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HealthInsuranceSummit2008
HealthInsuranceInc.:TheRoadAhead
9December2008
Mumbai
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Theprivatesectorhasplayedadominantroleinfinancingthehealthcare
expenditureinIndia,withhouseholds(Outofpocketexpenditure)accountingfora
disproportionate76percentfundingofthetotalhealthcareexpenditure1.The
scenarioisnotexpectedtochangesignificantlybyFY2015iftheGovernment
fundingofhealthcareexpenditureandthehealthinsurancecontributionto
healthcarefundingcontinuestogrowatthehistoricalgrowthrates.IfIndiawants
toachieveamoredesirableproportionofoutofpocketexpenditure,asinChina
(60percent),itrequiresincreasedparticipationfrompublic,privateora
combinationofthesesectors,withprivatehealthinsuranceplayingasignificantrole.
Theprivatehealthinsuranceindustryhasbeengrowingataremarkablegrowth
rateof37percentsinceFY2002andcurrentlystandsatINR5,125crores2.Going
forward,theindustryisexpectedtogrowataCAGRof25to30percentuntilFY
20153.However,thereareseveralimpedimentstothisgrowthsuchaslevelof
awarenessacrossdiversecustomersegments,standardizationofhealthcare
treatmentsandproceduresandproductinnovation.Itiswidelyfeltthatweareat
thethresholdofanunprecedentedgrowthforthenext5to7yearsinthe
industry.However,ifwewishtomakethisfaceliftintheindustry,itisimperative
forallthestakeholderstocometogethertodriveafewkeyinitiativesthatcould
helpformthebuildingblocksandtaketheindustryinthedesireddirection.This
reportsummarizesafewkeyinitiativessuchasincreasingcustomerawareness,
standardizationandaccreditationofhealthcareproviders,buildinga
comprehensiveandsustainabledatarepository,productandchannelinnovation
andusageoftechnologythatarelikelytobecriticalforthegrowthoftheindustry.
KPMGisprivilegedtocollaboratewithCIIasKnowledgePartnerfortheCII-KPMG
HealthInsuranceSummit2008onthethemeHealthInsuranceInc.:TheRoad
Ahead.
Foreword
1 WHO National Health Accounts
2 IRDA
3 Industry Discussions, KPMG Analysis
Pradip KanakiaHeadofMarkets
KPMGinIndia
A VaidheeshChairmanCIIWRHealthcare
SubCommitteeand
ChairmanCIIHealth
InsuranceSummit2008&ManagingDirector
Johnson&JohnsonMedical
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Economicgrowthisanimportantindicatorofanationseconomicdevelopment.
Growthinturn,amongotherthings,dependsonthehealthofitspeople,for
whichnationsneedtospendsubstantialamountsonhealthcare.Totalhealthcare
expenditureinIndiahashoveredaround5percentofGDP,withpublicfunding
contributinglessthan1percentofGDP.Limitedpublicfundingonhealthcarein
Indiahasnecessitatedout-of-pocketspendingtobethedominantcomponent,
funding76percentoftotalhealthcareexpenditureinFY20064.Highrelianceon
out-of-pocketspendingalonecanposeserioushealthpolicychallengesrelatedto
financialriskprotectioninfutureyears.Indianeedstofocusonthepotentialwaystopoolthisriskthroughinsuranceandreduceoutofpocketexpenditure,for
whichthereisaneedtostepuppublicandprivatesourcesofhealthcarefunding.
ThehealthinsurancesectorisoneofthemostpromisingsectorsinIndiannon-life
industrytoday.ThemarketsizecurrentlystandsataboutINR5,152croresinFY
2008,upfromINR761croresinFY2002,showingacompoundedannualgrowth
rateof37percent5.Severalfactorssuchasthechangingsocioeconomicand
demographicenvironmentofIndia,favorableregulatoryenvironmentaswellas
significantmarketingpushbyinsurancecompanieshavedriventhehighratesof
growthoftheindustry.
Goingforward,suchdriversareexpectedtopropelgrowthevenfurtherandthe
marketsizeisprojectedtobeapproximatelyINR28,000croresbyFY20156.
However,therearevariouschallengesfacedbythekeyparticipantsofthehealth
insurancevaluechain,whichcanimpacttheachievementoftheprojectedgrowth.
Foremostamongthesechallengesarelowawarenessabouthealthinsurance,
limitedproductofferingsbyinsurancecompanies,lackofstandardizationof
healthcareprovidersandthelackofdatathatcanempowerinformeddecisions.
Similartothekeyparticipantsofthehealthinsurancevaluechain,Indian
consumershavetheirownchallenges.Whilemostcustomersagreewiththe
conceptandnecessityofhealthinsurance,theyareskepticalabouttediousclaims
processingprocedures,limitedoptionsofhospitals/doctorsandlimitedproductofferingsbyinsurancecompanies.Moreimportantly,consumershavelimited
understandingofthefeaturesofhealthinsuranceproductswhichtheindustry
needstoaddressandchangetheperceptionabouthealthinsuranceinIndia.
Fromafuturepointofview,severalfactorsareexpectedtobeinstrumentalin
overcomingthechallengesexistinginhealthinsuranceindustryandmouldingthe
futureofhealthinsuranceindustryinIndia.Thesefactorscanbeclassifiedasthe
PillarsofChange-ConsumerAwareness,StandardizationandAccreditationof
healthcareproviders,HealthcareInfrastructureandDataandInformation
ExchangeandtheEnablersforGrowthProductandPricingInnovation,
Executive Summary and Acknow ledgements
4 WHO National Health Accounts
5 IRDA
6 Industry Discussions, KPMG Analysis
Neville Dumasia
Head-Governance,
RiskandComplianceServices
Ravi Trivedy
ExecutiveDirector,
BusinessAdvisory
Shashwat Sharma
Director,
BusinessAdvisory
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TechnologyandChannelInnovation.Withthesupportofthekeystakeholdersviz.
theGovernment,theRegulator,healthcareproviders,insurancecompanies,TPAs,
NGOs/SHGsandmedia,thesefactorscouldhelpcombatthechallengesand
facilitateextensivehealthinsurancecoverageinIndia.
Wewouldsincerelyliketoacknowledgeandthankthefollowingindustryleaders
forprovidingtheirvaluableviewsforthisreport(inalphabeticalorder):
Government of India
Mr.TarunBajaj,JointSecretary,GovernmentofIndia
Regulator
Dr.SomilNagpal,SpecialOfficerHealthInsurance,InsuranceRegulatory
andDevelopmentAuthority(IRDA)
Healthcare Providers/Health and Wellness centres/ Diagnostic
laboratories
Dr.DeviShetty,Chairman,NarayanHrudayalaya
Mr.NarinderKumar,GroupCFO&CompanySecretary,VLCCHealthcare
Ltd.
Dr.NarottamPuri,PresidentMedicalStrategy&Quality,FortisHealthcare
Ltd.
Mr.NimishR.Parekh,FounderandPresident,WellinformedHealthcare
Dr.SushilShah,Chairman,MetropolisHealthServices(India)Ltd.
Mr.VishalBali,ChiefExecutiveOfficer,WockhardtHospitals
Insurance Companies
Mr.C.Chandrasekharan,ChiefMarketingOfficer,ApolloDKVInsurance
CompanyLtd.
Mr.SandeepBakhshi,ManagingDirectorandCEO,ICICILombardGeneral
InsuranceCompanyLtd.
Dr.ShreerajDeshpande,Vice-PresidentHealthInsurance,BajajAllianzGeneralInsuranceCompanyLtd.
Microfinance Institutions
Mr.SatheeshArjilli,ManagerInsuranceBusiness,BASIX
Mr.VinayGolem,SeniorManager,SKSMicrofinancePrivateLtd.
Reinsurers
Mr.GirishRao,ManagingDirector,SwissReHealthcareServicesPvtLtd.
Technology Providers
Mr.SrivathsanAparajithan,Head-HealthcareBusinessSolutions,IBMIndia.
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Health Insurance: The Road Ahead 01
The Indian Health Insurance Industry 07
Voice of the Indian Consumer 13
22
Summary 32
Table of contents
Future Enablers and Action Steps
for the Health Insurance Industry
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Animportantindicatorofanationseconomicdevelopmentandnationalwell-
beingisitseconomicgrowth.Intheearlyyears,growthinlaborandcapitalwere
consideredtobethekeydeterminantsofeconomicgrowth.Empiricalevidence
suggeststhatasignificantportionofgrowthiscontributedbyhumancapital,the
elementsofwhicharethelevelofeducationandhealthofthepeople.Research
hasestablishedthata5-yeargaininlifeexpectancyisassociatedwithannual
averageratesofgrowthofrealGDPpercapitathatishigherbyaround0.5
percent.
WhatdoesthislinkagethenmeanforIndia?Atamacroeconomiclevel,
improvementsinhealtharelikelytoresultinimprovedeconomicperformance.
Indiaisnowundergoingademographictransition,withtheproportionofworking
populationexpectedtoincreaseinthenextquarterofacentury.Thisrisingyoung
population,ifhealthyandproductive,hasthepotentialofincreasingthegrowthof
realincomepercapitabyanannualaverageof0.7percenttill2025.Giventhe
implicationsthatahealthyandhence,productivepopulationhasonIndias
economicperformance,thereiscompellingneedtostepuphealthcarefunding
mechanismsinIndiaforpositivereturnsinthelongrun.
