Healthcare Insurance Sector in India

Santhosh

- Analyst

Contents

Introduction

Market Size & Forecasts

Market Drivers

Market Restraints

Competitive Structure

Value Chain

Recommendations

Impact Analysis

Introduction

Healthcare Insurance Market in India in unique and has a strong growth potential than the other

insurance markets. The study covers all the fundamental aspects of the healthcare insurance market

in India.

The Topics covered in this study are

• Market size – future forecast (reasons for the fc)

• Key drivers/resistors of the market

• Split between public and private healthcare insurance markets in India

• Competitive landscape – w.r.t private players

• How does public healthcare insurance work in India

• How does public healthcare insurance affect the healthcare scenario in India

• The healthcare insurance value chain – private compared with public

• Impact of healthcare insurance sector’s growth on the pharmaceutical market in India

• Strategic recommendations

Market Size & Forecasts

India Health Insurance Market (2002-2008)

Source:IRDA

The Indian healthcare insurance industry was worth INR 5,125crores with a compounded annual growth rate of

approximately 37 percent between 2002 and 2008. The market penetration is only around 2 percent of the total

population in India. The Health Insurance Industry is one of the fastest growing segments among other non-life

insurance segments.

Market Size & Forecasts

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2008 2009 2010 2011 2012 2013 2014 2015

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Total Revenue Forecast for Indian Healthcare Insurance Market - 2008-2015

The Indian healthcare insurance industry is worth INR 60,497 crores with a compounded annual growth rate of

approximately 42.3 percent between 2008 and 2015. The market penetration is will be 3 folds higher in 2015. The

main factors of growth are increased awareness. According to World Bank Report, 99% of Indians will face

financial crunch in case of any critical illness. Hence the need for Health Insurance.

Market Drivers

Current Impact (2008-2011) Future Impact (2011-2014)

0 5 10 0 5 10

Increasing awareness of Health Insurance

Rising healthcare costs have increased need for

health insurance

Supporting Demographic Profiles (Prospering Middle

Class, increasing disease state, population)

Detariffing of the general insurance industry (which

has increased emphasis and efforts by insurance

companies towards health insurance and other

personal lines of business)

Rationalization of premium rates (e.g. trend of upward

revision in respect of Group Health policies)

In order to encourage foreign health insurers to enter the Indian market the government has recently proposed to raise the foreign direct

investment (FDI) limit in insurance from 26% to 49% , Government initiatives are always supportive to Healthcare Insurance Environment.

Market Drivers (Cont…)

The spending on Healthcare is increasing YOY from

2005 to 2025. The prospering middle class in India

supports this spending environment. The average

annual household consumption in healthcare

(discretionary spending ) is expected to double

between 2005 and 2025.

There is a clear indication that seekers ( annual income between

INR 2,00,000 and 04,99,999) and strivers ( annual income

between INR 5,00,000 and 10,00,000) population is significantly

increasing in the next future. There will be a direct

proportionality of this increase to healthcare spending parity.

Source:Mckinsey

Source:Mckinsey

Market Drivers (Cont…)

Year Under 15 15-64 65+ Total

2000 361 604 45 1010

2005 368 673 51 1080

2010 (P) 370 747 58 1175

2015 (P) 372 819 65 1256

2020 (P) 373 882 76 1331

Population of India (in Millions)

Salient Demographic Features that support the growth of Health Insurance in India:

Adult literacy rate in India is 61.3% and the youth literacy rate in India is 73.3% and is expected to increase in the future.

The Disease rates in India is increasing. India has one of the highest heart disease and diabetes rates in the world.

It is home to one-sixth of the world’s population occupying less than 3 % of the world’s area.

Source: Institute of Economic Growth

The Indian population will have an increase in

population by 2010. Specifically, the age group between

15-64 will experience high growth levels. This will

support the health care insurance market to grow in

tandem.

