2016 should be a point of inflection for the health insurance industry
The health insurance industry grew at about 16% in 2015, which is more than twice the rate at which India’s gross domestic product (GDP) is growing. The industry has seen year-on-year growth of more than 27% in direct premium collections. These numbers indicate that the foundation has been laid to make 2016 a year of inflection.
The robust growth can be attributed to a variety of factors. The category per se has expanded with new companies coming in, new products being launched and the distribution network being expanded. However, there are also several catalysts at work, which have imparted momentum to the industry. The most important among these would include: a) increasing awareness among consumers; b) increasing disease burden on the society and the government; c) availability of technology to enable access and improve experience; and d) regulatory fillip.
A study jointly conducted by Nielsen and Max Bupa Health Insurance Co. Ltd in 2014-15, covering 1,500 consumers across India, brought out important insights. Nearly 70% of the respondents considered health insurance to be more important than life insurance. Nearly 60% of the aware consumers realised that their employer-provided health insurance plan might be inadequate. Importantly, consumers are moving from individual covers to family covers, going for higher coverage amounts and are looking beyond price while choosing their policy.
The penetration numbers for the industry might still be modest, but the growth in awareness numbers indicate that consumers are waiting for the right products.
Owing to the increasing number of lifestyle diseases, health insurance is becoming a necessity for people. Over 60 million Indians are afflicted by diabetes alone. Cardiovascular procedures have seen a spike and the burden is expected to increase further, making health insurance a universal need.
It is also worth noticing that technology-led transformation of the industry is underway. The pace of change in technology indicates that health insurance companies have more leverage to further enhance access and experience for consumers.
The industry’s expansion also got a fillip from important regulatory milestones in 2015. Increase in the foreign direct investment (FDI) limit to 49% as well as clarity coming from Insurance Regulatory and Development Authority of India (Irdai) are reforms that will help in the longer term.
While the above mentioned factors have laid a strong foundation in 2015, they also provide mettle to help the industry grow in 2016. It is my expectation that the industry is poised for 18-20% year-on-year growth for the next five years, faster than the year gone by. The factors which I feel would play out in the coming year and further sweeten the growth story include impact of technology and digitisation, product and service innovation, and improved transparency.
Under the aegis of the government’s Digital India initiative, I expect the pace of Internet adoption to accelerate. India should have half-a-billion Internet-connected citizens by the end of 2016. This change is expected to have a halo effect on insurance. The cost of reaching consumers, providing information and processing their claims seamlessly will reduce significantly. The parallel one could draw is what ATMs did for the banking industry. Digitisation would translate into our ability to reach the significant uninsured population in the country.
Further, the policyholder’s experience of using the product can be enhanced using digital and mobile platforms. Instant claim approval and preventive healthcare through Internet and mobile apps is already happening. It is a safe assumption that most insurance companies, too, would make their services and processes accessible digitally. The benefit of being able to enhance user experience digitally would provide the necessary positive referrals (a relatively feeble force today) for the category.
With growing awareness and rising cases of lifestyle diseases, consumers are demanding more ‘personalised’ products. Now it is for the insurance industry to create products mapped to such needs and to expand the category. The purview of insurance products has to expand beyond ‘in-patient’ care. Customer-centric product and service innovation will be the hallmark of new product launches in the new year.
Any effort that gives more power to the consumer strengthens the industry, which has for long been perceived as opaque. The survey brought out the fact that over 60% consumers aware about health insurance were wary about the amount of “fine-print”.
We have to envision a future that empowers the consumer with adequate information and transparency. The technology to help do this exists.
Important recommendations made by the health insurance committee (set up in December 2014 to examine health insurance framework) last year have been implemented, which should lead to tangible benefits. These include putting a curb on mis-selling, or in other words, improving transparency through standardised norms on disclosures; reforms that allow premiums to be increased linked to an inflation index; and have an entry age-based premium pricing model, to enable the industry cater to even the elderly, who in fact are more in need of cover and support.
Ashish Mehrotra, chief executive officer and managing director, Max Bupa Health Insurance Co. Ltd.