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 

The five-point insurance guide

Choosing an insurance policy needs as much attention as choosing other investment avenues. Nikhil Walavalkar gets you started on some basics to help you make a sound decision

 WHETHER it is for protection, retirement savings or to bequeath some capital, a large section of the working population today owns an insurance policy. To make the best out of this investment, there are some factors that should be kept in mind while buying an life insurance policy.
Keep it simple
    Several policies do not make sense because by splitting the cover across policies, a buyer loses 'large sum assured discounts'. Also in the context of marketlinked policies, multiple policies mean big money spent on charges. If you are only briefly exposed to certain risks you can go for specific covers. For example, an individual who has to travel extensively for work can consider buying a personal accident policy. Besides being cheap, the policy can be bought for short terms such as one year.
Nominations
    Insurance is primarily aimed at meeting protection needs. The product must function when the insured is not around. This need is best served by the concept of nomination. Hence, the policyholder should ensure that the right person is registered with the insurance company as a nominee. All so often a policy is bought when an individual is single and single persons usually nominate either their parents or siblings. Post marriage, it becomes imperative to consider if there is a need to change the nomination. Cover yourself
    Large businesses often provide their employees with insurance covers. This is usually up to a maximum of three times the annual cost to company of the employee. Some companies also go as far as to offer an option to buy voluntary covers for their employees.
    In an age where job hopping is the norm, it becomes imperative that individuals don't depend on their employers for protection needs. The insurance cover offered by the employer may not be enough to satisfy your individual insurance needs. The risk is higher when an individual quits a job and takes a break before joining another organisation. Health insurance is important in the golden years. Idea of buying it post retirement is good, for those who have health insurance from employer if and only if they remain in good health at their superannuation age.
Buying policies for children
    In India, there are many who buy life insurance policies for their children. This is primarily done to provide for their education and marriage. However, many forget that the child does not earn for the family, and hence, it makes sense to buy insurance for the bread winner and keep the investments in his name. Parents can always liquidate their investments and provide for their children's needs. A point to note is that the policies bought on the life of a child (minor) vests in the child's name till he or she attains majority. In other words, the parents have no say in the proceeds of the policy.
Opt for loan insurance
    If you are a borrower and the lender entity offers you an insurance cover on group insurance platform, consider it. Especially if you are 45 years and above because purchasing insurance at this stage in your life becomes tougher as multiple factors come into play, such as more number of medical tests and health guidelines.
    nikhil.walavalkar@timesgroup.com