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DECADE OF EXPERIENCE: HEALTH CARE INSURANCE- PRESENT SCENARIO
PROBLEMS & PROSPECTS OF DISTRIBUTORS/BROKERS IN HEALTH CARE
INDUSTRY IN INDIA
India Insure Risk Management & Insurance Broking Services Pvt. Ltd
SCOPE OF PRESENTATION
MARKET SCENARIOBroad overview of the Health care industry in IndiaBroad overview of Health insurance in IndiaCurrent market dynamics
DISTRIBUTION SET UP OF THE HEALTH INSURANCE INDUSTRY
Channel wise premium Channel wise concerns Broker concerns – in detail
THE WAY FORWARD Leveraging the Distribution networkAgency force restructuringBancassurance restructuringEnhanced marketing through broking
India Insure Risk Management & Insurance Broking Services Pvt. Ltd
HEALTH CARE IN INDIA
• Healthcare is one of India’s largest sectors, in terms of revenue and employment and the sector is expanding rapidly.
• Heath care spend in India is currently poised to touch 8% of GDP in 2012 ( 5.5% in 2009)
• Health care industry size in 2011 – USD 50 bn• Forecast to touch USD 235 bn by 2020• Private sector accounts for more than 80% of total healthcare
spending in India
India Insure Risk Management & Insurance Broking Services Pvt. Ltd
HEALTH CARE IN INDIA
• Drivers of growth in the healthcare sector include:– India’s booming population – Rising life expectancy– Expanding middle class – rise in disposable income – Rise in infectious, chronic degenerative & lifestyle diseases – Emergence of a robust pharmaceutical industry– Health insurance proliferation– Medical tourism
• Bottlenecks to growth :– India’s deteriorating healthcare infrastructure– The healthcare divide between the urban middle class & the rural poor
(education divide)– A widespread lack of health insurance compounds the healthcare challenges
that India faces– An abysmally low government spending on health - at USD 32 per capita
India Insure Risk Management & Insurance Broking Services Pvt. Ltd
HEALTH INSURANCE IN INDIA
• Why is Health insurance required?• Fastest growing segment in the insurance industry – presently growing at
32%• Health insurance sector poised for immense growth• The growth chart
• Projected growth – INR 30000 crs by 2015
2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11
16702222
3500
5300
6634
8305
11145
Health Insurance Premium Growth (in crs)
India Insure Risk Management & Insurance Broking Services Pvt. Ltd
SHIFT IN SEGMENT MIX from FY 2009 - FY 2011
Shift In Product Mix 2008 – 09 2009 – 10 2010 – 11Motor 44% 42% 41%
Health 20% 23% 25%
Fire 11% 11% 11%
Marine 7% 6% 6%
Engineering 5% 5% 4%
Liability 2% 2% 2%
Others 11% 11% 11%
The industry’s focus is now on
health insurance whose
contribution has increased to
25% in 2010-11 compared to
11% in 2005-06.
Health insurance has been the
fastest growing market segment
registering a CAGR of 32% for
last 6 years.
The growth drivers include
ageing population, increasing
healthcare costs, improving per-
capita income and awareness
and increasing health insurance
by employers.India Insure Risk Management & Insurance Broking Services Pvt. Ltd
WHAT AILS HEALTH INSURANCE IN INDIA
o High Claims Ratio -Competition forcing insurers to undercut prices - Insurer health portfolios in red
o System leakages - Provider malpractices leading to over-charging and over- treatment
o Large employee groups have traditionally abused the scheme – member impersonations, malafide claims etc – leading to large losses.
o Healthcare costs continue to outpace inflation
India Insure Risk Management & Insurance Broking Services Pvt. Ltd
MAJOR ISSUES IN HEALTH INSURANCE – SURVEY FINDINGS
PROPERTY PROJECTS HEALTH LIABILITY MOTOR
11%4%
22% 25%13%
12%
9%
7%
25%
11%19%
3%
29%
10%
13% 12%
3%
32%
10%
11%23%
6%
14%15%42%
31%
16% 18% 15%
41%
Lack of Underwriting discipline
Lack of product innovation
Lack of product awareness among dis-tributors
Lack of customer awareness – takes it only if mandatory by contract
Increased competition
Increase in hospital tariffs leading to increase in claims cost.
