The 364 day gap in health insurance

India has an abysmal penetration of health insurance. Less than 20% households are covered by any sort of health insurance (not accounting for PMJAY here, which is a pioneering Government initiative in the underprivileged segment). Over 60% of hospital bills are still paid by individuals themselves. Many households are thus pushed into poverty with single health events taking a toll on their livelihood. This is not just an issue among the poor. The middle class, the mass affluent and the rich are equally under-covered. Employers are doing their bit but out of 60 M income tax payers, only about half are covered by group health insurance (author's rough estimate). Although, the rate of growth of penetration is improving, it is a distance away from the coverage that a country like us needs.

We have all been told since aeons that insurance is sold and not bought. Health insurance is no different. Over the years, Banks and insurers have "attached" health insurance to almost every other financial product - loans, savings accounts, credit cards. Employers have scrambled to get the "lowest quote" so that they can somehow cover their employees and "check that box". Agents and brokers are at a perennial war in a commoditised market. As a result, millions of Indians have landed up with a product which they don't understand and which they perhaps didn't intend to purchase in the first place.

The real problem is quite straight forward. The Indian consumer does not find true value in the current product proposition. Period. Today's proposition is designed around the extreme event of hospitalisation - something that 5% of the insured population experiences in any calendar year. For the rest of the 95% of the population, there exists a 364 day gap - the days between their insurer seeking a renewal of their policy. In these 364 days, not one of the stakeholders who originally sold them the policy (insurer, intermediary, employer) have engaged with the consumer on their health. This is unpardonable in a product which is called "health" insurance. So, when the consumer is asked to pay for a 5% probabilistic event - he/she responds by attributing a much larger probability to "God" rescuing him/her!

If health insurance has to achieve "product market fit", the proposition needs to offer events which have a higher probability of occurrence or which matter to the health of the consumer. Doctor consultations, medicine purchases, diagnostics, challenges, fitness studio memberships, disease management, outcome based programs, health aspirations are some of the things which a consumer will see value in as they are already engaged in these week after week. On the other hand, the probabilities and the payouts also cannot be 100%, in which case, insurance loses meaning. The real innovations therefore are to be able to offer propositions which matter, at price structures which work and above all an incredible consumer experience.

Why have these problems not been solved? For the simple reason that its a hard one! There is a delicate balance between sales and underwriting (naturally so) - which has meant that when efforts have been made to include Out Patient Benefits or OPD in insurance policies, they have been half hearted. "Wellness" is a passing mention in most insurance policies with OPD and wellness, even if included, being almost impossible to claim against. Since utilisation of such benefits is low by design, correlations have yet not been firmly established between OPD and hospitalisation linked loss ratios, only proving the chicken or egg conundrum! Lastly, an engaging customer experience requires a connected health ecosystem offering seamless exchange of workflow and data, enabling insights for the consumer. Such an ecosystem is incredibly hard to execute and when incremental growth is possible by unleashing a distribution force selling a multitude of "me too" products , why risk the uncharted waters of health engagement ? As a consequence of all of the above, NPS, an indicator of customer love, is one of the lowest for the health insurance industry.

At Alyve Health, we are focused on solving the 364 day gap problem. Over the last few months, we have built a first of its kind connected health ecosystem. Our group business is live and we have a unique proposition. Our north star is consumer engagement and utilisation of product benefits. In doing so, we want to deliver a proposition which will ensure that health insurance is bought and not sold. More on this as the action unfolds!