Tuesday, January 25, 2011

Economic development and health insurance are meant to go hand in hand

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Yet in the Indian context the economic development remains the leading indicator. But with healthcare becoming costlier than ever, that needs to change soon

Times have changed and India is moving fast from public healthcare system to the realm of private healthcare. Be it in terms of quality or reach of services, the truth is that people now prefer to go to a private hospital rather than one run by the public authorities. It is more obvious when you consider that 80% of the amount spent by the country's citizens on healthcare goes to the private sector. This may be an inspiring trend for many, considering that people now aspire for a higher quality in the healthcare segment, but the rising cost of private healthcare keeps it out of reach of millions who need it so desperately. Going by the reports, India today spends nearly 6% of its GDP on health, one of the highest among the developing nations. But the worst part is that 80% of the same is out of their pockets, which means an average Indian today loses a good portion of his annual income on healthcare alone.

And how do we react to the same? Well, like for almost every other problem, we blame the government for not doing enough and keep burning larger holes in our pockets without even contemplating a solution called health insurance.

The general notion that prevails in the country is that health insurance is meant for the rich, educated or those in business' and benefits hospitals more than policy holders. Owing to such a negative perception, the health insurance market in India is still grossly under-penetrated with only around 2% of the billion plus population possessing a health insurance cover. But why so? Answers Frederick D'Souza, Senior Vice President, HDFC Standard Life, 'In a savings oriented society like India, people view protection as an expense. Once they pay for insurance, they will look at making use of the insurance which leads to misuse of the service and higher costs to all.' Another roadblock for the industry's growth surfaces from a communication gap between the insurer and the insured. Quite often, it is noticed that people who opt for a health insurance policy either ignore or are not enlightened about the details related to definition of pre-existing diseases/critical illness et al, for which insurers deny to pay the latter when they go with their claims. As per records, annually 30% of health insurance claims are rejected and 90% of these rejections are due to pre-existing diseases. Such situations create a wrong image about the insurers among the mass. In the Pink of Health Nevertheless, better late than never. The herd mentality has started mending its course and the health insurance sector has shown some real resilience over the past few years. Explains V. Vaidyanathan, MD & CEO ICICI Prudential Life Insurance Co. Ltd, 'Increasing awareness, rising healthcare costs, and detariffing of the general insurance industry have been key drivers for health insurance industry.' As a matter of fact, the industry has recorded total health insurance premium of Rs 8,100 crore (a 23% improvement over the previous year and more than twice the level seen just two years ago). Moreover, for the last six years, the health insurance industry has been growing at a CAGR of over 30%, and as put forward by experts it has the potential to become a $3 billion industry by 2015. But then, there are few glitches. As J. Hari Narayan, Chairman IRDA puts it, 'The growth in numbers is also fraught with numerous challenges of ensuring accessibility, affordability and efficiency in the health insurance system, which requires sustained and focused efforts on the part of all stakeholders.'

Rightly so, if the industry has to grow, keeping in mind the Indian demographics, then it is pertinent that apart from educating the masses, the communication between sales force and policy holders must increase. Moreover, insurance companies also need to make a conscious effort to come up with more and more tailor made products to include different groups of masses like the senior citizens. The importance of such products can be well understood from the fact that regular health insurance schemes are highly unaffordable for senior citizens as the cost of insurance increases with age. Unless the product is cross subsidised it is not possible to make health insurance affordable to all senior citizens. But senior citizens of the present day did not have an opportunity to buy insurance in their young age as such plans were not available at that time. So, as Frederick D'Souza puts it, 'They (senior citizens) have to be supported by some subsidy either from the government or the industry so that affordable insurance can be made available. Pricing is one of the issues that leads to very few senior citizen plans in the market.'

Considering the huge untapped potential present in India's health insurance segment, new players are flurrying into the market with every passing day and those who are already present are leaving no stone unturned to race ahead. But instead of competing on features on products and bombarding the same on a very restrictive audience, health insurance companies should concentrate more on consumer education, sales processes and control of healthcare expenses; thereby making it affordable for a larger market. Moreover, regulators and insurers must also see to the fact that there are standard definitions and lists of critical illnesses and non-medical expenses. This will not only enhance customer understanding of these terms, but will also help smoothen the interaction between patients, hospitals, TPAs and insurers, minimise ambiguities and generate higher level of faith.

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