Health Insurance Premiums Grow 40% in India During April-September Period

The Indian health insurance market is slowly coming out of the shadow of the non-life insurance sector, with premiums registering a rapid pace of increase in 2010. The sector’s figures are usually part of the miscellaneous accident policies segment; however, they are now gaining momentum as one of the fastest growing independent segments in the insurance market. Latest figures from India’s insurance regulator Insurance Regulatory and Development Authority (IRDA) report a 40% rise in premiums paid in April–September, 2010. The Times of India cites an unnamed IRDA official as stating that figures from four companies exclusively in the health insurance segment suggest a collectively earned premium of 6.77 billion rupees in the April–September 2010 period, up from 4.82 billion rupees in the comparable period last year.

The IRDA’s annual report for the year ending 31 March 2010 also reports a consistent rise in health insurance premium collections. From fiscal year 2006/07 to 2009/10, the insurance premium has increased by 158%.

Health Insurance Penetration

Penetration of health insurance is, however, increasing at a more moderate pace than premiums. According to the government, 25 million are currently covered under some kind of medical insurance policy, either through the private or public sector. By 2015 health insurance coverage is expected to reach 20% of the 1.1 billion population, up from 3% currently (source: Times of India). This rapid increase is being attributed to the surge in rural healthcare. Along with the rise in penetration, premium amounts are also expected to rise. Earlier this month the IRDA indicated that low premiums of some government health insurance schemes may not be sustainable. Undercutting among public-sector general insurers was also indicated as a concern. This is in stark contrast to healthcare services, which are registering a 10-15% cost increase annually. Insurance firms New India Assurance, Oriental Insurance, United India Insurance, Iffco Tokio General, and ICICI Lombard General Insurance are understood to be either revising health premium rates upwards or strongly considering it.

Outlook and Implications

Traditionally, health insurance cover in India has been restricted to the poor through the government schemes or through certain employer-based schemes. Healthcare costs for the majority of the population were paid through out of pocket. However, with the active propagation of the IRDA, which introduced a raft of measures over the past two years, healthcare insurance schemes are gaining popularity. The figures by IRDA foretell a sustained rise in uptake as disposable incomes for the large middle class population in India increase. This section of the populace is expected to drive most of the growth in the health insurance sector over the next five years. Along with the rise in uptake, the healthcare delivery sector will also benefit with assured reimbursements for treatments, particularly in specialty care, which are deemed expensive. However, this rapid rise in health insurance uptake is influencing the dynamics of the market segment. Currently, a tug-of-war exists between the newly emerging corporate hospital chain sector and the health insurers. The latter want more flexibility in price structures to gain better margins. The reason this is becoming vital is because of the increasing pressure on costs. With low premiums and high treatment costs, health insurers are increasingly squeezed on profit margins and this is an area in which the IRDA has expressed concern. The regulator believes that it may be increasingly difficult to sustain profitability on such low premiums and quite rightly so as a series of health insurers have indicated a premium rate rise. However, it is likely that public-sector-backed insurers will now be under pressure to follow suit in the ensuing weeks.

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