Increase in fraudulent claims
India Insure Risk Management & Insurance Broking Services Pvt. Ltd
MAJOR ISSUES IN HANDLING HEALTH INSURANCE POLICIES- from the policyholder perspective
Changes in regulations - PPN list being decreased
Policy cancellation notices from Insurer
Changes in regulation – Service tax being imposed for Cashless services
Change in Insurer attitude after picking up the cheque
Service from the Broker not up to the mark
Service from TPA not up to the mark
Employee dissatisfaction due to delayed claims settlement
13%
13%
14%
22%
24%
63%
76%
India Insure Risk Management & Insurance Broking Services Pvt. Ltd
CURRENT MARKET DYNAMICS
• Effects of cross-subsidization have rescinded. – The trend until Dec 2009 was Premium = Expiring claims– The trend today is Expiring claim + Inflation (10%) + Administrative
Charges + Service Tax• Overcharging Providers being increasingly blacklisted by Insurers• Claims upsurge => Mid-term cancellation notice from insurer• Loss control measures increasingly being introduced - caps on room rent,
surgery limits, parental claims etc.• PPN concept tasting some degree of success…likely to be emulated for
other cities also.
India Insure Risk Management & Insurance Broking Services Pvt. Ltd
DISTRIBUTION
• Distribution channel development in India• Channel wise Health premium• Leveraging the Distribution network• Channel wise analysis• Broker Concerns• Way forward
India Insure Risk Management & Insurance Broking Services Pvt. Ltd
DISTRIBUTION CHANNEL DEVELOPMENT IN INDIA
Agency - Mature
Direct Marketing- Mature
Bancassurance - Growing
Brokers - Growing
Telemarketing - Growing
Micro insurance- Growing
Virtual marketing - Emerging
India Insure Risk Management & Insurance Broking Services Pvt. Ltd
CHANNEL WISE HEALTH PREMIUM
2009-10 2010-11
Type of ChannelHealth Insurance* Health Insurance*
Premium (in lacs) % Premium (in lacs) %
Individual Agents 2,85,139 36.04 321132 29.57Corporate Agents 36,872 4.66 72546 6.68Banks 16,604 2.10 21774 2.00Others* 13,370 1.69 34598 3.19Brokers 1,33,531 16.88 227553 20.95
Referral Arrangements 7,450 0.94 51480.47
Direct Business 2,98,149 37.69 403435 37.14Total 7,91,114 100.00 100.00* excluding Overseas Health premium
India Insure Risk Management & Insurance Broking Services Pvt. Ltd
DISTRIBUTION CHANNEL POSITIVES NEGATIVES
AGENTS • Company centric• Reach • Personalized
• Limited knowledge• High attrition • Cost
BANCASSURANCE • Reach • Limited knowledge• Not personalized
BROKERS • Knowledge• Bargaining power• Personalized service• TPA relationship due to volumes• Larger volumes through corporate
policies• Claims control advise
• Limited value add in Retail market
• Focus on Urban market only• Not yet fully accepted by the
market• Clients using them as Quote
negotiatorsDIRECT MARKETING • Cost (can be cut and in case of in house
TPA, can be cut further)• Lack of personalized service• No value add in claims
minimization
India Insure Risk Management & Insurance Broking Services Pvt. Ltd
BROKER CONCERNS
• No access to repository of data • Still competing with Insurer…. Not yet ‘included’ by Insurer• Multiple mandates beating the logic of insurers …. What is L1?• Margins thinning• Price the only concern of customer- Quote vending machines• Market reacting slowly to wellness, prevention and cost control programs
India Insure Risk Management & Insurance Broking Services Pvt. Ltd
OUR SURVEY FINDINGS
56%
30%
15%
Single Insurance Broker?
Yes
No, multiple brokers depend-ing on area of expertise
No, multiple brokers to get the best price
The adjacent chart indicates the level of competition in the Indian insurance industry. 44% of the respondents utilize multiple insurance brokers- depending on the brokers area of expertise and also to pitch them into the competition to get them the best price.
India Insure Risk Management & Insurance Broking Services Pvt. Ltd
A GLIMPSE INTO THE MARKET FEEDBACK ON BROKERS
Serv
icin
g of
pol
icy
Know
ledg
e of
Pro
duct
Pric
e ne
gotia
tion
Und
erst
andi
ng C
usto
mer
requ
irem
ent
Abili
ty to
get
goo
d RI
term
s
Mak
ing
prop
er R
isk
pres
enta
tion
Clai
ms
serv
icin
g
Ove
rall
valu
e ad
d to
cus
tom
er
Ove
rall
valu
e ad
d to
ins
urer
Assi
stan
ce to
cus
tom
er fo
r cla
ims
docu
m...
