Posted on Oct 19, 2011 by Sergio Ulloa
British United Provident Association (BUPA) have seen their overall revenues increase by 6 percent in the first half of 2011, overcoming the global economic downturn largely on the back of the continued strong performance from its expatriate insurance and overseas healthcare operations. Bupa now intend to build upon this momentum and further develop their international medical distribution network, expanding the scope and rage of their operations in the Asia Pacific region in particular.
Bupa's interim report showed that overall half year revenues were £3.9 billion (US$6.14 million), with underlying surplus rising sharply up by 35 percent from £162.1 million (US$255.16 million) to £247.2 million (US$389.12 million) for the period. These figures came as Bupa's home UK market experienced a slight contraction, while their worldwide customer base
rose by 1 percent to 10.7 million. International sales from Bupa's Asian, Australian
, Latin American and Middle Eastern operations have helped the company offset the loss of growth in previously dominant markets. The British healthcare conglomerate is now exploring new ventures to move forward with its international development strategy
Bupa has long identified India as a prime target for further business development
. The health insurance market in India is in a nascent stage, with low coverage rates and the majority of expenditure on healthcare coming out of patients' pockets. However, with a population exceeding 1.1 billion people and a projected 600 million in the middle class by 2025, the country offers significant potential going forward. Bupa wants to capitalize on this huge demand. By their measurements, over seventy percent of healthcare expenditure in India is private and over 90 percent of what is spent is not insured.
Bupa entered the Indian health insurance market in 2010 through a joint venture partnership
with Max India Ltd, launching a standalone private health insurer named Max Bupa. The Max Bupa Health Insurance joint venture now has a presence in nine large cities and has established a network link with over 700 hospitals across India. For the financial year 2010-11, Max Bupa's premium from direct business written stood at Rs 254.6 million (US$5.18 million) and profit before tax was Rs 1162.4 million (US$23.65 million). Bupa has found themselves in a strong position in India through their MaxBupa venture already, with a sound reputation and over 100,000 insured customers in a market that is set to expand as economic conditions strengthen.
Max Bupa are now shooting for Rs 700 million (US$14.25 million) worth of new business premiums in India by the end of the fiscal year. To help achieve these goals, the insurer has been in negotiation with rural banks, co-operative banks and post offices this month to expand its distribution network and effectively engage the rural, largely underinsured, masses across India. Max Bupa has traditionally offered and promoted its insurance products through its agency force, telemarketing, direct sales or online channels. However, in order to reach the more remote areas of the country, gaining access to more entrenched business network, like community banks and post offices, becomes a vital tool. Mr Neeraj Basur, Chief Financial Officer of Max Bupa, explained to the press on Tuesday that establishing bancassurance relationships would allow the company to progress considerably. "Bancassurance is a good model for distribution of insurance products. Regional and co-operative banks have the kind of reach and expertise in this area so we want to tap them," Mr Neeraj Basur said.
Talks are already well underway to distribute Max Bupa insurance policies through a tie-in with five regional and co-operative banks in Maharshtra, India's second most populous state. Further expansion has been curtailed however by national regulatory roadblocks. Under existing Insurance Regulatory Development Authority (IRDA) law, commercial banks in India are only allowed to distribute the insurance products from one life and one non-life insurance company to bank customers. This has proven to be a particularly big obstacle for standalone health insurers like Max Bupa, as the non-life sector encompass a wide array of business lines, including automobile, property and creditor insurance, and thus could have a multitude of companies with differing products competing to fill a bank's allocation. Max Bupa's Chief Executive, Dr Damien Marmion, assured reporters that the company would work with regulators to address this regulatory issue, and that they would not be the last insurer to suffer from it "We are in talks with IRDA to allow banks to sell products of standalone health insurance companies alongside those of the life and non-life companies. The industry is in talks on this issue and something could emerge soon," Dr Marmion said.
Indian state governments will want regulation dissuading private health insurance investment to be dealt with as well. Many states are keen to rope in private insurers to help bring scores of poor and unorganized workers into the fold of health insurance. For these reasons the Rashtriya Swasthya Bima Yojana
(RSBY) scheme was launched by the Indian Ministry of Labour and Employment on April 1st 2008, tasked with providing sufficient health insurance coverage for families living Below Poverty Line (BPL), and to better protect them from the financial liabilities that arise out of health shocks involving hospitalization. The RSBY scheme is a cooperative venture between the Indian government and private health insurance companies. Insurance companies offering RSBY coverage are vetted and selected by the State to administer health insurance policies on behalf of the Indian government. Premiums are subsidized by the Indian government with the Central and State organizations splitting costs 75 percent and 25 percent respectively.
Max Bupa wants to provide health insurance cover under the government-sponsored healthcare scheme and to ultimately make it a commercially viable activity for the company. The insurer is currently bidding for the RSBY distribution rights in three states, with plans to design more appropriate cost-effective products for the unorganized labor market. If Max Bupa is able to find success through the RSBY scheme it could prove that health insurance products and providers can achieve results in what was previously considered to be an unprofitable market.
Insurance Companies Mentioned
Max Bupa Health Insurance is a 74:26 joint venture between Max India Limited and UK-based Bupa. Bupa is a leading private healthcare provider with more than 10 million customers worldwide and over 60 years experience in the health sector. The Max India Group has expertise in both health and insurance related services including hospitals, clinical research and life insurance.
Bupa is a leading international healthcare provider, offering personal and corporate health insurance, workplace health services and health assessments. The insurer today has ten million customers in over 190 countries, and over 52,000 employees around the world.As a provident association Bupa has no shareholders, because of this it uses its profits to invest in healthcare and medical facilities around the world. Bupa has operations around the world, principally in the UK, Australia, Spain, New Zealand and the US, as well as Hong Kong, Thailand, Saudi Arabia, India, China and across Latin America.