DECADE OF EXPERIENCE: HEALTH CARE INSURANCE- PRESENT SCENARIO PROBLEMS & PROSPECTS OF DISTRIBUTORS/BROKERS IN HEALTH CARE INDUSTRY IN INDIA India Insure

DECADE OF EXPERIENCE: HEALTH CARE INSURANCE- PRESENT SCENARIO

PROBLEMS & PROSPECTS OF DISTRIBUTORS/BROKERS IN HEALTH CARE

INDUSTRY IN INDIA

India Insure Risk Management & Insurance Broking Services Pvt. Ltd

SCOPE OF PRESENTATION

MARKET SCENARIOBroad overview of the Health care industry in IndiaBroad overview of Health insurance in IndiaCurrent market dynamics

DISTRIBUTION SET UP OF THE HEALTH INSURANCE INDUSTRY

Channel wise premium Channel wise concerns Broker concerns – in detail

THE WAY FORWARD Leveraging the Distribution networkAgency force restructuringBancassurance restructuringEnhanced marketing through broking


HEALTH CARE IN INDIA

• Healthcare is one of India’s largest sectors, in terms of revenue and employment and the sector is expanding rapidly.

• Heath care spend in India is currently poised to touch 8% of GDP in 2012 ( 5.5% in 2009)

• Health care industry size in 2011 – USD 50 bn• Forecast to touch USD 235 bn by 2020• Private sector accounts for more than 80% of total healthcare

spending in India


HEALTH CARE IN INDIA

• Drivers of growth in the healthcare sector include:– India’s booming population – Rising life expectancy– Expanding middle class – rise in disposable income – Rise in infectious, chronic degenerative & lifestyle diseases – Emergence of a robust pharmaceutical industry– Health insurance proliferation– Medical tourism

• Bottlenecks to growth :– India’s deteriorating healthcare infrastructure– The healthcare divide between the urban middle class & the rural poor

(education divide)– A widespread lack of health insurance compounds the healthcare challenges

that India faces– An abysmally low government spending on health - at USD 32 per capita


HEALTH INSURANCE IN INDIA

• Why is Health insurance required?• Fastest growing segment in the insurance industry – presently growing at

32%• Health insurance sector poised for immense growth• The growth chart

• Projected growth – INR 30000 crs by 2015

2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11

16702222

3500

5300

6634

8305

11145

Health Insurance Premium Growth (in crs)


SHIFT IN SEGMENT MIX from FY 2009 - FY 2011

Shift In Product Mix 2008 – 09 2009 – 10 2010 – 11Motor 44% 42% 41%

Health 20% 23% 25%

Fire 11% 11% 11%

Marine 7% 6% 6%

Engineering 5% 5% 4%

Liability 2% 2% 2%

Others 11% 11% 11%

The industry’s focus is now on

health insurance whose

contribution has increased to

25% in 2010-11 compared to

11% in 2005-06.

Health insurance has been the

fastest growing market segment

registering a CAGR of 32% for

last 6 years.

The growth drivers include

ageing population, increasing

healthcare costs, improving per-

capita income and awareness

and increasing health insurance

by employers.India Insure Risk Management & Insurance Broking Services Pvt. Ltd

WHAT AILS HEALTH INSURANCE IN INDIA

o High Claims Ratio -Competition forcing insurers to undercut prices - Insurer health portfolios in red

o System leakages - Provider malpractices leading to over-charging and over- treatment

o Large employee groups have traditionally abused the scheme – member impersonations, malafide claims etc – leading to large losses.

o Healthcare costs continue to outpace inflation


MAJOR ISSUES IN HEALTH INSURANCE – SURVEY FINDINGS

PROPERTY PROJECTS HEALTH LIABILITY MOTOR

11%4%

22% 25%13%

12%

9%

7%

25%

11%19%

3%

29%

10%

13% 12%

3%

32%

10%

11%23%

6%

14%15%42%

31%

16% 18% 15%

41%

Lack of Underwriting discipline

Lack of product innovation

Lack of product awareness among dis-tributors

Lack of customer awareness – takes it only if mandatory by contract

Increased competition

Increase in hospital tariffs leading to increase in claims cost.

