The pandemic has nudged more Indians to get health cover, but the distance to near-universal levels is huge. Affordability of health plans remains low and some insurers are guarded over the business impact of covid-19
Historically, Indians have had poor access to health insurance. While covid-19 has certainly nudged more Indians to get health cover, universal coverage still remains a distant objective. Individuals’ wariness in buying health cover—and companies’ in selling it—places limits on the adoption rate. For individuals, the circumspection comes from affordability. For some insurers, it comes from the devastation caused by covid-19, which has also hurt their financials.
Covid-19 has spurred health insurance, but universal coverage remains far away Of this, 362 million were covered via the government’s Pradhan Mantri Jan Arogya Yojana, which comes with coverage limits and issues of access to quality healthcare. The rest 136 million—or about 10% of the country’s population—were covered either by organizations a member in their family worked for or by themselves.
Data on how this number has moved during the pandemic is not available yet. However, data from the General Insurance Council, an industry body, shows ₹58,572 crore was paid as health premiums by policyholders in 2020-21, which included the first wave of the virus. This amounted to a year-on-year increase of 13%, the same as in 2019-20.
A growing chunk of these premiums is coming from the retail set, which shows rising propensity of individuals to cover themselves rather than rely on their employers. In 2020-21, this share was 45%, the highest in four years. Meanwhile, in the first four months of 2021-22, which included the second covid-19 wave, total health premiums increased by a brisk 34% on a year-on-year basis. While this would have added a few millions to the population covered, India still needs to bring 700-800 million more people into this fold.
Push to Pull
Another data point that shows rising individual adoption of health insurance is how plans are being bought. The three main sales channels—insurance brokers, insurers themselves, and individual agents—accounted for 86% of health policies sold and 77% of health premiums collected in 2020-21. While insurance brokers held on to their share, the other two saw a marginal decline over 2019-20.
One reason was the emerging online sales channel, which is serviced by the likes of policybazaar.com and coverfox.com. They are aggregators—they sell plans of multiple insurers—as well as sellers. In health insurance, the share of online policies sold has increased from 2.6% in 2018-19 to 5.4% in 2020-21. Its share in health premiums is even higher, at 7.9%.
The changing trend underscores the evolution of health insurance from a push product (sold aggressively by individual agents) to a pull product (bought by individuals themselves).
For insurers, the covid-19 pandemic has come as both a boon and a bane. On the one hand, the unpredictability and the harm caused by the virus have done more to impress upon individuals the necessity of health insurance as a risk-mitigation tool. On the other hand, the rash of hospitalization claims arising from the pandemic has dented profitability.
In the past, health had been a profitable piece for private insurers. The pandemic has changed this. Overall health claim numbers during the pandemic are not available, but a lot can be gleaned from the quarterly results of ICICI Lombard General Health Insurance, a listed company. In 2019-20, it made an operating profit of ₹493 crore from its health portfolio. During the first wave, its profits dropped significantly, but it was still profitable. However, in the quarter that saw the second wave, the insurer registered an operating loss of ₹516 crore in its health portfolio.
With fears of a third wave, covid-19 remains a potent threat to the health business of insurers in the near term. The question facing them is how much they are willing to stretch now to acquire new customers for the long term at the risk of seeing a short-term spike in their claims due to covid-19.
Among the top 10 insurers by premium share in the retail health segment, several private ones have registered brisk growth during the last 18 months or so. Notable among them are market leader Star Health, Care Health, Niva Bupa Health and Aditya Birla Health. The four public sector insurers, who lose money on their health portfolio in normal times, trail their private peers on growth. Covid-19 is likely to increase coverage. But given that only about 40% Indians have health cover, and only 10-15% is through insurers, the distance to cover remains huge.
www.howindialives.com is a database and search engine for public data.
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