

   Shri G.V. Rao (ex-CMD Oriental Insurance Company Limited)
   Shri Ramakrishnan (ex-Actuary LIC )
   Shri K.K. Rao ( Dy. G. M United India Insurance Company Limited
References
   IRDA Annual Report 2006 -07 http://irdaindia.org
   Tariff Advisory Committee http://tacindia.org
   IRDA Hand Book http://irdaindia.org
   Private Health Insurance in India: Promise and Reality, prepared by
   Bearing Point, Inc. for the United States Agency for International Development
THANK YOU !!! – Questions Please

				
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