Globally,healthcareexpenditureisfundedbypublicandprivatesources.
Public Sources: Publicsourcesincludeexpendituresincurredonhealthbycentral
governmentdepartments,statedepartments,publicenterprises,includingbanks
andexternalfundingforhealth.Thesourceofpublicfinancingisthegeneraltax
andnon-taxrevenues,includinggrantsandloansreceivedfrombothinternaland
externalagencies,andsocialsecurityschemesthatarefundedbymeansofa
compulsorycontributiontowardshealth.
Private sources: Privatesourcesoffundingcompriseoutofpocketexpenditure
whichincludespaymentsmadebyindividualsandhouseholdsandothersources
offundingsuchasprivatehealthinsuranceandfundingbynon-profitinstitutions
suchasNGOsandSelfhelpGroups(SHGs).
Starkdifferencesexistbetweenthecompositionofhealthcarefundinginvarious
countries,drivenbythedifferencesinincomelevels,epidemiologicalfactorssuch
ashealthandnutrition,causesofmortalityfrominfectiousdiseasesorchronic
conditionsandeffectivenessofhealthinputs.
Heath Insurance: The Road Ahead
7
7 Report of the National Commission on Macroeconomics and Health, Ministry of Health and Family
Welfare, Government of India, 2005
Figure1:Importanceofbetterhealth
Figure2:CompositionofWorldHealth
Expenditure,2005
Source:WHONationalHealthAccounts
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Forexample,inadevelopedeconomysuchasJapanortheUK,government
spendingonhealthformsamajority(over80percent)ofthehealthcarefunding8.
WhilehealthinsuranceintheUKisadministeredthroughthepubliclyfunded
NationalHealthService(NHS),Japanhastwomodelsofhealthinsurance:social
insurancesystemforcorporateemployeesandnationalhealthinsurancesystem
forpeoplewhoarenotcoveredbysocialinsurancesystem9.However,incaseof
emergingeconomiessuchasChinaandIndia,out-of-pocketspendingisthe
dominantcomponentofhealthcarefunding,accountingfornearly54percentand
76percentoftotalhealthcarespendingrespectively(FY2006).
HealthcareexpenditureinIndiainFY2006wasapproximately5percentofGDP
comparedtoJapan(7.9percentofGDP),UK(8.4percentofGDP)andBrazil(7.5
percentofGDP).Publicsectorexpenditureonhealthcarehasprogressively
decreasedovertheyearsfromabout26percentin1995tounder20percentof
thetotalhealthcarespendinginFY2006.Consequently,theprivatesectorhas
playedadominantroleinfinancingofhealthcareexpenditure,withhouseholds
accountingforadisproportionate76percentofthetotalhealthcareexpenditure,
increasingfrom67percentin199510.
Householdsspendnearly5to6percentoftheirtotalexpenditureand11percentoftheirnon-foodconsumptionexpenditureonhealth,asperconsumer
expendituredataofthevariousroundsoftheNationalSampleSurvey
Organization.Dataalsoshowanincreasinggrowthrateof14percentperannum
inhouseholdhealthspendingsinceFY1995-9611.
Intermsofhealthinsurancecoverage,statisticsinIndiahavenotbeenvery
encouraging.Severaldifferenttypesofinsurancecoverareavailable
GovernmentschemessuchastheEmployeesStateInsuranceSchemeand
CentralGovernmentHealthScheme,employercoverinPSUsandtheIndian
Railways,andfinallyprivateinsuranceschemes.Ithasbeenestimatedthataround
15percentofthepopulationwascoveredundersomepre-paidschemeinIndiain2007,withlessthan2percentshareofprivatehealthinsurance12.
Whataretheimplicationsoflimitedpublicspendingonhealthcareandlow
coverageinIndia?IncountrieslikeIndiaandanumberofotherdeveloping
countries,whichstillrelymostlyonout-of-pocketpayments,universalaccessto
healthcareiselusive.Asignificantproportionofthepopulation,whosuffersa
8 WHO National Health Accounts9 Healthcare in Japan, National Coalition on Healthcare; National Health Services, United Kingdom
10 WHO National Health Accounts
11 Financing and Delivery of Health Care Services in India - Background Papers of the National
Commission on Macroeconomics and Health, Ministry of Health and Family Welfare, Government of
India, 2005
12 KPMG Analysis
Figure3:Comparisonoffundingofhealthcare
expenditure
Source:WHONationalHealthAccounts,KPMG
Analysis
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hand-to-mouthexistence,isforcedtomakedirectpayments,oftenwithaheavy
burdenofdebt,toaccesshealthcarefromthemarketbecausethepublic
provisionisgrosslyinadequateornon-existent.
Highrelianceonout-of-pocketspendingislikelytoposehealthpolicychallenges
relatedtofinancialriskprotectioninfutureyears.Riskpoolinginsurespeople
againstsuchrisksbytransferringthecostsofcoveringthesicktoalargenumber
ofhealthypeoplewhoneedtopayonlyasmallpremium.Indianeedstofocuson
thepotentialwaystopoolriskandreduceoutofpocketexpenditure,forwhich
othersourcesofhealthcarefundingneedtobesteppedup.
Thekeyquestionthatarisesis,byhowmuch,andwhofundsthisgap?By
developingvariousscenarios13ofthehealthcarefundingcompositioninIndia,we
canacquireaclearperspectiveonthequantumofinvestmentsneeded,andthe
impliedgrowthratethatisrequiredtobeachievedbyvarioussegmentsofthe
economythatprovidethehealthcarefunding.
AssumingthattheIndianeconomywillwitnessarealgrowthrateof
approximately7percentuntilFY2015,theprojectedGDPislikelytobeINR98lac
croresinFY2015.Theotherimportantassumptionwouldbethatthetotal
healthcareexpenditurewillremainwithinarangeof5percentto6percentof
GDP.
Assumingthattheclaimpaymentsconstitutethehealthcarefunding,the
contributionofpublicandprivatehealthinsurancecompaniestohealthcare
fundingwouldbeapproximatelyINR16,800croresforFY201514,iftheindustry
premiumsgrowata(CAGR)of25percentto30percentbetweenFY2008andFY
2015.
GiventhatpublicexpenditurehashistoricallygrownataCAGRof10.6percent
betweenFY1995toFY200615 ,itisassumedthatthegovernmentexpenditure
shallcontinuetogrowatapproximatelythesamerateuntilFY2015.Inthiscase,
governmentexpenditurewouldamounttoapproximatelyINR98,000crores.
Thus,inthisbaselinehealthcarefundingscenarioinFY2015,Out-of-Pocket
Expediture(OPE)wouldconstitue77percentor80percent(asdepictedinTable
No.1)ofthehealthcarefunding,dependingonwhethertotalhealthcarefundingis
5percentor6percentofGDPrespectively.IfIndiawantstoachieveamore
desirableproportionofOPE,asinChina(60percent),itislikelytoentailincreased
participationfrompublic,privateoracombinationofthesesectors,implying
significantlyhighergrowthinhealthfunding.
13 Estimates based on NSS 1998; Report No. 441, 52nd Round, NSSO ; Finance and revenue accounts,
New Delhi: Ministry of Finance, Govt. of India; 2004; Finances of state governments, Mumbai:
Reserve Bank of India, Govt. of India 2005 Labor year book; Health information India, New Delhi:
Ministry of Health and Family Welfare, Govt. of India; 2002.
CSO 2004, New Delhi: National Accounts Statistics, CSO, Govt. of India; 2004.
14 Assuming a claims ratio of 60 percent
15 WHO National Health Accounts, KPMG Analysis
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AnalyzingthescenarioI,wheretherequiredincreaseinfundingtobringdownthe
OPEcomponentisborneonlybytheGovernment,itwouldhavetomobilize
nearlyINR81,220crorestoINR120,420croresofadditionalfundsinFY2015.
WhiletheGovernmenthasinitiatedschemessuchastheRashtriyaSwasthya
BimaYojana(RSBY)toreducethisfundinggap,thereisclealyaneedformanysuchinitiatives.Further,thereexistsaviableopportunityforprivatesectortoshift
asizeablepopulacefromadirectout-of-pocketexpensemodeltoaprepaid,risk-
poolingmodelasillustratedinscenario2.
Thus, in order to reduce the proportion of OPE in the overall healthcare
funding there needs to be focused efforts from the public as well as the
private sector along with the possible public private partnership (PPP).
ExamplesofPPPcouldincludeapartner-agentmodelbasedcommunityinsurance
schemesinvolvingcooperativesocieties,governmentinitiativeslikeRSBYscheme
involvingcontributionbyinsurancecompaniesaswell.
Table1:Healthcarefundingscenario
Mr. Tarun Bajaj,
Joint Secretary,
Government of India
M r. Girish Rao,Managing Director,Swiss Re India
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Health Insurance in China
The Challenge
Bytheearly1980s,thecollapseofcommunityfinancinginstitutionsinrural
areasledtonearly90croreChinesepeasantsbeinguninsured.Inthecities,
residentswerecoveredbyacity-basedsocialhealthinsuranceschemewhich
coveredonlyworkersintheformalsector,leavingtheothersuninsured.In
2003,itwasfoundthatonly55.9percentofurbanand21.4percentofrural
residentswerecovered.
