Posted on Dec 21, 2010 by Sergio Ulloa
In recent years India has become one of the fastest growing countries in the world. At present, there is a high demand for health insurance in India; this is driven primarily by the growing percentage of middle class citizens in the country,
and the types of illnesses or diseases associated with their lifestyle. As India sees the wide scale emergence of illnesses predominantly associated with developed nations, the costs associated with healthcare in the country have started to increase. The disparity in Indian healthcare provision has also been highlighted by the development of privately funded Start-up hospital chains catering specifically to upper-middle class residents of the country. As India further develops over the next 5 years the growth of the country's medical industry, in addition to the increased levels of lifestyle related illnesses will further increase demand for quality healthcare services, and consequently health insurance, in the urban areas of India.
The growth of the Indian economy, together with the increase of lifestyle associated illnesses has seen the cost associated with healthcare increase dramatically in the last decade. As a consequence of this Indian health insurance
premiums have grown by an estimated 40% in the last 10 years as insurance providers seek to cover their risk. The Indian Government, together with non-governmental organisations and insurers, have recognised the need for quality low-cost healthcare and are jointly launching several different schemes to offer lower cost health insurance to all residents in India. Some of the insurers include General Insurance Corporation of India (GIC)
, National Insurance Company
, Oriental Insurance Company
, New India Assurance Company
and United India Insurance Company
Although the health sector in India continues to grow at a fast pace, it has not yet achieved its highest potential, as there are a few internal factors limiting widespread implementation of quality medical services throughout the country as a whole. First, the general public is unaware of the insurance products available to them and which products are best suited to address their needs. Moreover, they have the general perception that the claim and settlement procedures are so complicated that this has frightened the potential consumers from purchasing health insurance. The health insurance providers are also facing challenges due to high claims ratios. The deficiency in the availability of accurate consumer profile data and illness patterns have limited the insurance providers in coming up with optimal product pricing, as well as stunting the development of any new desirable products for the intended target group.
The tax-free policy in general insurance currently in place has failed to attract the interest of the majority population in purchasing health insurance. The core problem to the situation lies in the lack of new product ideas and designs. In the current marketplace Indian health insurance providers mainly offer customers traditional protection type insurance policies; in some cases there is the possibility of obtaining minimal extended coverage options, which are largely considered to be innovative when looking at the industry within India. When one talks about innovation on insurance products in India, it normally only refers to slight adjustments on the product features and charges, such as options to include dental coverage or to include daily cash benefits for hospitalisation to name a few.
In order to expand the health insurance market in India, the Insurance Regulatory and Development Authority (IRDA) can carry out a few radical changes; one option is to consider subsidising universal healthcare in order to help reducing individual's spending on emergency, as well as day-to-day, medical treatments.
In mature markets around the globe, such as Europe and North America, it has been proven that product innovation within the health insurance industry is a key success factor. Gartner (an analyst firm) has noticed that insurers have placed a large portion of their investment towards improving their product development abilities and coming up with new innovative products. Recent international innovations include taking into consideration the product requirements of different potential customers, as well as reviewing and establishing the product life cycle strategies accordingly. Other alternative strategies such as managed care organisations (MCOs) and health savings accounts (HSA) have also proven to be successful in managing medical costs, as well as improving healthcare standards and quality.
Comparatively, China also faces similar challenges as India. There seems to be a shift in the China operation model. The "old" operation model focused more on protection and customer service, whereas the "new" operation model is more client oriented as it offers additional value-added services to its customers. In terms of products, China health insurance
is now moving towards placing more weight on offering health protection plans to clients rather than just merely offering basic medical care plans.
The insurers in China have only recently included managed-care type of products in their portfolio. With their limited experience with these types of products, they are still trying to sort out the issues in terms of product design, claims handling and operations. To differentiate themselves from other competitors in the market and create a competitive advantage, the insurers in China have identified that offering managed care products is the approach they need to follow in the years to come.
In 1986, India introduced Mediclaim, a list of multi-tiered long term insurance products, designed to close the gap in their product portfolio. This product is required to develop further in order to differentiate from the long term insurance products offered by other health insurers. Other products available in the market are health savings account type products offered by non-life and life insurance companies in the public sector. Unfortunately, due to limited coverage of these insurance products, they are not very popular in the market.
The Indian health insurance market is unique; it has a number of specific requirements and challenges of its own. It is the hope that insurers, by learning lessons from the more experienced counterparts in the market, will eventually develop their own new set of competencies and abilities such as insight on buyer behaviour, rationalising product development and taking advantage of technology to differentiate themselves from competitors by offering tailor-made services. In order to be successful in the Indian insurance market, it is one of the top priorities that insurers develop innovative products for their potential customers and have an execution plan and strategy to serve the market efficiently and effectively.