Health insurance industry as early as 10 years back was in its infancy with only public sector companies who were also life insurance players. It was after the year 2000 that privately owned general health insurance companies came to India like HDFC, Tata, Max life, Kotak and Birla but it was only in year 2005 with Star health that a dedicated health insurance company came in India. It was followed with Apollo DKV now known as Apollo Munich and now Max Bupa which has launched in March.
There are more coming!
Max Bupa health insurance Company which is launched in March 2010 is a tie-up between Max health care and UK based Bupa. There is news that there will more 3-4 more pure health insurance companies that will come in the next few months. Most of these companies are international insurance
companies with a tie up with a company in India. Among these there is Discovery of South Africa and Cigna and Aetna of United States who are in talks with Religare for a tie-up. Some other international giants have also expressed their interest to form a joint venture with Axis Bank which is India’s third largest money lender.
What’s bringing them here?
K S Sankar of Medimanage Insurance Broking Private Ltd says, “The primary reason is the largeness of the market with low insurance penetration.” What with a middle class of about 300 million people and growing, and only about 10 % of Indian population covered in health insurance that leaves around a potential market of 270 million people. Sudhir Sarnobat, Founder of Medimanage agrees with Sankar and says it is the growing number of people who can afford health insurance which is driving this trend.
Just a look at the numbers tells the whole story, health insurance premiums amounted 66.25 billion rupees in 2009 from 32.09 billion rupees just two years back, it is more than 50% hike in just two years.
K S Sankar also points out that the health infrastructure in India, though unregulated is better than other economies in the world. He also gives other factors that make investing in India a good idea for foreign companies like better regulated insurance environment, lower capital investment requirement, smoother and relatively less corrupt processes with a population that is young hence a good risk and the factor that health insurance in India means only hospitalization costs that drop the overall costs considerably.
Mr. Sarnobat also sees an improvement in the industry that will interest the foreign players, “The premium rates are hardening which can provide a sound profitable business model for health insurance companies in next 3-5 years. These companies can bring in innovation in product structuring which is lacking in India and thus the heightened interest by foreign players.”
What will it mean for us?
Sudhir answers this question in two words, “Innovative products and better service.” K S Sankar feels that since these companies will solely concentrate on the health sector, their in-depth knowledge of health will help us. He says, “Their knowledge will initially make their processes more customer friendly and in the long run, rein in the health service providers from the perspective of cost standardization and right pricing of health services – not by sheer force of volumes but through more scientific benchmarking”.
Mahavir Chopra, founder of online health insurance broking in India, says "Customer will be spoilt for choice. The flip-side is there are chances he will get overwhelmed and confused. Brokers have an opportunity here. Look at a parallel of the now highly competitive cellular mobile service market, its pretty difficult to know which company or plan is good. Even though there is innovation, lack of any IPR on the innovation, results in the new service being copied by other companies in a couple days of the launch. Cellular service is almost a commodity."
Pashupati Davella, Insurance IT entreprenuer says, " Foreign players will bring process innovations so that the client can take treatment wherever he or she is, with minimum hassles. Also, because of greater integration between hospitals and insurers and reduced fraud, the cost of buying Health Insurance products go down and we may get long term care products, lifelong cover and features which are customer friendly like portability."
Currently in India, there is no standardization of health care cost, one procedure may cost Rs. 20,000 in one hospital and may cost over Rs. 50,000 in other. Mr. Sankar hopes that the ‘health only’ insurers will bring to the table independently validated bench marks.
Will they survive?
The scenario though seems to be very bright seeing the growth in premium, the reality is that health insurance is a loss making industry, the claim rate is about 120-150%. The underwriting losses of United India increased from 541 Crore last year to 880 Crore this year, a whopping growth of 63%. The reason why most of health insurance companies are still showing profits is that they have a life insurance subsidiary that is making money or if they have invested in the market.
K S Sankar also believes that it is the non-health insurance activities that will keep them running. He says of the purely health insurance companies in India; Star Health has been successful because it is sponsored by the government in some states. He points out that of Max Bupa, Max is already into Life and Bupa is primarily a service provider for international insurances and this combination again will have synergies to sustain them. “It is not without reasons that they did not rush in (before) but are coming in only now. All these players are using these models for immediate sustenance hoping right pricing of health insurance in India will happen sooner than later.”
Sudhir Sarnobat also feels that things will become better now, he thinks that as the premium rates are hardening, there is possibility of creation of innovative products in retail spectrum which can provide profits. He says “Till last year, the retail Health Insurance portfolio of all insurance companies was profitable hence, this business, if done properly, can provide profits.”
Having more dedicated health insurance companies in India means more good news than bad news to us- the end users, it means more choice, better service and better products and innovations in the field. “The more the merrier” says the Indian middle class customer, for sure!