THE growing affluence of the Indian middle-class accompanied with lifestyle-related diseases and inflationary healthcare costs are driving the demand for health insurance in India today. Launch of new hospital chains with a stress on holistic well-being is further accentuating this demand, especially in urban areas. Meanwhile the government, in collaboration with nongovernmental organisations and insurers, is launching various schemes to provide low cost health insurance facility to all citizens. All factors combined contributed to the nearly 40% compound annual growth rate in premiums of health insurance since the sector's liberalisation a decade ago.
However, certain intrinsic factors inhibit this segment from reaching its fullest potential. On the one hand, low awareness and lack of understanding of product features, in addition to perceived apprehension in claims procedures and settlement, intimidates consumers from buying a health cover. On the other hand, health insurance providers are challenged by the high claims ratio and insufficient or inaccurate data on consumer profile and disease patterns which is proving to be a constraint for product pricing and the development of new products.
The Insurance Regulatory and Development Authority (Irda) could possibly support the growth of health insurance with radical reforms such as the benefit of a subsidised universal health cover which will, in turn, reduce individuals' out-ofpocket expenditure. The de-tariffing policy in the general insurance market has so far failed to elicit interest in making health insurance attractive to the larger population. Inadequate product innovation and design is at the heart of this predicament. The portfolio of Indian health insurers still relies on standard products and indemnity-based annual contracts, at best providing variety through add-ons to traditional products.
Product Innovation:
Globally, product innovation has proved to be critical for insurers to succeed in mature markets, including Europe and North America. As observed by the analyst firm, Gartner, insurers are investing significantly in improved product manufacturing capabilities, including building product life cycle management strategies and considering the product needs of future demo-graphic segments. Alternate approaches such as managed care organisations (MCOs) and health savings accounts (HSA) have been successful in meeting the dual objectives of controlling medical costs and improving the quality of healthcare delivery. China, with similar challenges to India, has begun shifting from an indemnityfocused, customer-service model to a more customer-centric, value-add model. An intelligently designed insurance product will shift the focus from mere medical care to proactive health protection. Managed-care type of products are in the infancy stage, as specialised Chinese health insurance players are grappling with issues surrounding their lack of experience in product design, handling claims and operations. However, confronted with the bigger challenges relating to competition and losses, specialised Chinese health insurers have realised the need to differentiate in the market by offering managed care.
In India, innovation is limited to minor modifications on tariffs and features, add-on covers such as dental cover, daily cash benefits for hospitalisation and the like. India has to evolve from mediclaim, first marketed in 1986, to bridge this conspicuous gap in the portfolios of health insurers by introducing differentiated and multi-tiered long- term products. The public-sector non-life insurance companies and a few life insurance companies have attempted to introduce health savings account-type products. However, the products are not widely accepted partly due to the limited terms of coverage.
While the Indian health insurance market presents a unique case with its specific requirements and challenges, insurers can learn from their more mature counterparts by developing new capabilities. These would include gaining insight into buyer behaviour, streamlining product development, integrating technology and adopting a holistic approach to differentiation through tailored services. It is imperative for insurers to make product innovation a top strategic and operational priority.