Market Restraints

Current Impact (2008-2011) Future Impact (2011-2014)

0 5 10 0 5 10

Inadequate healthcare infrastructure

Insufficient data on Indian consumers & disease

patterns resulting in difficulty in product

development and pricing

Limited reach

Significant underwriting losses for Health Insurance

business in India

Lack of standardization and Accreditation norms in

healthcare industry in India

Competitive Structure

Health Insurance

Companies

Non-life insurance

companies

Specialized Health

insurance

companies

Life Insurance

Companies

Public Sector: New India, Oriental, National, United India

Private Sector: ICICI Lombard, Reliance, Bajaj Allianz

and others

Star Health and Allied Insurance

Apollo DKV insurance

Life Insurance broadly addresses four needs: saving, protection,

retirement and investment.

Main players:

LIC

Private players etc

Health Insurance Companies’ Landscape

Competitive Structure (Cont…)

Market Share of Key Players in Health Insurance Companies (2008)

Source:IRDA

Health insurance forms a low proportion of the total business for life insurance companies in India (0.2 percent

of the individual regular premium for FY2008), it forms a significant proportion of the business for non-life

Insurance companies (approx.18 percent of the total Gross Written Premium for FY2008)

Market Leader : New India Insurance

Market Structure : Oligopolistic Competition

Top players : New India

ICIC Lombard

United India

National

Oriental

Market Size : Increasing

Competitive Structure (Cont…)

Private Healthcare Companies have doubled their market share since 2004. The public sector companies are increasingly losing their

market share.. The public health insurance companies accounts for 62% while the private sector accounts to 38% of the Indian Health

Insurance market in 2008.

Inference:

The total premium income of Private health insurance portfolio in 2008 grew by 57.03% to INR 1941.50 crores from 2007.

The total premium income of Public health insurance portfolio in 2008 grew by 61.3 % to INR 3183.50 crores from 2007.

In 2008, there wasn’t a significant change in the market share for public and private sector.

Public Vs Private Health

Insurance Companies Market –

India (2008)

Healthcare Insurance Premium – Company wise analysis

By Analysis

www.healthinsuranceindia.org

Competitive Structure (Cont…)

Market Share of Key Players in Private Health Insurance Sector (2008)

Market Leader : ICICI Lombard

Market Structure : Oligopolistic Competition

Top players : ICIC Lombard

Reliance

Bajaj Alliance

Market Size : Increasing

By Analysis

Present Scenario

Market Leaders

ICICI Lombard

Reliance

Bajaj Allianz

Niche

Star Health

Apollo DKV

Market Boomers Market Followers

Royal Sundaram IFFCO Tokio

Futuristic Scenario : Perfect Competition

Market Leaders

ICICI LombardReliance

Bajaj Allianz

Niche

Star Health

Apollo DKV

Market Boomers Market Followers

New Players Others TATA AIG

Royal Sundaram IFFCO Tokio

TATA AIG

The market in the current scenario is oligopolisitc in nature and there is a fair possibility in future that the market will have large number of

firms with homogenous product offering ending with Perfect Competition.

By Analysis

Value Chain

Payers

IRDA - regulator

Customers (Individuals, Patients)

Employers

Government

Mediclaim Policy Holders

NGO/SHG/MFI

Intermediaries

TPAs

Distribution Channel

Partners

HMO

PPO

Insurers

Private Companies

Public Companies

Providers

Hospitals

Diagnostic Centers

Doctors

Nursing Homes

Private: Private Companies, TPAs, Distribution Channel, TPA’s, PPO, HMO, Healthcare Providers, Private Employers

Public : Public Companies, Healthcare Providers, Government Employers

Impact Analysis – Public Sector

Health Insurance Plans

Private

Social/Government

(CGHS, EHIS, RSBY

etc)

Community Based/

Micro insurance

Some of the leading health

insurance plans in India with

good coverage options and

tax saving schemes are

Health Guard, Star package,

Silver Health Policy, Insta

Insure, Star package, Health

Advantage Plus and Family

Floater Plan.

