Reportlinker Adds India Health Insurance Market

India, a country full of lucrative opportunities, is amongst the most important emerging insurance markets in the world. The sound economic fundamentals, burgeoning middle class, improving regulatory structure and growing risk awareness, the life insurance has created a good scope for rapid growth over the decade to come.

The basic changes in the regulatory framework of the Indian insurance sector in 1999 will prove extremely critical for future growth. FDI in the Indian insurance sector is capped at 26% and the government plans to increase it to 49% by the end of 2010 despite this restriction; several large foreign insurers have forayed into the market. Detariffication has also proved beneficial for the market and foreign players. However, the majority share is still under the control of state-owned insurance companies. But this is likely to change over the next decade.

Life insurance accounts for the larger chunk of the overall Indian insurance sector. In this sector, new private insurers are bringing in new products to the market and using innovative distribution channels to reach a broader base of the population.

The life insurance segment is all set to flourish but the sector, since it was opened up to competition in 2001, has recorded a decline in its premium income in 2008-09 due to economic slowdown and slump in demand for ULIPS that provide market-linked returns to policyholders. This decline can be a signal of impending consolidation in the marketplace.

Early this year, a very strange row between SEBI and IRDA that had cropped due to the very controversial, expensive and mis-sold product, ULIP, finally came to an end when IRDA issued new guidelines. The fight was due to the administrative power over the product, ULIP is an investment plus insurance product so both regulators were claiming their control on it.

The Insurance Regulatory and Development Authority (IRDA) has issued guidelines on unit-linked insurance products (ULIPs) under the guidelines:

• The minimum policy term for ULIPs would be up to five years.

• All ULIPs would have an insurance cover payable on death.

• The pension/annuity products need to have insurance cover too.

• No loans would be allowed under ULIPs

• A partial withdrawal in the ULIPs would be allowed only after the fifth year of policy.

• No partial withdrawal for pension/annuity products.

The guidelines would be applicable to all ULIPs from 1 July 2010.

The General Insurance industry has recorded a growth of 13.4% in its gross premium collected during 2009 – 2010. The growth has been propelled by the increase in the value of underlying assets with rising GDP and personal incomes, increasing penetration across categories, and of course, growing population.

Indian population has crossed the mark of 1.2 billion and is growing at an annual rate of 2%. The major reason for this large population base is improving healthcare infrastructure, declining infant mortality, eradication of such diseases as polio and hepatitis, and increasing life expectancy (by 2025, an estimated 189 million will be 60 or older). But still, the healthcare infrastructure is not strong enough to support the burden of a billion people. As a result, the private sector accounts for more than 80% of total healthcare spending, but only a little more than 1% of the population are covered by private healthcare insurance.

To cover more people under the health insurance schemes (and increase the penetration of insurance in the country in general), the Indian healthcare insurance sector was liberalized by passing the Insurance Regulatory Development Authority Bill in 1999. The Bill was designed to allow the private insurance market to emerge and proliferate in the country. However, there has been little experience of administering large volumes of healthcare claims effectively since then and the chances for misuse have not been eliminated completely.

Post-liberalization, some companies have been licensed as Third Party Administrators (TPAs) of health services to make the business of claims management more professional and streamlined, and facilitate cashless payment. Liberalization and introduction of TPAs has also made it easier for health insurers to offer health insurance on a cashless payment basis for in-patient treatment.

Nevertheless, the shortcomings of public healthcare system, high healthcare cost, and a large pent-up demand opens up the opportunities of developing insurance products to bring effective and affordable means to provide the poor with in-patient healthcare.

Presently, just around 11% of the Indian populace has any form of health insurance coverage, and only about 2.2% has private health insurance cover. Rural areas have further low penetration of health insurance; out of 2.2% total health insurance penetration, rural penetration stands at less than 10%. This doesn't go well with the extensive potential rural India, with over 6.3 lakh villages and more than 170 million households, has.

But the future will bring a turnaround and the overall Indian health insurance market will surge at a CAGR of nearly 25% spanning from 2009-10 to 2013 - 14. Insurance companies who offer innovative customer-friendly products and build strong underwriting and claim gate-keeping protocols for their health insurance business are expected to emerge as market leaders. Detariffing of the general insurance industry has increased emphasis and efforts by insurance companies towards health insurance business in the country.

But the Indian government needs to work on low awareness level and such issues as lack of information. Unlike West, where records are maintained from the time the child is born, India does not maintain individual health profiles. In the absence of such health records, insurers find it extremely difficult to evaluate whether an individual is eligible for health insurance or not. To make the industry more successful and reach the zenith, these issues have to be solved on priority basis.

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Table of Contents

Executive Summary

Indian Insurance Market

Evolution of Insurance in India

Market Size & Penetration

Market Structure

Life Insurance

General Insurance

Health Insurance Market

Indian Landscape

Indian Healthcare Industry

Indian Health Insurance Market

Market Size & Growth

Trend Analysis

Current Evaluation

Liberalization and Detariffing

Third-party Administrators

Economic Slowdown

Complex Procedures and Lack of Information

Other Factors

Future Outlook

Trends

Sales Channel Expansion

Customized Products

Partnership Spree

Market Size & Growth Potential

Market Players

Public Sector

Oriental Insurance

National Insurance

New India Assurance

United India Insurance

Private Sector

ICICI Lombard

Bajaj Allianz

Royal Sundaram

IFFCO Tokio