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BW Businessworld

The Distress Call

How insurance companies are creating products custom-suited to educated urban Indians and their counter parts in tier -2 /3 cities

Photo Credit : Shutterstock


For 45-year-old Nitin Oza (name changed), memories of his family’s hapless condition — both emotionally and financially — when his grandfather was detected with cancer continue to linger and haunt, even after 30 years. In the 1980s, says Oza, people neither had enough knowledge about insurance products, nor did the market offer schemes that could take care of such huge expenses, if the need arose. Awareness, whatever little there was, was restricted to only life insurance.

As a young boy, Oza was witness to the anxiety, worry and sense of helplessness that his father underwent for months, denting a slice of his childhood.

Now, with several options in the market for insurance, and the experience so strongly etched in his  mind, Oza knows his priorities. “I have a health insurance cover of Rs 25 lakh from a general insurance company. The product covers hospitalisation and treatment cost of most major illnesses for my family and me. However, a few months ago, while I was renewing my life insurance plan, I realised I could get covered for specific illnesses like cancer and I immediately thought of buying that product,” he says. “Cancer and cancer treatment can financially and emotionally drain out families. Since then, I have grown up with a sense of fear about being attacked by the illness myself and when I realised there was a product that covers cancer I bought it instantly,” says Oza.

Grim Picture
Though India accounts for 21 per cent of the global disease burden, only about 350 million Indians out of 1,320 million have access to health insurance. Medical inflation in the country is rising at about 15 per cent annually and a medical emergency at any stage can trigger an unexpected financial burden and even push many families into financial distress.

A study jointly done by the Confederation of Indian Industry (CII) and PricewaterhouseCoopers notes that the rise in healthcare costs will significantly impact the healthcare ecosystem in India. Behavioural factors such as change in lifestyle have also resulted in newer types of diseases, which require access to specialists.

Industry estimates suggest that over 78-80 per cent of healthcare expenses, at present, are funded by Indians from their own pockets. In times of medical emergencies, people have been dipping into their savings or even resorting to selling off their assets to meet treatment costs. Only the remaining amount comes from insurance.

The Silver Lining 
Level of awareness among Indians is increasing rapidly and there is a visible change in their mindset. The rising number of upwardly mobile Indian upper middle class or the high networth individuals (HNIs) are now open to spending “a significant amount” on health insurance.

Not just that. One of the most encouraging aspects for insurance companies is the fact that a large number of Indians, below 35 years of age, are looking at buying insurance products. Even a decade ago, insurance products were primarily purchased by those over 35 — closer to 40 years of age. And as health insurance segment shows robust growth, life insurers, too have started foraying into this area.

While a host of general insurance companies, as well as, stand-alone health insurers offer health cover, life insurance players, in the last two years, have started focusing on health insurance products. Analysts say with rising awareness levels, especially among urban Indians, life insurers are using their own network to reach out to their customers with health plans designed for critical illnesses.

According to an ICICI Prudential research, heart ailments and cancer together account for over 50 per cent of casualties among Indians and an estimated 2 lakh heart surgeries are conducted every year. The research also shows that cancer cases are expected to rise by 25 per cent by 2020. Every 13th new cancer patient in the world is from India.

Typically, health insurance products offered by life insurance companies are different from a mediclaim or what health insurers offer to their customers. Life insurers that have forayed into this space, typically offer lumpsum benefit instead of reimbursement of medical expenses. Simply put, the customer gets the full amount from the insurer after diagnosis and she can use it the way she wants — for treatment or even otherwise. Often customers even use a part of the insured amount as cover for any loss of income which may arise due to the illness.

ICICI Prudential, HDFC Life, Aviva Life, Max Life are among those which have already launched their own stand-alone health insurance products.

“Within health insurance, we believe there is a differentiated proposition that life insurance companies can offer. This segment is gaining popularity due to its greater relevance for customers,” says Puneet Nanda, CEO, ICICI Prudential Life Insurance. “A financial plan should not just be about meeting the cost of treatment but should also take into account other aspects such as potential loss of income, other incidental expenses. This is where having a lumpsum benefit plan offered by life insurers helps.”