The Approach
Thegovernmenthasbeendirectingnewinvestmentwithaviewtowardspro-
vidinguniversalbasichealthcare.
Rural: In2003,thegovernmentestablishedtheNewCooperativeMedical
Scheme(NCMS)agovernmentrun,voluntaryinsuranceprogramthataimed
toinsureruralresidentsagainstcatastrophichealthexpenses.Underthis
scheme,thecentralandthelocalgovernmentswouldeachsubsidize40Yuan
perfarmer,withthefarmerpaying10Yuanasanannualpremiumforenrol-
ment.
Urban: UndertheUrbanEmployeeBasicMedicalInsurance(BMI)introduced
in1998,employercoveragewasfinancedthroughemployerfundedcollective
funds(6percentofwages)andabeneficiaryfundedpersonalaccount(2per-
centofwages);thecentralandlocalgovernmentssubsidizenon-workerscov-
erage.
Results
Bytheendof2007,NCMScovered86percentoftheruralpopulation,andis
targetedtoreach100percentbytheendof2008.BMIontheotherhandcov-
ered160millionworkersandretireesin2006,andisexpectedextendcover-
agetoallurbanresidentsbytheendof2010.
Lessons for India
IndiahasrecentlylaunchedtheRashtriyaSwasthyaBimaYojana,similartotheChineseNCMS,tocover30crorepeoplebelowpovertylinein5years
However,itmaybenotedthatwhilepublicinsurancehas playedanimpor-
tantroleinChina,Indiadoesnothaveobligatorypublicinsuranceandis
bettingontheemergenceofprivatemicro-insurancepolicies
Besides,thedifferentformsofgovernmentinthetwocountriescould
resultindifferentoutcomesforsimilarschemes
Source:Yip,W.,Mahal,A.TheHealthCareSystemsofChinaandIndia:Performanceand
FutureChallenges,HealthAffairs,Volume27,Number4
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The Rashtriya Swasthya Bima Yojana (RSBY)TheRSBYisaCentralGovernmentSchemelaunchedinOctober2007to
providehealthinsurancetothebelowpovertylinefamiliesintheunorganized
sector.
Benefits
TheSchemeenvisagestoprovidesmartcardbasedcashlessinsurance
coveruptoINR30,000onafamilyfloaterbasis
Pre-existingdiseasesarecovered
Hospitalizationandservicesofsurgicalnatureandpre-andpost-hospital-
izationexpensesarecovered.
Funding
TheCentralgovernmentbears75percentoftheestimatedannual
premiumofINR750andthecostofthesmartcard
StateGovernmentsbear25percentofthepremiumandadministrative
andothercostsofadministeringthescheme
ThebeneficiarypaysINR30perannumas registration/renewalfee.
Coverage
Anestimated6croreBelowPovertyLine(BPL)workersinall600districts
inthecountryattherateof1lakhworkersperdistrictareexpectedtobe
coveredat120districtsperyearstartingfromFY2008.
Role of State Governments
Stategovernmentsengageinacompetitivebiddingprocessandselecta
publicorprivateinsurancecompanylicensedtoprovidehealthinsurance
byIRDA.
Role of Insurer:
Theinsurercoversthebenefitpackageasacashlessfacilitythatinturn
requirestheuseofsmartcardsissuedtoallmembers
TheinsurerengagesintermediarieswithlocalpresencesuchasNGOs,MFIs,etc.inordertoprovidegrassrootsoutreachandassistmembersin
utilizingtheservicesafterenrolment
Theinsureralsoprovidesalistofempanelledpublicandprivatehospitals
meetingcertainbasicminimumrequirements(e.g.,sizeandregistration)
thataretoparticipateinthecashlessarrangement.Thesehospitalsmust
setupaspecialRSBYdeskwithsmartcardreaderandtrainedstaff
Theinsurertracksclaims,transfersfundstothehospitalsandinvestigates
inthecaseofsuspiciousclaimpatternsthroughon-siteaudits.
WhileRSBYhassetaggressivegoalsforitself,thesuccessofthescheme
needstobeseeninIndia.Butiftheschemeisabletoachieveitsambitioustarget,itcantoplayadominantroleinincreasinghealthinsurancecoveragein
India.
Source:www.rsby.in
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The Indian Health Insurance Industry
TheIndianhealthinsuranceindustrystandsatINR5,125croreswithonlyasmall
sectionofthetotalpopulation(around2percent)beingcoveredsofar.Witha
compoundedannualgrowthrateofaround37percent(FY2002-08),health
insuranceindustryinIndiaisoneofthefastestgrowingsegmentsamongother
non-lifeinsurancesegments.
Highgrowthratesofhealthinsuranceindustryhavebeendrivenbyseveralfactors
suchaschanginghealthcarescenario,socio-economictrendsandregulatory
changesintheindustryinIndiaasdiscussedbelow.
Goingforward,thesegrowthdriversareexpectedtocontinuetodrivethegrowth
ofthehealthinsuranceindustryinIndia.
Figure4:IndiaHealthInsurancemarketsize
andgrowthrate
Source:IRDA
Key Growth Drivers Description Impact on Health Insurance Industry
Changing Healthcare sce-
nario in India
Privatehealthcareisbecomingpredominantwithpro-
liferationofprivatehospitalsinurbanareasthus
increasinghealthcarecosts
Increaseinpopularityofhealthinsurancein
urbanareas
Healthcarecostsaremounting,thusmaking
treatmentforcommonpeopleincreasingly
unaffordable
Changing demographic
environment
Increasingprevalenceoflifestylediseasesinthe
country
AgeingPopulation
Largerafflictedpatientpopulationrequiring
treatmentandmedicalprocedures
Increased awareness and
affordability
Empiricalevidenceindicatesthatthereisapositive
correlationbetweenhealthcarespendingpercapita
andproportionofpopulationcoveredbyhealthinsur-
ance.
Indiahasseenariseinincomelevelsandliteracylev-
els.
Moreinformedandawareconsumer,
demandingbetterfacilities
Greaterabilityandwillingnesstopayfor
medicaltreatmentandhealthinsurancepre-
mium
Percapitaspendonhealthcareisontherise.
Thishascreatedademandforhealthinsur-
anceproducts
Push factor by insurance
companies
Increasedfocusonhealthinsurancewiththeemer-
genceofstandalonehealthinsurancecompanies
StrongerpushfromInsurancecompaniesalongwith
increasingdistributionreach
Increasedfocusanddistributionpushlead-
ingtoincreasedpenetrationofhealthinsur-
ance
Favourable Regulatoryenvironment
Pricedetarifficationinnon-lifeinsuranceindustryin
Indiaresultingintheremovalofcross-subsidizationof
healthinsurancepoliciesinIndia
Increaseinthehealthinsurancepremium
Government focus onhealth insurance
GovernmentinitiativeslikeRSBYscheme,Janashree
BimaYojana,NationalRuralHealthMissionetctopro-
videextensivehealthinsuranceaccess
Increasedhealthinsuranceawarenessand
coverage
15 IRDA Journals
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Thefutureoutlookofthehealthinsuranceindustryremainspositive.Theindustry
witnessedagrowthrateof52percent17 inthefirstquarterofFY2009compared
toFY2008.
Whiletheindustryiswitnessingsomedecreaseinthegrouphealthinsurance
businessduetothecurrentfinancialcrisis,theretailmarketisexpectedtogrow
inthenearfuture.Overall,thehealthinsuranceindustryinIndiaisexpectedto
growataCAGRof25to30percenttillFY2015toreachthemarketsizeof
approximatelyINR28,000croresbyFY201518.
TobeabletoincreasethemarketsizebyaroundINR22,900croresormorein
sevenyearstime,theindustryparticipantswouldrequiretomakeconcerted
effortsinthisdirection.Thebuildingblockshavetobeputinplacebythekey
participantsofthehealthinsuranceindustryandtheissuesandchallengesfaced
bythemhavetobeaddressedindefiningtheseconcertedefforts,forachieving
thetargetmarketsizeandincreasedpenetrationforhealthinsuranceinIndia.
Thehealthinsuranceindustrycomprisesseveralkeyplayersacrossitsvaluechain.
Figure5:KeyparticipantsintheHealthinsurancevaluechain
17 IRDA Journals
18 Industry Discussions, KPMG Analysis
Dr. Shreeraj Deshpande,
Vice President
Health Insurance,
Bajaj A llianz General Insuranc e
Company Ltd.
M r. Sandeep Bakhshi,Managing Director and CEO,
ICICI Lombard General Insurance
Company Ltd.
