V. Jayalakshmi Siva Sivani Institute of Management Hyderabad

The Burgeoning Indian Health Insurance Industry……Yet miles to go !!!

IIRM - National Seminar on “A Decade of Experience: Health care Insurance….

Present Scenario”, 24th January, 2012

V. Jayalakshmi Siva Sivani Institute of Management Hyderabad

1

Presentation Outline

Indian Health Insurance – bare facts

Objectives of the Study

Methodology

Household Survey Analysis

Summary and Conclusion

Brief Background

Indian Economy : LPG ………year 2000

Insurance industry ‘engine for growth’

Consumers today have choice and variety

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Health Insurance Facts

Rs 7,803 crores in year 2009-10, CAGR of 25-30% Poised to grow to Rs. 28000 cr industry by 2015

Out of the total population 15 % - covered under all prepaid schemes 2 % - covered under private insurance

Total healthcare expenditure constitutes 5% of GDP Public Funding – 1% of GDP OOP spending – 76%

HEALTH INSURANCE – A NECESSITY TODAY

4

Health Expenditure in India by Source of Financing

5OOP – SIGNIFICANT AND BURDENSOME

Universal Truths & Facts Private health care expenditure is greater than that of

public health care

Little preference for Government health delivery system vis-à-vis the private

Reliance on the government need to be reduced

Voluntary health insurance schemes – globally acceptable model

Health insurance plan - income protection plan

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Key Stakeholders

7“ Policyholders” – missing

General Insurance Premium composition [2003 – 09]

8Health insurance significantly contributing ………..

Health Insurance Premium Growth [2003 – 09]

9

Indian Health Insurance Market- 2010-11

10

INDIA RANKS : • 78th in terms of insurance density• 52nd in terms of insurance penetration• OOP expenses met out of * Borrowings / * Sale of assets / * Past Savings * Current incomes

Huge market to tap……

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NCEAR (2008) Survey Report: Penetration 1.2 per cent (US – 4.2%)

ASI of Rs 98,604 per policyPopulation covered – just 15% Population covered by Private Health insurance companies – 2%

Huge untapped market

Indian Heath Insurance Estimates at a glance

Total health care spending in India - 1.7 lakh crores [2007-08]

Insurers’ payouts barely Rs. 5,000 crore!!!

Rs. 1,00,000 crore - OP Treatment (non-hospitalization) expenses and

Rs 70,000 crore - hospitalization expenses

Insurers’ claims - 100-105 % claims

[ 2007 - 2009]

Total Healthcare spending at a glance at Macro level……..

Out of an average annual income of Rs 62,114, an Indian household spends

6.7% (Rs.4,079) of income on for routine medical expenses

37.4 %(Rs.23,237) of income for major sicknesses

Huge Out-of-pocket spending!!!

Micro level ..............

Indian HHs not taking health insurance policy to mitigate huge OOPs?

Are the existing insured HHs satisfied ? Why are few HHs discontinuing their policies ?

Health insurance has not yet achieved the desired levels of penetration?

But then, ……………Why?

Present study makes a humble attempt to

find answers to these question through a household survey

Insured households in AP only 0.62 %

( National Average 1.2%)AP Health Index Rank - 20th with 0.46 score (National 0.54)

Average annual HH income Rs 45,372

Annual health expenses - Rs 19,566 (43% of HH income) 9 % households surveyed faced major sickness, with average expenditure being Rs 16,463

Relevance of study

Examine perception of HHs towards Health Insurance

Study factors influencing health insurance purchase decisions

Identify coverage needs, reasons for discontinuation or unwillingness to purchase health insurance

Help insurers tap potential market

Objectives of the Study

Policyholders’ Perceptions on Health Insurance

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Household Survey – primary data

Questionnaire Twin cities of Hyderabad & Secunderabad

221 Households

Methodology, Sample Source& Size

Socio-economic and

demographic profiles

Health Care Facilities and

Preferences

Insurance awareness and

Coverage

Data pertaining to….

Willingness to Purchase Health

Insurance

Factors influencing Health

Insurance purchase decision

Data pertaining to….