Increase in fraudulent claims


MAJOR ISSUES IN HANDLING HEALTH INSURANCE POLICIES- from the policyholder perspective

Changes in regulations - PPN list being decreased

Policy cancellation notices from Insurer

Changes in regulation – Service tax being imposed for Cashless services

Change in Insurer attitude after picking up the cheque

Service from the Broker not up to the mark

Service from TPA not up to the mark

Employee dissatisfaction due to delayed claims settlement

13%

13%

14%

22%

24%

63%

76%


CURRENT MARKET DYNAMICS

• Effects of cross-subsidization have rescinded. – The trend until Dec 2009 was Premium = Expiring claims– The trend today is Expiring claim + Inflation (10%) + Administrative

Charges + Service Tax• Overcharging Providers being increasingly blacklisted by Insurers• Claims upsurge => Mid-term cancellation notice from insurer• Loss control measures increasingly being introduced - caps on room rent,

surgery limits, parental claims etc.• PPN concept tasting some degree of success…likely to be emulated for

other cities also.


DISTRIBUTION

• Distribution channel development in India• Channel wise Health premium• Leveraging the Distribution network• Channel wise analysis• Broker Concerns• Way forward


DISTRIBUTION CHANNEL DEVELOPMENT IN INDIA

Agency - Mature

Direct Marketing- Mature

Bancassurance - Growing

Brokers - Growing

Telemarketing - Growing

Micro insurance- Growing

Virtual marketing - Emerging


CHANNEL WISE HEALTH PREMIUM

2009-10 2010-11

Type of ChannelHealth Insurance* Health Insurance*

Premium (in lacs) % Premium (in lacs) %

Individual Agents 2,85,139 36.04 321132 29.57Corporate Agents 36,872 4.66 72546 6.68Banks 16,604 2.10 21774 2.00Others* 13,370 1.69 34598 3.19Brokers 1,33,531 16.88 227553 20.95

Referral Arrangements 7,450 0.94 51480.47

Direct Business 2,98,149 37.69 403435 37.14Total 7,91,114 100.00 100.00* excluding Overseas Health premium


DISTRIBUTION CHANNEL POSITIVES NEGATIVES

AGENTS • Company centric• Reach • Personalized

• Limited knowledge• High attrition • Cost

BANCASSURANCE • Reach • Limited knowledge• Not personalized

BROKERS • Knowledge• Bargaining power• Personalized service• TPA relationship due to volumes• Larger volumes through corporate

policies• Claims control advise

• Limited value add in Retail market

• Focus on Urban market only• Not yet fully accepted by the

market• Clients using them as Quote

negotiatorsDIRECT MARKETING • Cost (can be cut and in case of in house

TPA, can be cut further)• Lack of personalized service• No value add in claims

minimization


BROKER CONCERNS

• No access to repository of data • Still competing with Insurer…. Not yet ‘included’ by Insurer• Multiple mandates beating the logic of insurers …. What is L1?• Margins thinning• Price the only concern of customer- Quote vending machines• Market reacting slowly to wellness, prevention and cost control programs


OUR SURVEY FINDINGS

56%

30%

15%

Single Insurance Broker?

Yes

No, multiple brokers depend-ing on area of expertise

No, multiple brokers to get the best price

The adjacent chart indicates the level of competition in the Indian insurance industry. 44% of the respondents utilize multiple insurance brokers- depending on the brokers area of expertise and also to pitch them into the competition to get them the best price.


A GLIMPSE INTO THE MARKET FEEDBACK ON BROKERS

Serv

icin

g of

pol

icy

Know

ledg

e of

Pro

duct

Pric

e ne

gotia

tion

Und

erst

andi

ng C

usto

mer

requ

irem

ent

Abili

ty to

get

goo

d RI

term

s

Mak

ing

prop

er R

isk

pres

enta

tion

Clai

ms

serv

icin

g

Ove

rall

valu

e ad

d to

cus

tom

er

Ove

rall

valu

e ad

d to

ins

urer

Assi

stan

ce to

cus

tom

er fo

r cla

ims

docu

m...