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Broker Rating
V Good Good
Average Poor
V poor
India Insure Risk Management & Insurance Broking Services Pvt. Ltd
LEVERAGING THE DISTRIBUTION NETWORK
• Enhancing Customer awareness• Product innovation to suit different segments of society rather than “one
size fits all”• Agency model to be restructured to tap the rural market• Finding new business opportunities in the micro insurance segments• Bancassurance channel not capitalizing on the available data base• Brokers contribute to about 18% of health insurance market – Focus only
on urban, group policies• Brokers can tap the worksite marketing opportunities available• Virtual marketing activities such as electronic kiosk stands, mobile
advertising and the Internet to be tapped
India Insure Risk Management & Insurance Broking Services Pvt. Ltd
GROWTH ENHANCERS GROWTH INHIBITORSCorporate group policies Intensively price drivenState Govt./ Central Govt. group policies
Customers at the receiving end at the time of a claim
Life insurers entering the fray with Combi policies
Product not catering to different segments
Emergence of stand-alone health insurance companies
Distribution structure inadequate
Increasing awareness of benefits of health insurance products
Govt. spending on health care negligible
Steep rise in hospitalisation costs No regulation on providers leading to a vicious circle of premium & cost increases thus making insurance unaffordable to a majority of population
Health insurance portability Service tax on health insurance products
Demand for New Products - Preventive Care, Out-patient coverage, Long Term Care
India Insure Risk Management & Insurance Broking Services Pvt. Ltd
CAN WE EMULATE?• A study of developed markets reveals that health insurance in Netherlands
has developed to a very great extent – Uninsured individuals is about 1.5% of the population and in Switzerland it is < 1%
• Every person who resides or pays payroll tax in Netherlands, mandatorily must take insurance and in Switzerland every resident must take basic health insurance.
• Insured has the freedom to select the insurer and subsequently switch during an annual enrolment period (semi annual in case of Switzerland) and insurers must accept all applicants. Internet premium comparison sites available
• Group insurance through employers exist in Netherlands (57% covered through such contracts) whereas it is not permissible in Switzerland
India Insure Risk Management & Insurance Broking Services Pvt. Ltd
WAY FORWARD – REGULATIONS SUGGESTED• Encourage innovation – segment based and channel based• Discourage insurer / broker, broker/ broker competition – single
mandates to control price drop• Incentivize products for the rural segment• Govt. to make health insurance mandatory in select segments• Govt to check intervene on variable tariffs – with / without insurance• Bidding system – one insurer – one state - so that risk is spread
uniformly • Pool for identified segments
India Insure Risk Management & Insurance Broking Services Pvt. Ltd
WAY FORWARD – AGENCY MODEL PRESENT• High level of attrition• Low economic incentive• Weak management practices –
low control on distribution
SUGGESTED• Tight recruitment process • Align performance metrics and
incentives to build long term franchise
• Rigorous systems to ensure ground discipline
• Enhance interface between sales force and operations – market feedback
India Insure Risk Management & Insurance Broking Services Pvt. Ltd
WAY FORWARD – BROKING CHANNEL
PRESENT• Focus on Group policies• Focus on Urban market only• Price negotiators
SUGGESTED• Incentivize rural market schemes
– with emphasis on service parameters
• Claim controllers• Insurer acceptance – not
competitor
India Insure Risk Management & Insurance Broking Services Pvt. Ltd
CHANGING ROLE OF BROKERS
Match Maker Service Provider
Conventional Insurance Specialty lines insurance
Property risks Human capital risks
Insurance Placement Claims Control
Transaction executor Trusted business partner
India Insure Risk Management & Insurance Broking Services Pvt. Ltd
WAY FORWARD – BANCASSURANCE
SUGGESTED
• Leveraging the strengths of both parties• Simple products to reach out to rural masses• Standardized sales scripts for training bank employees• Integrate IT link- insurer - bank
India Insure Risk Management & Insurance Broking Services Pvt. Ltd
WAY FORWARD• Focus on rural India through micro insurance initiatives• Central Govt. initiatives to reach Health insurance to the masses• Priorities for insurers to be
– Product innovation– Managing channel costs, Improving channel productivity and exploring new channels
with a focus on IT enablement in channels
• Brokers role to increase only for claims analysis and claims minimization advise
• Engaging all stakeholders to hold the line on costs and focus on quality of care
• Effective Information Delivery - Because policyholders are increasingly responsible for making decisions about their health care, participants must be familiar with the health care system and understand their health care options
India Insure Risk Management & Insurance Broking Services Pvt. Ltd
THANK YOU
India Insure Risk Management & Insurance Broking Services Pvt. Ltd