Analysis of

Household Survey

Socio-economic &

Demographic Profiles of

Households

39%

32%

19% 6% 4%

Age Profile 0-35 yrs 36-45yrs

46-55 yrs 56-65 yrs

66-70 yrs

70 percent of respondent were between 35 years to 45 years

Gender & Marital Profiles

66%

34%

Gender Profile

Male Female

60%

40%

Marital Status Male Female

14%

33%39%

11%3%

Educational Background

Professional

Postgraduate

Graduate

High School

Illiterate

Around 86 percent of Households were educated

Family Profiles / Insurance

Joint Nuclear

41%

59%

Insured Uninsured

57%

43%

56%

44%

Nuclear Joint

11%

4%

50%

2%

4%

8%

13%

3%5%

Occupational Profile

Governement

Public sector

Private sector

University

Autonomous Body

Self Employed

Quasi Governemnt

Unemployed

others

Occupational Profiles/ Insurance

Govern

emen

t

Public s

ecto

r

Privat

e se

ctor

Univer

sity

Autonom

ous Body

Self E

mplo

yed

Quasi G

overn

emnt

Unemplo

yed

other

s

11%4%

49%

2% 4% 8%13%

3% 5%

67%67%

60%

40%

11%

58%45%

83%

42%

33% 33%40%

60%

89%

42%55%

17%

58%

Respondents Insured Uninsured

Uptp Rs. 1 lakh

Rs. 1 lakh - Below

Rs. 2 lakh

Rs. 2 lakh - Below

Rs. 3 lakh

Rs. 3 lakh - Below

Rs. 4 lakh

Rs. 4lakh - Below

Rs. 5 lakh

Rs. 5lakh and

above

30% 31%

16%

11%

6% 6%

Income Range

Uptp Rs. 1 lakh

Rs. 1 lakh - Below

Rs. 2 lakh

Rs. 2 lakh - Below

Rs. 3 lakh

Rs. 3 lakh - Below

Rs. 4 lakh

Rs. 4lakh - Below Rs.

5 lakh

Rs. 5lakh and above

30% 31%

16% 11% 6% 6%

68% 62%

37% 46%50%

43%

32% 38%

63% 54%50%

57%

Income Range / In-surance

Uninsured Insured Respondents

28%

20%8%

21%

7% 10% 4%

Assets HoldingsHouse Bank Deposits SharesVehicles Agri lands House siteothers

Health care Provisioning and preference

72%

11%

8%

9%

Health Facilities

Within 2 km 2-Below 3 km3- Below 5 km 5 kms and more

12%

38%35%

15%

Types of HC facilities

PHC Private clinicsPrivate Hospitals Govt. Hospitals

Satisfaction with the quality of care

65%

35%

Yes No

Quality of Care

10%

60%

28%

2%

Excellent Good Average Poor

Healthcare Expenditure Experience

of Households

Hospitalization/ Acute / Chronic Diseases

42%

55%

45%

58%

57%

43%

0%

20%

40%

60%

80%

100%

Yes No

Hospitalised Households/ Insurance

Uninsured

Insured

Hospitalised

25%

66%

34%

18%

59%

41%

0%

20%

40%

60%

80%

100%

Acute Chronic

Nature of Illness / Insureance

Uninsured

Insured

Respondents

Duration/ Reasons for Hospitalization

Reasons for Hospitalization

14%

10%

34%19%

18%5%

Accident Unknown Fever Sickness Surgery Chronic Problem Disability

Duration of hospitalization

26%

25%28%

21%

Less than 5 days 5 days to less than 10 days 10 days to less than 15 days 15 days or more

Range / Impact of Medical Expenses

33%

32%

10%

11%

14%

Below Rs. 10000

Rs. 10000 - Below Rs.25000

Rs. 25000 - Below Rs.50000

Rs. 50000 - Below Rs.75000

Rs. 75000 and above

Range of Medicalcare Expenses Series1

Impact of Medical Expenditure

58%24%

18%

Heavy Financial Burden Moderately burdensome No financial Burdfen

Sources of Finance for Hospitalisation Expenditure

21%

34%

6%28%

40%

4% 5%Insurance

Past Savings

Sale of assets

Borrowings

Current Income

Employer Financed

other

Treatment Preference/ Satisfaction

Type of Medication

About 65% of Households preferred Allopathic treatments

Homeopathy

Ayurvedic

Satisfacton from Quality of Care

63%

37%

Yes No

OP Experience of Households ………….

