Health insurance in India is a growing segment of India’s economy. The Indian health system is one of the largest in the world, with the number of people it concerns: nearly 1.4 billion potential beneficiaries. The health industry in India has rapidly become one of the most important sectors in the country in terms of income and job creation.
India-Health-Insurance-Market-Segment-InfographicImpact of Covid Pandemic on Health Insurance Industry in India
In the Apr-Sep 2021 period, health insurance leaped ahead of motor insurance to lead the non-life insurance segment in India for the first time.
For a business that thrives on medical uncertainty, the covid-19 pandemic has provided a shot in the arm for the health insurance industry in India. The prospect of hospitalization due to covid-19, and high medical costs in private hospitals have driven more Indians to sign up for private health insurance.
This has caused a shuffle, albeit temporary, in the pecking order of portfolios of non-life insurance companies. In the six-month period from April to September 2020, health insurance became the most valuable segment for non-life insurers in terms of premiums collected, leapfrogging motor insurance. This is happening for the first time since the industry was thrown open to private players about 20 year ago.
According to the General Industry Council, an industry body, health insurance accounted for 29.7% of premiums collected by non-life insurers in the first half (April to September) of 2020-21. Motor insurance came in a close second, with 29% of premiums. In 2014-15, the share of health was 23.4% and motor 44.4%. The recent primacy of health insurance is partly because sales of new vehicles halted during the lockdown, and even now are struggling to match pre-covid levels. As a result, motor insurance premiums dropped 13.8% on a year-on-year basis—the second-highest fall among the 10 main non-life segments. Meanwhile, health insurance premiums grew 15.8% in the same period—the second-highest growth among these 10 segments.
Historically, health premiums have been driven by ‘group policies’, or organizations buying an umbrella cover for their employees. In the post-pandemic phase, the momentum came from individuals buying policies. Premiums paid on individual policies increased by 34% in the Apr-Sep period compared to the year-ago period, against 16% on group policies. As a result, the share of individual policies in the health premium pie increased from 36% to 41%. Premiums in the government segment fell and the overseas segment was virtually decimated.
New Developments in the Market
Historically, health premiums have been driven by ‘group policies’, or organisations buying an umbrella cover for their employees. In the post-pandemic phase, the momentum came from individuals buying policies. Premiums paid on individual policies increased by 34% in the Apr-Sep period compared to the year-ago period, against 16% on group policies. As a result, the share of individual policies in the health premium pie increased from 36% to 41%. Premiums in the government segment fell and the overseas segment was virtually decimated.
Insurance literacy needs to spread across age groups. India shouldn’t depend on pandemics to increase insurance demand. Insurance literacy needs to be a part of our education system. With NEP on the cards, insurance literacy should be a part of the curriculum. This will nudge consumers to buy insurance leading to higher coverage, bridging information asymmetry, and reducing the socio-economic cost of COVID-like-pandemics.
More often than not, Indians react strongly to financial incentives. Hence, reducing Goods and Services Tax (GST) for a term and health insurance, offering income tax benefits on paying premiums, etc. will also improve insurance uptake. Gen Z can be attracted by offering discounts on fitness products, and wearables to customers with insurance cover.
Since COVID has forced digitization, it is time companies embrace AI fully. IRDAI played a key role by establishing the Sandbox Regulations in 2019 to promote innovations in fin-tech and insure-tech products like online automotive claims, health profile-based pricing, as well as AI-based claims estimation, and chatbots on wellness programs for customer engagement. This will make room for customer-centric products, efficient policy pricing, and bridge the trust deficit between insurers and customers.
Additionally, it is time IRDAI de-links insurance and investment to harness the optimum benefits of insurance as a product. Products like ULIP are popular as they are seen as protection-cum-investment products. However, such products fail to function efficiently and enhance the already existing asymmetry in industry, leading to market failure.
Lastly, in the long run, the National Health Stack, conceptualized by NITI Aayog and part of the National Digital Health Mission, should be utilized to identify the uninsured vulnerable population. A digital record of medical history will enable targeted insurance and allow companies to spread operations to tier 2,3,4 cities.
