FDI booster dose to rejuvenate health insurance cos

Premium Income Expected To Touch Rs 30k Cr In 7 Years; Half Of The Population May Get Cover

HEALTH insurance is poised to record a massive growth in India. Half of the country's population is expected to come under the health insurance umbrella in the next seven years, according to an Ernst & Young study. A mere 12% of the population is currently covered by healthcare.
    The health insurance premium income is likely to touch Rs 30,000 crore in 2015 from the existing Rs 4,000 crore, according to the study. The premium was Rs 670 crore in FY02. Experts say the government's proposal to scale up the foreign direct investment (FDI) in the insurance sector from 26% to 49% will boost the healthcare business. Ernst & Young National Leader-Financial Services, Ashvin Parekh says, "The health insurance report is yet to be tabled, but increased FDI investment will help the sector. The committee on health insurance has submitted its report recommending a reduction in capital, transformation of health providers into stakeholders in health insurance companies to prevent over-treatment and encouragement of regional health insurance companies vis-a-vis pan-Indian ones."
    Ideally, three years of health reforms should give rise to 16 regional health insurance companies. "It is important to create a pool of resources at the grassroots level and cover communities instead of individuals. Moreover, abuse needs to be checked, given the importance of data," Mr Parekh said.
    With rising income levels, changing lifestyles and dietary patterns, the healthcare consumption in India has increased by 8% in the past 20 years, compared to the overall consumption growth of 4.7%. The health expenditure across the country was Rs 180,000 crore last year. Given the escalating healthcare costs, rising demand for healthcare services and limited access of the low-income group to quality healthcare, health insurance is emerging as an alternative mechanism for financing healthcare. And with merely 12% of the population being covered, companies are looking at the health insurance space as a lucrative segment.
    The state-owned companies constitute nearly 70% of the health insurance market and private companies account for the remaining 30% As the out-of-pocket expenditure on healthcare is pegged at more than 70%, private insurers are treating this as an important target market. ICICI Prudential has started a division catering to health insurance, while Bupa-Max is awaiting the IRDA's approval to launch health insurance schemes. LIC recently unveiled its health insurance scheme to compete with players such as Apollo, Star and Bajaj Allianz.
    Bajaj Allianz head of health insurance Shreeraj Deshpande said, "We are going to the semiurban and rural areas. We are targeting the informal sector by having viable products and communicating through NGOs." The channels of reach are also seeing a change, with companies tapping banks' databases in an attempt to reach people. "Banks will play an important role in selling policies, given the difficult environment. The entry of additional companies into the health insurance sector will depend on regulations and companies' abilities to make profits," he said.
    "The growth in healthcare will be supported by standalone health insurance companies and new players. Moreover, domestic life insurance players are augmenting their product portfolios with innovative standalone health insurance products for catering to the growing health insurance segment," the report stated.
    nina.mehta@timesgroup.com