Insurance and other organized forms of

payment for health services, including

ESIS, CGHS and other such employer

schemes, presently cover <15% of all

people in the country. (Membership: 47

million under ESIS, 4 million under

CGHS, and upwards of 100 million

under government-sponsored, group

and individual commercial health

insurance, plus coverage under

schemes of Defence, Railways, PSUs-

esp. steel and coal etc)

Health Insurance Landscape

Impact Analysis – Public Sector (Cont…)

The social/community insurance is has the highest coverage till date. Even in case of entry of private players in the market, this

segment will have tremendous potential due to diversified coverage (Rural India). There has been strong evidence of growth on

adoption of insurance plans in the rural India. If similar plans introduced, there would be a raise in the penetration of the Indian

market. For the healthcare sector, this is significant in terms of more number of patients. Hence there would be requirements

from the healthcare sector to adjust to infrastructure mandates

Healthcare Impact:

Impact: on Quality of

Healthcare services

(service quality would

increase)

Impact on healthcare

infrastructure (Quality

would definitely increase)

Increase healthcare

insurance penetration

Impact Analysis – Pharmaceutical Industry

Healthcare Insurance Growth’s Impact on Pharmaceutical Industry

Reimbursement

Reimbursement is the sales price that a payer for a drug ultimately pays, net of any rebates or discounts it receives. Reimbursement is

important to pharmaceutical companies because any rebates or discounts that impact the price of a drug to a payer also impact

pharmaceutical company revenue and profits (along with quantity). Generally speaking, as a payer’s negotiating power increases,

either through government legislation or concentration of buyers, reimbursement levels go down.

Payer mix represents the percentage of prescriptions that are reimbursed by a private health insurance plan, government funded

health plan or paid for in cash by an individual. Payer mix is relevant because on average pharmaceutical companies receive very

different revenues for the same drug depending on whether it is ultimately reimbursed by a private health plan, government funded

plan or paid for in cash.

Payer Mix

Utilization

Utilization is defined as the quantity of pharmaceuticals consumed. It is necessary to evaluate potential impact on overall utilization

of pharmaceuticals (both brand and generic drugs) as well as any potential bias towards utilization of generics over branded

pharmaceuticals.

Impact Analysis- Pharmaceutical Industry (Cont…)

Reimbursement

Payer Mix

Utilization

FactorsNet Effect on

Pharmaceutical Companies

Branded Generic

With the growing Health Insurance market in India, the overall utilization of drugs

would subsequently increase. However, generic drug utilization would be higher than

that of the branded drugs due to the factor that India is still in nascent stages health

insurance penetration. Assuming that the penetration is more in middle class, the

premium they opt will be lesser and hence generic drugs would have an definite

advantage.

The growth of healthcare insurance market

in India will have a positive impact on

Pharmaceutical Industry. India’s

Pharmaceutical market is a pharma

emerging market with growth potential more

than 10%. Alongside with the growth of

insurance market, the pharmaceutical

market may grow at a faster phase more

than 15% within the next few years.

As the health insurance penetration

increases, reimbursement will also increase.

As the volume of drug sale or utilization of

drugs grows, reimbursement increase with

a positive impact. A partnership

environment strategically would be in

advantage for pharmaceutical companies to

offer discounts and increase their volume

sales.

By Analysis

Recommendations

Increase exposure through media (TV, Radio and Internet). In this case, the traditional model is more generic and

there is a need to reinvent the messages based on target groups to achieve the business objectives.

Create the Awareness

Product Mix & Quality

There is a demand for new products in the market with optimal pricing. Preventive care, out patients coverage

and long term care needs to be addressed with utmost flexibility in options such as continuity/renew-ability and

portability.

Comprehend the nuances of the market

Companies should understand the nitty-gritty of the market to increase their market share.

Fraud Control

Cost & Inflation Factors

Localization Trends

Quality Standards – Region wise.

Managing the divergent expectations of the insurer, the insured and the provider

The Research Methodology Followed

(Secondary Research – Internet)

1. Define Marketing Problem and Opportunities

2. Obtain background information on industry, markets, customers and competition

3. Locate appropriate resources/collect data

4. Organize and analyze data

5. Present Finding

Research Methodology