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A. Insurance companies:
Therobustgrowthofhealthinsurancepremiumincomeinrecentyearshas
helpedensurethathealthinsuranceisconsideredafocussegmentbymost
Insurancecompanies.Healthinsuranceiscurrentlybeingofferedbynon-life
insurancecompanies,specializedhealthinsurancecompaniesandlifeinsurance
companiesinIndia.Whilehealthinsuranceformsalowproportionofthetotal
businessforlifeinsurancecompaniesinIndia(0.2percentoftheindividualregular
premiumforFY2008),itformsasignificantproportionofthebusinessfornon-life
insurancecompanies(approx.18percentofthetotalGrossWrittenPremiumfor
FY2008).19
StarHealthandAlliedInsuranceandApolloDKVInsurancearetheonlytwo
specializedhealthinsurancecompaniesinIndiatilldate.InJuly2008,BupaGroup,
aleadinginternationalhealthandcarecompanyandMaxIndiaLtd.,formedanew
partnershiptoenterthehealthinsurancemarketinIndia20.Majorhealthinsurers
fromoverseas,suchasAetna,CIGNAaswellasothermulti-nationallifeandnon-
lifecompanies,havealsoevincedinterestinenteringtheIndianhealthinsurance
market
B. Third Party Administrators (TPAs)
TPAswereestablishedasaresultofregulationsintroducedinFY2001.Theirkey
responsibilitiesincludeprovidingadministrationsupportforinsurers,suchas
admissionandsettlementofclaims,andestablishingprovidernetworksof
hospitalsthatpolicyholderscanutilise.ManyTPAsprovideawidervarietyofvalue
addedservicessuchasambulanceservice,medicinesandsupplies,information
abouthealthfacilities,hospitals,bedavailability,andhavemovedbeyondthe
boundariesthattheywereoriginallyintendedtofulfil.
AsofMarch2008,therewere28TPAsinoperation,thoughthetopthreehave
over50percentshareofthemarket21.Interestingly,asinsurershavestarted
analyzingtheirclaimsexperience,someofthemhaverealizedthatbyusingaTPA
fortheadmissionandsettlementofclaims,theyhaveinfactoutsourcedtheir
mostimportantactivity.Asaresult,someinsurancecompanieshaveeither
establishedorareintendingtoestablishtheirownin-houseclaimsoperations.
Further,reinsurerslikeMunichReandSwissRehavetakenstakesinParamount
HealthcareandTTKHealthcarerespectively,whilstRelianceGeneralInsurance
hasacquiredamajoritystakeinMediAssist
Figure6:MarketshareofkeyplayersinHealth
insuranceindustry(FY2008)
Source:IRDA
Figure7:MarketshareofTPAs(FY2007)
Source:IRDA
19 IRDA
20 Insurance Business Review, July 2008
21 IRDA, KPMG Analysis
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C. Reinsurers
Reinsurersplayacriticalroleinthehealthinsurancevauechain.Theytakeonpart
oftheriskthatinsurersassumefromtheircustomerssothattheinsurercan
assumegreaterindividualrisks.Inthepast,mostofthetop50globalreinsurers
operatedindirectlyfromtheiroverseasofficesbysharingthereinsurancerisks
assumedbytheGeneralInsuranceCorporationofIndia.Onereasonforthiswas
thatglobalreinsurersfeltthatratesforreinsuranceproductswereinadequateand
notatallreflectiveofglobalmarketconditions22.However,withtheentryoflarge
playersintotheIndianmarket,thisseemstobechanging.
Apartfromprovidingreinsurancesupport,reinsurerscanalsosupportinsurance
companiesindefiningtheirproductandcustomersegmentsbasedontheirglobal
experience.
D. Healthcare providers
Thehealthcareindustryisestimatedtogrowatabout15percenteveryyearfor
thenextfourtofiveyears.23 Increasedfavorableregulatorydrivers,changesin
demographicsandchangesindiseaseprofilehaveledtotherapiddemandfor
qualityhealthcareprovision.
Privateplayershaveinvestedsignificantlyinthismarket,leadingto
corporatizationoremergenceofhospitalchains.However,thefocusofthese
playershasbeenlargelyurbanasthisiswheretheinfrastructureandpatientpoolisavailablefortheseplayers.ExamplesincludetheApollogroup,Manipal,Fortis,
MaxandWockhardthospitals.Infact,84percentofhospitalbedsaretoday
locatedinurbanareas,whereas75percentofthepopulationstillresidesin
villages24.Thisselectiveconcentrationofhealthcareprovidersisamajorconcern
tobeaddressed,especiallysincestudieshaveshownthatthoselivinginrural
areasspendaboutasmuchonhealthcareasthoseintowns.
CurrentlyhealthcareprovidersarenotbeingregulatedinIndiawithregardto
standardizationandaccreditationnorms.Thishasresultedineachhealthcare
providerbeingsignificantlydifferentfromtheotherintermsofthehealthcare
costs,processesandqualityamongstothers.
E. Distribution channel partners
Agentsandbrokersarethekeydistributionchannelsforsellingretailandgroup
healthinsurancerespectively.Bancassuranceisalsoevolvingasanimportant
distributionchannelforretailhealthinsurance.Theusageofdirectdistribution
channelsliketheinternet,telemarketingetcislimitedinIndiacurrently,butwill
gainimportanceastheindustrymatures.Thisformofdistributionispopularinthe
developedcountriesandiscatchingoninIndiaaswell.
22 Indian Health Insurance- A major opportunity, Watson Wyatt
23 Foreign Investments in Hospitals in India: Status and Implications, WHO India
24 The Private Health Sector in India : Nature, Trends and a Cr itique, CEHAT
M r. Girish Rao,
M D,
Sw iss Re
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F. Regulators
TheInsuranceRegulatoryandDevelopmentAuthority(IRDA)regulates,promotes,
ensuresorderlygrowthoftheinsuranceandthereinsurancebusinessinIndiaand
protectstheinterestsofthepolicyholders.Currently,healthinsuranceformsa
partofthenon-lifeinsurancebusinessandisbeinggovernedbythenon-life
insuranceregulationsinIndia.TheIRDAisconsideringannouncingseparate
guidelinesforhealthinsurancetopromotesustainablegrowthofthehealth
insuranceinIndia.TheIRDAhasalsorecommendedloweringoftheminimum
capitalrequirementforstand-alonehealthinsurancecompaniesfromINR100
crorestoINR50crores25.Thismoveisexpectedtoencouragetheentryofstand
alonehealthinsurancecompaniesinIndia,andmayalsofacilitatetheemergence
ofRegionalhealthinsurancecompaniesinIndia.
Despiteawellestablishedindustrystructureinthehealthinsuranceindustryin
India,theindustryhasnotbeenabletoachieveitstruepotential.
ThesignificanteconomicgrowthinIndiaattheturnofthemillenniumhasleftits
medicalcareandhealthinsurancesystemsstrugglingtokeepupwiththegrowing
healthcaredemandsofitspeople.Indiaischaracterizedbyagrowing(butstill
relativelysmall)middleclassandalarge(butshrinkingandmostlyrural)near-
subsistencepopulation.Giventhepopulation,geographicalsizeofthecountry,
differentlevelsofevolutionwithintheurbanandruralstrataofthesociety,itisnot
surprisingthatplayersarefacedwithvariouschallengesinincreasinghealth
insurancecoverage.
25 New Health Insurance Law on the Anvil, Business Standard, October 2008
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Thus,therearesignificantchallengesbeingfacedbytheexistingparticipantsof
thehealthinsurancevaluechainwhichhaveimpactedthegrowthofthehealth
insuranceindustryinIndia.Whilethesechallengesneedtobeaddressedto
increasethehealthinsurancecoverageinIndia,thereisalsoaneedtounderstand
thechallengesfacedbytheIndianconsumerintheexistingmarketenvironment.
IssuesandChallengesfacedbyvariousparticipantsoftheHealthInsuranceValueChain
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Voice of the Indian Consumer
Theendeavorofhealthinsuranceistoprovideconsumerswiththeoptionsor
productsthatcanaddressissuesofpreventionandtreatmentofillness,leadto
wellnessandtherebyhelpthemtoleadlonger,healthierandhappierlives.Thus,
understandingthevoiceoftheIndianconsumersiscriticaltounderstandthe
healthinsuranceneedsoftheconsumers.
TounderstandthevoiceoftheIndianconsumer,KPMGcommissionedIMRB
InternationaltocarryoutaQualitativeConsumerResearchstudy.Thestudy
involved13FocusGroupDiscussions(FGDs)acrosssixcities(twocitieseachin
metro,Tier1andTier226 segments)inIndia.ThecitiesincludedMumbai,
Chennai,Ahmedabad,Lucknow,CochinandPatna.
Therewerearound6-8participantswithdiverseprofessions(salariedaswellas
selfemployed)pergroup.SeparateFGDswereconductedfortheholdersand
non-holdersofhealthinsuranceinSocio-economicclass(SEC)A/B1(Upperstrata)
andSECB2/C(Lowerstrata)27.
Itwasfoundthatwhiletheconsumersdiffersignificantlyintheirprofiles,theyare
homogenouswithrespecttotheirhealthinsuranceawarenessandneedswhich
werecapturedduringtheconsumerresearch.
Thestudyalsorevealedthatcharacteristicsofconsumerswithandwithout
insurancecoversdifferedsignificantlyasshownbelow:
Typical characteristics of a consumer with
an insurance cover
Moderatelevelofawareness,knowledgeandeducation
Professionthatiseitherhighlypayingorhasconsistent
incomestream
Taxpayingcitizen
Preferstosecurethefuture,andiscautiouswithfinan-
cialmatters
Likestoplanthingsandorganizethem
Viewsinsurancefromsecurityaswellasinvestment
standpoint
Likestostrikeabalancebetweenriskandreturns.