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Broker Rating

V Good Good

Average Poor

V poor


LEVERAGING THE DISTRIBUTION NETWORK

• Enhancing Customer awareness• Product innovation to suit different segments of society rather than “one

size fits all”• Agency model to be restructured to tap the rural market• Finding new business opportunities in the micro insurance segments• Bancassurance channel not capitalizing on the available data base• Brokers contribute to about 18% of health insurance market – Focus only

on urban, group policies• Brokers can tap the worksite marketing opportunities available• Virtual marketing activities such as electronic kiosk stands, mobile

advertising and the Internet to be tapped


GROWTH ENHANCERS GROWTH INHIBITORSCorporate group policies Intensively price drivenState Govt./ Central Govt. group policies

Customers at the receiving end at the time of a claim

Life insurers entering the fray with Combi policies

Product not catering to different segments

Emergence of stand-alone health insurance companies

Distribution structure inadequate

Increasing awareness of benefits of health insurance products

Govt. spending on health care negligible

Steep rise in hospitalisation costs No regulation on providers leading to a vicious circle of premium & cost increases thus making insurance unaffordable to a majority of population

Health insurance portability Service tax on health insurance products

Demand for New Products - Preventive Care, Out-patient coverage, Long Term Care


CAN WE EMULATE?• A study of developed markets reveals that health insurance in Netherlands

has developed to a very great extent – Uninsured individuals is about 1.5% of the population and in Switzerland it is < 1%

• Every person who resides or pays payroll tax in Netherlands, mandatorily must take insurance and in Switzerland every resident must take basic health insurance.

• Insured has the freedom to select the insurer and subsequently switch during an annual enrolment period (semi annual in case of Switzerland) and insurers must accept all applicants. Internet premium comparison sites available

• Group insurance through employers exist in Netherlands (57% covered through such contracts) whereas it is not permissible in Switzerland


WAY FORWARD – REGULATIONS SUGGESTED• Encourage innovation – segment based and channel based• Discourage insurer / broker, broker/ broker competition – single

mandates to control price drop• Incentivize products for the rural segment• Govt. to make health insurance mandatory in select segments• Govt to check intervene on variable tariffs – with / without insurance• Bidding system – one insurer – one state - so that risk is spread

uniformly • Pool for identified segments


WAY FORWARD – AGENCY MODEL PRESENT• High level of attrition• Low economic incentive• Weak management practices –

low control on distribution

SUGGESTED• Tight recruitment process • Align performance metrics and

incentives to build long term franchise

• Rigorous systems to ensure ground discipline

• Enhance interface between sales force and operations – market feedback


WAY FORWARD – BROKING CHANNEL

PRESENT• Focus on Group policies• Focus on Urban market only• Price negotiators

SUGGESTED• Incentivize rural market schemes

– with emphasis on service parameters

• Claim controllers• Insurer acceptance – not

competitor


CHANGING ROLE OF BROKERS

Match Maker Service Provider

Conventional Insurance Specialty lines insurance

Property risks Human capital risks

Insurance Placement Claims Control

Transaction executor Trusted business partner


WAY FORWARD – BANCASSURANCE

SUGGESTED

• Leveraging the strengths of both parties• Simple products to reach out to rural masses• Standardized sales scripts for training bank employees• Integrate IT link- insurer - bank


WAY FORWARD• Focus on rural India through micro insurance initiatives• Central Govt. initiatives to reach Health insurance to the masses• Priorities for insurers to be

– Product innovation– Managing channel costs, Improving channel productivity and exploring new channels

with a focus on IT enablement in channels

• Brokers role to increase only for claims analysis and claims minimization advise

• Engaging all stakeholders to hold the line on costs and focus on quality of care

• Effective Information Delivery - Because policyholders are increasingly responsible for making decisions about their health care, participants must be familiar with the health care system and understand their health care options


THANK YOU


Documents

DECADE OF EXPERIENCE: HEALTH CARE INSURANCE- PRESENT SCENARIO PROBLEMS & PROSPECTS OF DISTRIBUTORS/BROKERS IN HEALTH CARE INDUSTRY IN INDIA India Insure