Households with OP Expenditure

59%

41%

yes No

Preference for OP Treatment

11%

18%

14%2%

55%

Government Corporate Trust Employer Private Clinic

Causes for OP Treatment

20%

24%56%

Disease Injury Others

86%

13%

1%

0% 10% 20% 30% 40% 50% 60% 70% 80% 90%

Below Rs. 10000

Rs. 10000 - BelowRs.25000

Rs. 25000 - BelowRs.50000

Range for OP costs

Series1

Sources of Finance for OP & IP Care

Sources of Finance for Hospitalisation Expenditure

21%

34%

6%28%

40%

4% 5%

Insurance Past Savings Sale of assets Borrowings Current Income Employer Financed other

Current income being major source Drain of liquid income Huge OOP spending …………….. Potential market

Sources of Finance for OP Expenditure

18%

9%

4%

19%

44%

3% 3%

Insurance Past Savings Sale of assets Borrow ings

Current Income Employer Financed other

Insurance AwarenessOf

Households

Awareness / Sources of Information

Insurance awareness

73%

27%

Yes No

Types of Insurance

85%

73%

75%

8%

Life Insurance Health Insurance Motor Insurance others

Life insurance awareness significant Agent’s role very prominently seen

Sources of Information

49%

37%

18%

16%

13%9%

Agents

Friends

Colleagues

Neighbours

Relatives

Others

Media Sources

49%

40%

29%

13%11% 6%

Newspaper

Agents

Television

Magazines

Radio

others

Perception on Health insurance ………….

Necessity of Insurance

92%

8%

Yes No

Insured Households

56%

44%

Yes No

Although Health insurance is perceived as necessary by majority

Almost half of HHs Uninsured !!! Understanding and evaluating reasons important Family Floater policies significant

Health Insurance Claims Experience

68%

52%

32%

0%

20%

40%

60%

80%

100%

120%

Yes No

Claims Made Claims Paid Claims Experience with Insurer

Very Good Good

Unpaid claims significant Delays in claims settlement to be efficiently reduced Result in disinterest to continue or unwillingness in puchase

Duration for Claims Settlement

7% 6%

87%

1 Week 2 Weeks 1 Month

Continuation of Policy

25%

75%

Yes No

Reasons for rejections Reasons for Rejection

69%

25%

6%

Partly rejected

False claims

Exclusions

Interested in Continuation

25%

75%

Yes

No

Reasons for Discontinuation

29%

58%

13% Not Satisf ied w ith service ofinsurers

No Claim

Limited Coverage

Part rejections, discouraging factor No Claim reflects lack of understanding of insurance fundamentals Insurers’ quality tested through claims settlement………………

Policy Coverage desired Happy with Existing Coverage

68%

32%

Yes No

Additional Coverage Desired

42%

35%

29%28%

26%

22%

20%18%

LTC Out-Patient Drugs Pre-existing Chronic Pregnancy Consultation Disability

Reasons for taking insurance

39%

35%

17%

10%

12%6%

Realised need

Reduce burden

Avoid anxiety

Save income

Avoid debt

Tax benefit

Perception shift in purchase and continuation observed Coverage desired if integrated will reduce Out-of- pocket spending

Preference of Households Willing to Buy New Policies

Company

21%

59%

20%

Private Companies Public Companies Health insurance Companies

Premium Range

18%

25%

33%

11%

13%

Below Rs.1000 Rs.1000-2000 Rs.2000-3000 Rs.3000-4000 Rs.4000 - 5000Policy Term Preference

11%

54%

35%

1 year 2 years 3 years

Low Cost policies for a longer term more than one year from Public Companies seem to be the choice of majority HH willing

Households un-willingness to buy HI

Unwilling to take policy

12%12%

13%

21%

14%17%16%

22%

13%12%

Prior Coverage

Do not like any scheme

Expensive

Financial Constaints

Limited coverage

No product choice

Unsuitable

No past record of illness

No premium refund

no awareness

Financial constraints hindering element Low-cost policies to be concentrated on No past history of illness reflects ignorance about insurance

Summary and Conclusion

Health insurance a necessity in present times Lower income households face the brunt of

the escalating costs severely Huge out of pocket spending resulted in

indebtedness and erosion of assets Lower aged people and people from lower

income strata had more awareness and willingness for health insurance policies

Need of the hour………

Design low cost need based policies Focus on “Customer satisfaction” Improve quality of service of insurer Ensure good quality of care at the network hospitals Increase awareness for need for HI Convert unwilling customers through good counseling Tap huge potential market by changing MINDSET towards “ No premium

refund, no prior illness history Promote Health insurance as a RISK management tool Agency channel most popular and hence emphasize on professionalism

Insurers to focus on health insurance as distinct from other insurance

Ensure that large part of the population should not get left behind

Efficiency and equity must be adhered too

Those willing and able, those unwilling but able and those willing and unable to be given all the attention

Last Thought …………

“One of the greatest investments which we can make is to invest in health, for there is no other

investment like it.

Health is Life Insurance, success and … happiness insurance”

... Mahatma Gandhi 

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