Typical characteristics of a consumer without
an insurance cover
Lowlevelofawareness,knowledgeandeducation
Earnslowlevelofincomesorhasnosuretyofregular
incomes;typicallyunemployedoremployedinlower
orderjobs
Accordslowprioritytoinsurance,primarilyduetolack
offundsandpresenceofotherinvestmentneeds
Fewdependants
Focusesonimmediatefutureneedsratherthandistant
ones
Securityaboutfuturemeanseducatingchildrenand
makingthemselfdependent.
26 Metro Cities with population more than 40 lac , Tier 1 - Cities with population between 15 lac and
40 lac , Tier 2 - Cities with population between 5 lac and 15 lac27 SEC classification is based on Chief wage earners (CWE) occupation and education level
SEC A: CWE is graduate/ post graduate and is primarily employed at executive positions or is an
industrialist/businessman
SEC B: CWE is a post graduate or below and is primarily employed at clerical/supervisory level or is a
small businessman
SEC C: CWE is educated till class XII and is primarily employed at clerical/supervisory level or is a
skilled worker/petty trader/shop owners
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Perception about Health Insurance in India
Thefocusgroupdiscussionshaverevealedseveralinterestingobservations.While
asignificantportionofconsumersareawareofhealthinsuranceandits
importance,thereareseveralperceptionsbothnegativeandpositive,thathave
astronginfluenceontheirbuyingdecisions.Interestingly,consumersacrossSEC
segmentsandcitiessharemanyoftheseviews.Thisdemonstratesthat
addressingsomeofthenegativeperceptionsandcapitalizingonthepositiveones
arelikelytoplayavitalroleinincreasinghealthinsurancecoverageinIndia.We
discussthemindetailbelow.
Figure8:PerceptionsaboutHealthinsuranceinIndia
Characteristics have been classified into Core, Primary and secondary segments based on
the level of emphasis with which these characteristics were mentioned during the focus
group discussions
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Negative Perceptions: Impediments to buying Health
Insurance
Thestudyhasthrownlightonseveralpossiblereasonsthatconsumershavecited
fornotbuyinghealthinsuranceinIndia.Someofthemostpertinentonesinclude:
a. Problems with Claims processing: Problemswithclaimsprocessing,
experiencedeitherfirsthandorbypeergroups,deterconsumersacross
segmentsfrombuyinghealthinsurance.
i. Consumersbelievethatreimbursementofclaimsfrominsurance
companies,forcashpaidinhospitals,requirenumerousfollow-ups
ii. Incaseofcashlesstransactions,theperceptionisthatthereisaneedto
submitseveraldocuments
iii.Anotherpredominantperceptionisthatinsurancecompaniesrejectclaims
ondubiousgrounds,renderingtheinsurancepolicyfutile.
Suchinstancesdiscourageconsumersfrominvestinginhealthinsurance
policies.Negativeexperienceswithclaimsprocessingcouldalsoleadto
negativepublicity,makinginsurancepolicieslesspopular
b. Limited product coverage: Healthinsuranceplansdonotcoveroutpatient
careandcertainailmentssuchasdiabetes,bloodsugar,eyeanddental
surgeries.Theviewisthatthepolicycovershealthproblemsthathavealow
probabilityofoccurring,renderingthepremiumpaidfutileifhospitalizationdoesnotoccurinaparticularyear
c. Less importance given to health insurance: Formostconsumers,theneed
tosaveandinvestforahome,education,vehicle,childrensmarriageandother
lifecycleneedstotakeprecedenceovertheneedforahealthinsurancepolicy.
Amisconceptionprevalentamongmanyconsumersisthatthereturnon
investmentinhealthinsuranceislow,withlittlerewardiftheymakenoclaims.
Inaddition,severalconsumers,particularlyyoungeragegroups,tendto
believethatpeopleover45yearsofagewhoaremorepronetoailments,
needahealthinsurancepolicy.
Thereisthereforeatendencytoinvestinahealthinsurancepolicyonlywhen
extrafundsareavailable,orifconsumershavefacedhardshipsinthepast
duringamedicalemergency.Oneofthereasonsforthiscouldbethe
confusioncreatedbymultipleparticipantsaboutinsurancebeingan
investment/savingsproductorrisktransfermechanismintheconsumers
mind.
SEC B2/C,Tier 2 city,
Non -holder of health insurance
SEC B2/C,Tier 2 city,
Non-Holder of health insurance
SEC A/B1,Tier 2 city,Non-holder of health insurance
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d. Limited options of doctors and hospitals: Insurancecompanieshavetheir
ownnetworkofhospitalsandseldomreimburseproceduresperformedin
hospitalsoutsideofthenetwork.
i. Intheeventthataconsumerusesanon-networkhospitalduringan
emergency,thepolicybecomesineffectual
ii. Further,Indianconsumerstendtoestablishacomfortlevelwithdoctors.
Theyarereluctanttoswitchtootherprovidersiftheirdoctorsarenotpartof
thenetwork
e. Agent and Payment Related Issues: Insuranceadvisorsdonotsuggest
suitableoptionstoconsumers,hideinformation,areunawareoftheproducts
theysellorcoercethemintobuyingpoliciesthatarenotsuitedtotheirneeds.Thishascreateddiscontentamongconsumersthatagentsdonotactintheir
interestandinsteadoftreatingadvisorsastrustedpartners,several
consumersarewaryofthem.Anothercommongrievanceofconsumersis
thattherearefewoutletstodepositpremiums.Moreover,whilecompanies
havebeenencouragingtheuseofinternettopayinsurancepremiums,
consumersinnon-metrosmakelimiteduseoftheinternet.
WhilethesereasonsfornotbuyinghealthinsurancearesimilarforSECA,BandC
Consumersegments,thereareseveralotheraspectswherethesereasonsdiffer
forSECB2/C,whicharecitedbelow:
a. Complicated policy document: Consumersfinditdifficulttounderstandthevariousjargonsandpaperworkinvolvedinthehealthinsurancepolicy
b. Limited awareness: Limitedawarenessabouthealthinsurancehasledtonon-
considerationofthisoptiontoasignificantnumberofpeople
c. Expensive: Consumersperceivethathealthinsurancepoliciesareexpensive
andaremeantfortherichandtheeducatedonly.
Ithasbeenfoundthatconsumerswithahealthinsurancecoversharesimilar
viewsasthosewithout,intermsoftheirskepticismtowardsclaimsprocessing,
limitedcoverageintermsofproducts,anddoctorsandnetworkhospitals.While
thisskepticismhasbeenbasedonexperience,manyoftheothernegative
perceptionsstemfromafundamentallackofawarenessabouthealthinsurance
itsimportance,productsavailableandtheprocesses.
SEC A/B1,Tier 2 city,
Non-holder of health insurance
SEC A/B1,Tier 2 city,
Non-holder of health insurance
SEC 2/C,
Tier 2 city,
Non-holder of health insurance
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Positive Perceptions: Perceived benefits about Health
Insurance
Despitethenegativeperceptionsofpeopleabouthealthinsurance,thereareclear
benefitsofhealthinsuranceasperceivedbyconsumerswhoarecoveredundera
policy.
a. Cashless Hospitalization: Oneofthekeyadvantagesofhealthinsurancehas
beenfoundtobecashlesshospitalization.Thisgivestheinsuredthebenefitof
startingthetreatmentoncehispre-authorizationisapprovedbytheinsurance
company/TPA.Inaddition,thisgivesthefamilythetimeandpeaceofmindto
concentrateonthepatientandthetreatmentandrelieffromarrangingfor
funds
b. Tax benefit:Taxbenefitsoninvestmentsinhealthinsuranceforselfand
dependantsbecomesamajordriverforconsumerstoinvestinapolicy
c. Financial Independence and Security: Consumersconsiderhealthinsurance
tobeameansofensuringtheirfinancialindependenceandsecurity.Health
insurancesavesthemfromborrowingmoneyfromotherpeopleduringan
emergencyandhelpspreserveothersavingsforlateruse.
Whileconsumerswhodonotholdhealthinsurancewerefoundtobeawareof
thesebenefits,thepainpointsoverpoweredthebenefitsperceived.However,
theywerefoundtobeopentotheideaofbuyinghealthinsuranceprovidedtheinsurancecompaniesrevisetheirofferingstomatchtheirexpectationsofan
Modelhealthinsuranceofferings.
HowdifferentistheModelHealthInsuranceOfferingsthattheconsumershave
envisagedfromtheexistingproductofferings?Thefindingsrelatetotheissues
thatconsumersfaceintheexistinghealthinsurancepolicies.
Largely,newideasofconsumerswerearoundthefollowingthemes:
a. Ease of claims disbursement: Currently,consumersfindtheclaims
disbursementprocesstobevague,fraughtwithproblemsandwithnosurety
ofreimbursementofclaims.Instead,theywishtohaveahasslefreeclaims
disbursementprocess,inwhichtheinsuranceagentispresentatthehospital
totakecareoftheformalitiesduringanemergency.Useofmedicalcardsthat
arelikecreditcards,whichcanswipedathospitals,mayprovetobean
innovativeandhassle-freeprocess
SEC A/B1,Tier 1 city,
Holder of health insurance
SEC A/B1,Metro,Holder of health insurance
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b. Increased hospital network coverage: Consumerspreferthattheirinsurance
policytocoveragreaternumberofhospitalsandcertainDoctors,particularly
FamilyDoctorsintheirnetwork
c. Product and Pricing Innovation
i. Product Innovation
i. Coverage of incidental costs and more diseases: Whilehospitalization
formsasubstantialcostinmedicalcare,pre-hospitalizationentailsvisits
tospecialists,diagnostictestsetc.,andpost-hospitalizationcarealso
entailhighcosts.Therefore,coverageoftheseexpensesisdesirable.
