Health Insurance Sector Boom & Key Challenges

Indians have kept health insurance in their priority list. According to reports the leading non-life insurance sector recorded a whopping 25 per cent growth in just a year between FY 2021-22, due to a rise in demand for medical facilities across the country. 

The pandemic more than other things made people realise that a healthy future means investing in health. The huge out of pocket medical expenditures made people choose health insurance covers. 

A paper published by National Insurance Academy, a pune based institution under the Union Finance Ministry in early May had revealed that a leap of Rs 14,758 crore has been made in health insurance premiums in FY 21-22 alone, while in 2020-21, premiums collected by the medical insurance industry were Rs 58,572, this figure rose to Rs 73,330 crore in the following financial year of 2021-22. 

“The insurance industry has been growing at a rapid pace. The industry has come up with new and innovative product offerings; and there is an increased demand for specialized products including disease-specific health insurance products which can cater to the specific needs of the consumers.” stated Ajay Shah, Director & Head - Retail Business, Care Health Insurance while commenting on the recent boom of the sector.

Apart from Covid, a growing middle class, with a hike in burden of new diseases and NCDs (non-communicable diseases) can be attributed to the boom of the health insurance market. 

“Traditionally, Mediclaim covered only hospitalization (IPD) needs. Post Covid, The IRDA has asked insurers to allow telemedicine consultation in the policy contract. And now, many Health Insurance schemes also cover an extent of OPD benefits and pre & post hospitalization care.  But, as the demand and expenses increased, the utilization of the health insurance has also increased and has had a direct impact on the premium amount.” said Vaibhav Singh, Co-Founder & MD, Visit Health on the changes the health insurance market is witnessing. 

Health insurance premiums remain the main drivers of the non-life insurance industry and will continue this trend as the sector is expected to grow in coming years.

“Few of the interesting trends that we are witnessing right now are, the younger age profile has started purchasing health insurance in big numbers, earlier health insurance was an area of discussion for people in their mid 40s but now we are seeing people in their mid and early 30s also purchasing health insurance for them and for their families, so it's a very good sign going forward. The limits of health insurance coverage that the people are buying has also gone up by at least 20-25 per cent over the last two years, so people are going for a higher coverage,” said Anand Roy, Managing Director, Star Health and Allied Insurance Co. Ltd, while commenting on the emerging trends in the health insurance industry. 

Key Challenges Ahead 

Though the trends show a continuous expansion in the growth rate, the challenges stare wide eyed, different reports from the NITI Ayog and National Health Family Survey-5, reveal that the insurance cover penetration in Indian population is far from satisfactory, while the NITI Ayog report showed that 30 per cent or around 40 crore Indians are left out of the health insurance cover. The NHFS-5 showed that 41 per cent of Indian households have at least one individual covered by a health insurance plan which flashes the urgent need to cover the remaining stack of population.  

The union government's flagship scheme PMJAY (Pradhan Mantri Jan Arogya Yojana) launched in 2018 under the The Ayushman Bharat project provides hospitalisation cover to the bottom 50 per cent of the population, around 70 crore individuals, while social health schemes and private voluntary health insurance cover another 20 per cent. 

Which leaves a 30 per cent gap called the ‘missing middle’, though the NITI Aayog report suggests that the coverage claims could be an overstatement as the real uncovered population is higher due to inherent coverage gaps in PMJAY and overlapping between schemes in the country. Awareness, identification and outreach, and affordability are some of the reasons cited in the report for the ‘missing middle’. 

Mr Roy explained that affordability of health insurance product is directly linked to the medical inflation in the country, the inflation has been soaring for last two years, during the pandemic the hospital charges went up substantially, “I think medical inflation is a big challenge as the entire industry is dependent on that, and ultimately its the health insurance coverage, people go into hospitals and if hospital cost go up, the insurance premium also needs to be high,” stated Mr Roy. 

The actual number of uncovered population is difficult to decipher but broadly there seems to be a big unexplored territory and a huge market for insurance companies and investors to play with and to deliver health insurance coverage to the last mile. 

Mr Roy further added that the penetration of health insurance is still very low in India, it's one of the lowest in the world, as a result health insurance will continue to be one of the fastest growing segments in the industry. “Globally, wherever there was an outbreak, disease or endemic earlier, like the SARS outbreak in Hong Kong or the MERS outbreak in the Middle East, the health insurance business of those markets grew rapidly for the next 3-5 years, because of the awareness these outbreak created,” commented Mr Roy on the future growth aspects of the sector. 

The share of the pie is big for the health insurance industry as the growth is expected to continue in coming years. According to Invest India organisation, The private Non-Life insurance segment is expected to advance at 16 per cent in FY22 and 14 per cent in FY23. The Standalone insurance segment is forecasted to grow at 25 per cent in FY22.