As the county’s economic growth picks up and customers — both urban and rural — realise the need to be adequately insured, the insurance market in the country is expected to mature.

“The money is just given to the customer and she can not only use it for treatment but also to cushion any financial loss that could arise due to salary loss or even for other personal use, unlike a health insurance product or mediclaim,” adds Anjali Malhotra Nanda, chief customer, marketing and digital officer, Aviva Life Insurance.

While, at present, only a few life insurers are offering stand-alone health covers, many more are looking to grab this space in the next couple of years.

Differential Pricing
To increase reach, especially in the smaller towns, a host of companies is looking to introduce differential pricing for health insurance products. A customer, living in Patna, for instance, may have to pay lesser premium for a health cover than another subscriber in Delhi or Mumbai. The premium could be lower by even 20 per cent. Many customers in tier-2/3 towns have often shied away from buying health insurance products because of their high costs. But as companies begin to adopt multiple-price formula, demand from smaller towns is set to increase. The average claim in the major metros is typically between Rs 40,000 and Rs 45,000, while the sum is much lower in smaller cities — say, between Rs 11,000 and Rs 15,000. Several companies such as Bajaj Allianz, Max Bupa and Apollo Munich Health Insurance have already adopted differential pricing for health insurance premium.

Urban Indians Seek Higher Health Insurance Cover
The increase in the number of HNIs in India has carved out another opportunity for health insurance companies. A large section of the HNIs are now seeking health insurance cover upward of Rs 25 lakh, due to rising medical costs in the metros. In many cases, customers even seek health insurance cover of up to Rs 1 crore.

According to a Kotak Wealth Management report, the number of ultra-HNIs in the country is increasing. In fact, this community is growing at 12 per cent CAGR. The projected number of ultra-HNIs is expected to touch 3,30,400 by 2022, from an 1,60,600 at the end of 2017. Interestingly, 60 per cent of the ultra HNIs were below 40 years of age. “This provides a huge opportunity for insurance companies in India, which has a highly under-penetrated insurance market. But with growth picking up and income levels increasing, the under-penetrated and under-served insurance market is set to boom,” Soumya Kanti Ghosh, chief economic adviser, SBI Group, adds.

“A sharp escalation in medical expenses especially for treatment of critical lifestyle diseases including cancer, heart attacks and surgeries for the brain or transplants of organs can dent the individual’s pocket,” says Aviva Life Insurance’s Nanda. “We see more and more Indians being open to buying health insurance products over and above what a basic cover would provide, they are absolutely open to increasing spends on healthcare and health insurance,” Nanda notes.

The Government Push
Finance minister Arun Jaitley, in his last full Budget, announced a national healthcare scheme for 10 crore families covering about 50 crore people. Those, who get covered under the plan, will get a benefit of up to Rs 5 lakh annually for hospitalisation.

Insurance companies are happy with the government’s focus on insurance, albeit the announcement was aimed at covering those categorised as vulnerable.

“In a country like India, focus on health and health insurance is critical. Though the final plan is yet to be chalked out, the states will have a significant role to play in this and to make this programme a success but this will further increase the awareness level,” says Sanjaya Baru, secretary general, Ficci.

Majority of India’s poor, living in rural areas, still have no access to insurance, despite government schemes under the JanSuraksha umbrella. The JanSuraksha umbrella includes the Pradhan Mantri Jeevan Jyoti Bima Yojana and the Pradhan Mantri Suraksha Bima Yojana besides the Atal Pension Yojana.

The government has been nudging public sector banks to proactively push the social security schemes under the Pradhan Mantri Jan Suraksha umbrella. The public sector banks, based on the bank accounts under Pradhan Mantri Jan Dhan Yojana (PMJDY) and profiles of their customers, have been asked to identify all those who are not covered under any social security schemes so that they can be brought under the security net. While the Pradhan Mantri Jan Dhan Yojana — bank accounts for all households — was a huge success, the social security schemes are yet to take wings.