Consumersalsoexpectcoverageofdiabetes,bloodsugar,dental
ailments,surgeriessuchaseyesurgeries,rootcanaletcthatdonotrequirehospitalization,andspecializedcoverageforwomentobepartof
theirModelHealthInsuranceofferings
ii.Long term policies: Consumerswishtotakelonger-termhealth
insurancepoliciescomparedtotheexistingone-yearpolicies.Consumers
alsomentionedaneedforbundlinghealthinsurancewithlifeinsurance
iii.Simple policy documents: Smallpointerssuchasprintingpolicy
documentsinlocallanguagescanbeveryusefulinhelpingconsumers
understandtheirhealthinsurancepolicybetter.Consumersalsowantthe
policydocumenttobesimpleandeasytounderstand
ii.Pricing Innovation: Currentlyformostpolicies,thefrequencyofpayment
ofpremiumisyearly.However,severalconsumershavesuggestedan
alternativepossibilityofaone-timepremiumwithlife-longcoverage.Thisis
especiallypreferredbyself-employedpeoplewhocouldhaveaspurtin
earningsduringaparticularyear,whichcanbeinvestedinapolicyasaone-
timeinvestment.Anotheralternativeisthepaymentofaone-timelarge
premium,followedbyyearlytop-upstocoverafamilyforalongperiod
d. Regular benefits to insurance holders: Apartfromthecoveragebenefitto
theinsured,consumersalsodemandedregularbenefits.Annualhealthcheck
ups,substantialreductioninpremiumforanoclaimyearetc,weresome
exampleswhereconsumersfeltthattheycouldgainsomebenefitfromtheir
associationwiththehealthinsurancecompany.
WiththeunderstandingoftheconsumersviewsabouttheModelHealth
InsuranceOfferingsandthereasonsfornotbuyinghealthinsurance,thekey
forincreasingcoverageofhealthinsuranceinIndiaistodesignandimplement
strategiestodesignhealthinsuranceofferingsthatmeetatleastsomeofthe
consumerpreferencesandaddresssomeofthechallengesfaced.
SEC A/B1,
Metro,Holder of health insurance
SEC B2/C,
Tier 2 city,
Non-holder of health insurance
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Withtherecentspurtingrowthofthehealthinsurancemarket,companiesare
keentotryoutdifferentplanstoensureextensivepenetrationofhealthinsurance
inIndia.ToassisttheIndiancompaniesinthisregard,weattemptedtotestthe
acceptabilityoftwosuccessfulglobalhealthinsurancemodelsamongstIndian
consumers.Theconsumerswereexposedtotwonewtypesofhealthinsurance
planstogaugetheirwillingnesstoinvestinthesetypesofplans.
Globally successful health insurance models - Managed Healthcare and HealthSavings Account
Managed Healthcare:
Internationaltrendsindicatethatinsurancecompanieshavebeenabletoinfluencehealthcareproviderstocutcostsand
improvethequalityoftheirservicesthroughtheadoptionofthemanagedhealthcaremodel.Itisthemostpopularhealth
insurancemodelintheUS.
Typical features include:
Integrationofhealthcareservicedeliveryandhealthcarefinancingfunctions
Healthcareservicedeliveryincludeseithertie-upwithexistingprovidersorbuildingonesownprovidernetworkandis
intendedtoreduceunnecessaryhealthcarecosts.Thisisdonethroughavarietyofmechanismsincludingeconomic
incentivesforphysiciansandpatientstoselectlesscostlyformsofcare,programsforreviewingthemedicalnecessityofspecificservices,increasedbeneficiarycostsharing,controlsoninpatientadmissionsandlengthsofstay,the
establishmentofcost-sharingincentivesforoutpatientsurgery,selectivecontractingwithhealthcareproviders,etc.
Consumershavetotakeservicesonlyfromthenetworkinordertohavetheirhealthcarepaidbytheplan.
Health Savings Account (HSA):
VariouscountriesliketheUS,SouthAfrica,Canada,Singapore,ChinaandHongKonghaveexperimentedwiththisconcept
andhaveachievedvaryingdegreesofsuccessinHSAsbeingacceptedasaviableandlong-termoptionforfinancing
healthcareexpenses.Forexample,inSouthAfrica,itformsaround50percentofthehealthinsurancemarket.Thereisno
uniformarchitecturethatthevariousproponentsofHSAhaveadopted.Eachcountryhasadoptedandstructureditasper
theneedsoftheirpeople.
Typical Features:
Tax-exemptsavingsaccountsimilartoanIndividualPensionAccount,butearmarkedformedicalexpenses.Depositsin
theaccountaretax-exemptfortheaccountholdersandcanbeeasilywithdrawntopayforroutinemedicalbills
HSAworksinconjunctionwithaspecialhigh-deductiblehealthinsurancepolicyresultingintheprovisionof
comprehensivehealthinsurancecoverageatthelowestpossiblenetcost
Theinsurancecompanypaysformajormedicalexpenses(coveredexpensesinexcessofthedeductibleamount)while
theHSAaccountholderpaysfortheminormedicalexpenseswithtax-exemptmoneyfromhisHSA.Unutilized
balancesintheHSAcanbeaccumulatedtowardsindividualretirementaccounts.
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Plan 1: Managed Healthcare
Asaconcept,thisplanwaslikedandappreciatedbymostconsumers.
However,peoplewerequiteapprehensiveabouttheclauseofpre-authorization
inanemergency.
Affirmative points about the plan:
a.Cashless hospitalization: Consumersappreciatedthattherewouldnotbe
anyhassleofarrangingforcashatatimewhenthefocusshouldbeon
treatment.Thiswouldalsoavoidthetediousprocessoffollowingupwith
insurancecompaniesforclaims
b.Right treatment: Doctorswillbeencouragedtousetherighttreatment
insteadofadministeringneedlessproceduresandtestsinanattempttomakesomemoremoney.Patientswillnothavetofacethetraumaof
unnecessarytreatmentsandtheywouldbeassuredthattherighttreatment
isbeinggiventothem
c. Emergency cases/pre authorized to be considered: Itwasunderstood
thataccidentcaseswilldefinitelybetakenasemergencycase,and
authorizationsinsuchcaseswouldbeabigreliefforpatients.
Apprehensions about the plan:
a.Fear of treatment compromise: Manyconsumerssharedafeelingthatin
ordertosavemoneyfortheinsurancecompanies,networkhospitalswill
tryandkeeppeopleawayfromthehospitals.Eveniftheygetadmission,
theywilltryandhastenthetimespentinthehospital,thuscompromising
onthetreatmentregimen
b.Restrictions in the choice of hospital/doctor: Consumersarecomfortable
inreceivingtreatmentfromtheirfamilydoctorordoctorstheyarefamiliar
with.Also,theremaybesmallerhospitalswhichpeoplefindeasytoaccess
owingtotheirconvenience.Thesedoctorsandhospitalsmightnotbepart
oftheinsurancecompanynetwork,andpeoplefearthattheymaybeforced
togotofarawayplacesfortreatment
c. Unclear clause of pre-authorization or authorization in an emer-
gency: Whileconsumersviewedthisasoneofthepositivepointsabout
theplan,theyalsoneedmoreclarityontheprocessofpre-authorization.
Manywereskepticalandneededtoknowhowcompanieswoulddefineanemergency.
Overall,thisplanhadhigheracceptanceamongstSECA/B1consumersandtier
2cities.
Managed Health Care Concept
Thisplancontrolsthefinancingand
deliveryofhealthservicesto
memberswhoareenrolledinthis
plan.Underthisplanthereisan
existingcontractwithhealthservice
providerslikehospitals,doctorsthus
formingaprovidernetwork.
Memberswillhavetotakeservices
fromthisnetworkonlyinorderto
havetheirhealthcarepaidbytheplan.Incaseamembertakesservice
fromabodyoutsidethisnetwork,
theplanwillnotpayfortheir
healthcareunlessitwaspre
authorizedoranemergency.
ManagedcarePlanhasbeenparticularly
popularinTier-2cities
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Plan 2: Health Savings Account
Taxsavingsemergedasthemostdominantadvantageofthisplan.Thegeneral
feelingwasthatthelock-inperiodislengthyandifreviewed,wouldmakethe
planmuchmorecustomer-friendly
Affirmative points about the plan:a. Taxsavings:Theplanwasappreciatedfortheoptionoftaxsavingandwas
wellreceivedbytaxpayersegment
b.Goodbalanceofsavingtaxandassuringsecurity:Theplanwasappreciated
forthedualbenefitofsecurityandtaxsaving.Theconceptappealedto
respondentssinceitoffersconsumerstheflexibilitytohaveacheckover
theirownmoney.
Negative points about the plan:a. Lowinterestrates:Theconcernofgettinglowerreturnswasprevalentinthe
mindsofrespondents.Theyexpecttogethigherreturnstomakeitmore
appealing
b.Limitontheinsurableageofconsumer:Respondentswereoftheopinion
thattheirinsurancecovershouldbeforlifesincethemoneywouldbe
lockedintheschemeforaverylongtime.However,theyalsofearedthat
premiumsmightbehighastheygetolder
c. Notsuitableforolderinvestors:Respondentswereoftheopinionthatto
availthetotalbenefitofsuchascheme,itisimportantthatonestarts
investingatanearlyage.Suchaschemebeyondmiddleagewouldprovide
nobenefittothem.
Overall,thisplanhadhigheracceptanceamongstSECA/B1consumersand
metrocities.Theplanwasalsofoundtohavehigheracceptanceamongst
salariedconsumersasitwasviewedasataxsavingtool.
Health Savings Account
Concept
Thisplanallowsmemberstocreate
fundsorsavingsaccountswith
banks/insurancecompaniesthat
aretobeusedforhealthcare
expensesonly.Inthisplanthereare
twoparts
Healthinsuranceplan
Medicalsavingsaccount
Individualwillbecontributingtomedicalsavingsaccountsregularly
andwithdrawincaseofhealth
emergencies.Theuserisgenerally
providedwithaspecialdebitcard
whichhecanusetopayformedical
expensesfromhismedicalsavings
account.Howeverifthebalancein
theaccountrunsout,userhasto
payfromhisownpocket.
Thepremiumherewillbedivided
intotwocomponents:
Oneusedforhealthinsurance
whichwillprovide
comprehensivehospitalization,
criticalillnessandout-patient
care
Secondpartwillbefor
investmentthatcanbe
shelteredfromtaxationuntil
withdrawn
Deposittomedicalsavingsaccount
maybemadebyanypolicyholder,
byanemployeronbehalfofa
policyholderoranyotherperson.
Howeveriffundsarewithdrawnfor
areasonotherthanaqualified
medicalexpense,thewithdrawn
fundscanbeliabletoincometax
andpenalty.Onceapersonreaches
retirementageorbecomes
disabled,fundscanbewithdrawn
withoutpenalty.
TheHSAPlanhasbeenparticularlypopularintheMetros
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Future enablers and action steps for thehealth insurance industry
Fromthefutureperspective,severalinitiativesareexpectedtobeinstrumentalin
overcomingthechallengesexistinginthehealthinsuranceindustryinIndiaand
mouldingthefutureoftheindustry.
KPMGbelievesthatachievingthefuturegrowthpotentialisdependentonthe
abilityofthekeystakeholdersviz.Government,Regulator,healthcareproviders,
insurancecompanies,NGOs/SHGs,TPAs,distributionchannelpartners,health
centersandthemediatostrengthentheindustryaroundthePillars of Change
and Enablers for Growth.
WhilethePillarsofChangearecriticalforbuildingarobusthealthinsurance
industry,theEnablersforGrowtharecriticalforthepropellingthegrowthofthe
industryinthefuture.
ThissectiondiscussestheexpectedPillarsofChangeandEnablersforGrowth
oftheHealthInsuranceindustryinIndiaandsomeofthepertinentactionsteps
whichneedtobeconsideredbyvariousstakeholderstoimplementthese
changes.
Pillars of Change
Pillar1:ConsumerAwareness
TheIndianhealthinsuranceindustryfacesachallengeoflowlevelsofawareness
amongconsumersoftheneedsandpotentialbenefitsofahealthinsurance
policy,andthislackofawarenesscreatesahindrancetoexpandingcoverage.
UnlesstheIndianconsumersaremadeawareofthehealthinsuranceconceptand
itsbenefits,theindustryisnotlikelytobeabletoachieveitsgrowthpotential.
Figure9:PillarsofchangeandEnablersfor
growthforhealthinsuranceindustry
Figure10:Keystakeholdersofthehealthinsuranceindustry
M r. Nimish R Parekh,Founder & Director,
Wellinformed Healthcare
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Consumerresearchhasrevealedtwoimportantaspectsrelatedtotheawareness
oftheconsumersabouthealthinsurance:
Theconsumershavelimitedawarenessaboutthehealthinsuranceproducts,
theirfunctionalitiesandtheirfeaturesandbenefits
Theconsumerswhoareawareabouthealthinsurancehaveseveralnegative
perceptionsaboutthesame,whichimpacttheirpurchasedecision.
Thus,theobjectiveofcreatingconsumerawarenessneedstobetwofold:
Increaseawarenessofthehealthinsuranceconcept,itsfunctionalities,
featuresandbenefits
DeveloppositiveperceptionabouthealthinsuranceamongsttheIndian
consumers.
Toachievetheseobjectives,someofthekeyactionstepsforthevarious
stakeholdersinclude:
Apartfromtheseactionsteps,stakeholdersshouldsupporttheGovernment,the
regulatorandtheinsurancecompaniesinincreasinghealthinsuranceawareness
inIndia.
M r. C. Chandrashekhar,Chief M arketing Officer,
Apollo DKV Insuranc e Company Ltd.
Dr. Narottam Puri,
President M edical Strategy & Quality,
Fortis Healthcare Ltd.
M r. Vishal Bali, CEO, Woc khardt Hospitals Group, India
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Pillar 2: Standardization of Healthcare costs and
Accreditation norms
Anoffshootofthelackofstandardizationofhealthcareprovidersisthediffering
qualitiesofservice,costs,procedures,treatmentsacrossdifferentproviders.This
hasresultedinlowcustomersatisfaction,unethicalpracticessuchaslong
hospitalstays,expensivetreatmentsanddrugs.Forbuildingastrongand
consistenthealthcareinfrastructure,standardizationofhealthcarecostsand
introductionofaccreditationnormsisapre-requisite.
HealthcareinIndiaistheresponsibilityofeachIndianstate.Therehavebeen
attemptsinsomestatestoinstitutionalizeuniformstandardsforhospitals.Apart
fromthissomeeffortshavebeenmadebyconsumerbodies,groupsofhealth
professionals,hospitalorganizationsandnon-governmentalorganizationstohelp
medicalbodiesadoptstandardsforaccreditation.Butwhatislacking,isa
concertedefforttomonitorthefunctioningofhospitalsinIndiaandthestringency
ofcompliancetoestablishedstandards28.
Figure11:StandardsandAccreditationsforhealthcareprovidersinIndia
Source:Accreditationofhospitals:AnOverview:Dr.GarimaChandra,ExpressHealthcareManagement
28 Accreditationofhospitals:AnOverview:Dr.GarimaChandra,ExpressHealthcareManagement
Dr. Sushil Shah,Chairman,
M etropolis Health Services India Ltd.
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Someofthekeyinitiativesandactionstepsforthevariousstakeholdersinclude:
Dr. Shreera j Deshpande,Vice President Health Insurance,
Bajaj Allianz General Insurance
Company Ltd
c
Dr. Narottam Puri, President Medical Strategy & Quality, Fortis Healthcare Ltd.
C. Chandrashekhar, Chief M arketing Officer, Apollo DKV Insuran ce Company Ltd.
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Pillar 3: Healthcare Infrastructure
ForthegrowthofhealthinsurancecoverageinIndia,thereisaneedtodevelopa
networkofhealthcareinfrastructuretodeliverqualityhealthcaretothecon-
sumers.
Someofthekeyinitiativesandactionstepsforvariousstakeholderstoimprove
healthcareinfrastructureinIndiainclude:
M r. Sandeep Bakhshi,M D & CEO,
ICICI Lombard General Insurance
Company Ltd.
Dr. Narottam Puri, President Medical Strategy & Quality, Fortis Healthcare Ltd.
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Pillar 4: Data and Information Exchange
Buildingacomprehensiveandsustainabledatarepositoryandinformation
exchangemechanismsiscriticalforbuildingarobusthealthinsuranceindustryin
India.Thecomprehensivedatabasecouldhelpinthedevelopmentofnewprod-
ucts,analyzingexistingandemergingtrends,promotingnewresearch,testingof
neworalternativehypothesesandmethodsofanalysis.
IRDAhasalreadyinitiatedstepsinthisdirection.TariffAdvisoryCommittee(TAC)
hasbeendesignatedbyIRDAasthedatarepositoryforthenon-lifeinsurance
industryinIndia.Presently,thetransactionleveldataonMotor,Healthandother
linesarebeingcollectedfortherepository.Thesummaryreportsforhealthinsur-ance(2003-04,2004-05and2005-06)arealsoavailableinthepublicdomainon
TAC'swebsite.
Whilethesestepsmarkthebeginningofthedataandinformationexchangesys-
teminIndia,thereisstillalongwaytogo.Variousstakeholdersinthehealth
insuranceindustryhavesignificantamountofinformationaroundconsumers,dis-
easepatternsetcwhichisnotbeingsharedamongstthem.
Someofthekeyinitiativesandactionstepsforvariousstakeholderstohelp
ensuredataandinformationexchangeinclude:
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Enablers for Growth
Enabler1:ProductandPricingInnovation
Productandpricinginnovationisexpectedtobethekeydriverforpenetrationof
HealthInsuranceinIndia.BasedontheConsumerResearchitwasevidentthat
theIndianconsumersdesirenewproductstobeintroducedintheIndianmarket.
Developmentandintroductionofnewproductsattheoptimumpricehasthe
potenialtonotonlydrivethepenetrationofhealthinsuranceinIndia,butalso
helpreducetheclaimscostbeingincurredbyexistinginsurancecompaniesin
India.
Productandpricinginnovationincreasetheoptionsavailabletotheconsumersin
termsofnumberofproductsavailable,diseases/illnessescovered,improvecus-tomersatisfaction,providebetteraccesstocosteffectiveandqualityhealthcare
andreducefraud.
Someofthekeyinitiativesandtheactionstepsforthevariousstakeholders
include:
M r. Nimish R Parekh,Founder & Director,
Wellinformed Healthcare
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Case study: Wellness Products offered by Insurance companies
OfferedbyInsurancecompanieslikeCIGNA,PhiladelphiaInsurance,United
HealthcareintheUSandBUPA,PrudentialintheUK
Features:
Coversbenefitsthatencouragehealthybehaviorsorlifestylechanges
intendedtoimprovehealth,qualityoflifeandresultinavoidingthecosts
associatedwithbehavior-inducedchronicillness
Offersfinancialincentivessuchaslowerpremiums,co-paymentsor
deductiblesforparticipationinawellnessprogram
Examples:Nutritioneducation,physicalactivityeducation,weightloss,stressmanagement,maternitymanagement,diabeteseducation,and
asthmaandhearthealthylifestylemodifications
Win-Win situation:
Advantageforconsumers:Products/healthplansareofferedatdiscounted
rates
Advantageforinsurancecompany:Thereductioninriskforeachindividual
Preventivemorethancurative;leadingtolowerclaimsratio
Dr. Sushil Shah,
Chairman,M etropolis Health Services India Ltd.
M r. Narinder Kumar,
Group CFO & Company Sec retar y,
VLCC Health Care Ltd.
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Enabler 2: Technology
Asatransaction-intensiveindustry,healthinsuranceisexpectedtocontinueto
benefitfromtheefficienciesthattechnologybringstotraditionallypaper-driven
processes.Buttheindustryisatacrossroads:Itnotonlymustimproveexisting
processes,itmustalsodevelopnewprocessesandcapabilitiestomeetnew
customerdemands.
Therearevarioustouch-pointswheretechnologycanhelpcreateandmonitor
processesinamuchmoreefficientmanner.Someofthekeyinitiativesandthe
actionstepsforthevariousstakeholdersinclude:
M r. Sandeep Bakhshi,M D & CEO,
ICICI Lombard General Insurance
Company Ltd.
M r. Srivathsan Aparajithan, Head- Healthcare B usiness Solutions, IBM India
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Enabler 3: Innovative Distribution Channels
ToincreasethepenetrationofHealthInsuranceinIndia,thereisaneedto
exploreinnovativedistributionchannels.Someofthekeyinitiativesandtheaction
stepsforthevariousstakeholdersinclude:
Mr. Vishal Bali,CEO,
Woc khardt Hospitals Group, India
M r. C. Chandrashekhar,Chief M arketing Officer,
Apollo DKV Insuranc e Company Ltd..
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Summary
TheindustryhasgrownataCAGRof37percentoverthelast6yearsandis
poisedtogrowataCAGRof25-30percenttoreachamarketsizeof
approximatelyINR28,000croresbyFY2015,whichtranslatestoanincremental
growthofaroundINR23,000croresinthenext7years.KPMGbelievesthat
achievingthisgrowthisdependentontheabilityofthekeystakeholdersviz.
Government,Regulator,healthcareproviders,insurancecompanies,NGOs/SHGs,
TPAs,distributionchannelpartners,healthcentersandthemediatostrengthen
theindustryaroundthePillarsofChangeandEnablersforGrowth.
WhilethePillarsofChangearecriticalforbuildingarobusthealthinsurance
industry,theEnablersforGrowtharecriticalforthepropellingthegrowthofthe
industryinthefuture.Inanutshell,themostcriticalparadigmsinclude:
Increasingcustomerawarenessabouthealthinsuranceanditsbenefits
Standardizationandaccreditationofallhealthcareproviderstohelpensure
qualityhealthcare
Enhancinghealthcareinfrastructureespeciallyintier2/3andruralareasinIndia
Buildingacomprehensiveandsustainablehealthinsurancedatarepositorylike
acreditinformationdatabasemanagedbyCreditInformationBureau(India)
Ltd.
Encouraginginnovationaroundproducts,channelsandusageoftechnology.
Thus,thereisaneedforconcertedeffortbyallthestakeholdersofthehealth
insuranceindustrytocollaborateandpavetheroadaheadfortheIndianhealth
insuranceindustry.
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List of Abbreviations
BPL BelowPovertyLine
CAGR CompoundedAnnualGrowthRate
CGHS CentralGovernmentHealthScheme
ESIS EmployeesStateInsuranceScheme
FGD FocusGroupDiscussion
FY FinancialYear
GDP GrossDomesticProduct
GWP GrossWrittenPremium
INR IndianRupee
IRDA InsuranceRegulatoryandDevelopmentAuthority
MFI Microfinanceinstitutions
NCMS NewCooperativeMedicalScheme
NGO Non-GovernmentOrganization
OPE Out-of-PocketExpenditure
OTC OvertheCounter
PHC PrimaryHealthCenter
PPP Public-PrivatePartnership
PSU PublicSectorUnit
RSBY RashtriyaSwasthyaBimaYojana
SEC SocioEconomicClass
SHG SelfHelpGroup
TAC TariffAdvisoryCommittee
TPA ThirdPartyAdministrators
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About KPMG in India
KPMGisaglobalnetworkofprofessionalfirmsprovidingAudit,TaxandAdvisory
services.Weoperatein145countriesandhave123,000peopleworkingin
memberfirmsaroundtheworld.TheindependentmemberfirmsoftheKPMG
networkareaffiliatedwithKPMGInternational,aSwisscooperative.EachKPMG
firmisalegallydistinctandseparateentityanddescribesitselfassuch.
TheIndianmemberfirmsaffiliatedwithKPMGInternationalwereestablishedin
September1993.Asmembersofacohesivebusinessunittheyrespondtoa
clientserviceenvironmentbyleveragingtheresourcesofaglobalnetworkoffirms,providingdetailedknowledgeoflocallaws,regulations,marketsand
competition.Weprovideservicestoover5,000internationalandnationalclients,
inIndia.KPMGhasofficesinIndiainMumbai,Delhi,Bangalore,Chennai,
Hyderabad,KolkataandPune.ThefirmsinIndiahaveaccesstomorethan3000
Indianandexpatriateprofessionals,manyofwhomareinternationallytrained.We
strivetoproviderapid,performance-based,industry-focusedandtechnology-
enabledservices,whichreflectasharedknowledgeofglobalandlocalindustries
andourexperienceoftheIndianbusinessenvironment.
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About CII
TheConfederationofIndianIndustry(CII)workstocreateandsustainan
environmentconducivetothegrowthofindustryinIndia,partneringindustryand
governmentalikethroughadvisoryandconsultativeprocesses.
CIIisanon-government,not-for-profit,industryledandindustrymanaged
organisation,playingaproactiveroleinIndia'sdevelopmentprocess.Founded
over113yearsago,itisIndia'spremierbusinessassociation,withadirect
membershipofover7500organisationsfromtheprivateaswellaspublicsectors,
includingSMEsandMNCs,andanindirectmembershipofover83,000companiesfromaround380nationalandregionalsectoralassociations.
CIIcatalyseschangebyworkingcloselywithgovernmentonpolicyissues,
enhancingefficiency,competitivenessandexpandingbusinessopportunitiesfor
industrythrougharangeofspecialisedservicesandgloballinkages.Italso
providesaplatformforsectoralconsensusbuildingandnetworking.Major
emphasisislaidonprojectingapositiveimageofbusiness,assistingindustryto
identifyandexecutecorporatecitizenshipprogrammes.Partnershipswithover
120NGOsacrossthecountrycarryforwardourinitiativesinintegratedand
inclusivedevelopment,whichincludehealth,education,livelihood,diversity
management,skilldevelopmentandwater,tonameafew.
Complementingthisvision,CII'stheme"India@75:TheEmergingAgenda",
reflectsitsaspirationalroletofacilitatetheaccelerationinIndia'stransformation
intoaneconomicallyvital,technologicallyinnovative,sociallyandethicallyvibrant
globalleaderbyyear2022.
With64officesinIndia,8overseasinAustralia,Austria,China,France,Japan,
Singapore,UK,USandinstitutionalpartnershipswith271counterpart
organisationsin100countries,CIIservesasareferencepointforIndianindustry
andtheinternationalbusinesscommunity.
Confederation of Indian Industry
105,KakadChambers,132,Dr.A.B.Road,
Worli,Mumbai-400018
Phone:022-24931790,
Fax:022-24939463,24945831
Website:www.ciionline.org
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Acknowledgement
This report was wr itten wi th valuable inputs from Shalin i Pillay, Avani Shah, Nidh i Goel, Pratixa Davawala,
Shouvik Paul, Gaurav Mahant, Swati Shankar, Naren Gorthy, Ashish Sing la, Kavya Shetty and Riddhi Kaul.
7/29/2019 Health Insurance Summit - proceedings
43/43
in.kpmg.com
KPMG in India
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e-Mail: adiwanji@kpmg.com
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