The health of Health Insurance adoption in India

It was November 2018. Our cook in Delhi had to arrange for INR 40,000 for the treatment of his daughter. As someone working in an informal blue-collar role, he didn't have that stash readily lying with him. At that time, few of us chipped in for the treatment.

A month later, he needed a bigger sum to follow-up on the treatment, and this time, he took up a loan. To pay off the debt, he picked up additional gigs. Starting to work at 7 am in the Delhi cold and finishing by 8 pm. His wife also supported his work apart from managing all the household chores and tending to the kids. Finally, the treatment got completed and last I knew, he had almost finished paying the loan.

For most of us who have lived/worked in India, this probably wouldn't sound like a one-off story. It is rather the norm. And this is where the premise of the post begins. On why we need a bigger push for wide-spread health insurance adoption in the country, the challenges and some ways to get past them.

But before that, let's run some numbers.

Dining on Data

The overall Gross direct premiums in India pertaining to Health Insurance for FY 19-20 have been ~ 56,000 crores. Out of this, ~ 6000 cr is attributed to Personal Accident cover and Travel insurance.

So ~ 7 billion USD is the overall Gross Direct premium collected for Health insurance in India. As a total, ~ 500 million people are insured one way or another by either (state / central) government schemes or private insurance. Big numbers and so far, so good.

However, go into the details, peeling through the layers, and therein lies the rub. Take a look at the table below - the numbers are for 2019-20. These numbers have been taken from the annual report published by IRDAI for 2019-20. As goes the usual disclaimer, I have lightly edited the numbers for easier digestion.

To give additional context, an INR 5 L (7000 USD) health cover for a healthy 30-year someone, the typical annual premium charged is 50-150 USD by the private players. This wide range corresponds to the different bells and whistles covered and provided under the individual scheme. Generally, with ~ 80 USD however, one can typically get an annual health cover for ~ 8000 USD - for a healthy 30-yo someone.

So to the takeaways:

a) High dependence on public insurance cover: Out of the 500 million people covered under some sort of health insurance, ~70% of them are covered by some public insurer. 150 million people are covered under 'National'. I couldn't find the definition of what 'National' means but I reckon it refers to the much-touted Ayushman Bharat scheme.

Incidentally, the premium paid per person under 'National' is the lowest at USD 5 annually. Remember, generally, it costs ~ 80 USD annually with a private player for an annual cover of 7,000-8,000 USD.

.......so as RDJ says in Avengers - Well, how about that!

Now I don't have a definitive answer as to why is the average premium per capita at USD 5 for government-sponsored schemes but if I have to hazard a guess it's probably because of two reasons:

i) Bare minimum cover of 700-800 USD (~ INR 50K) instead of the typical 7,000-8,000 USD cover which people take with private players.

ii) Negotiation on bulk-rates instead of retail prices with the providers. Given that the government collectively covers ~ 350 million people, the different state governments or MOH would have negotiated hard enough to get rates as cheaply as possible.

b) Smaller but growing private insurance: The overall private health insurance segment covers ~ 150 million people. That's roughly 10% of the overall population of India. A significant portion of this population would be availing health insurance services as part of the corporate insurance plans.

In terms of the segment persona, I would presume it's the same user segment using Flipkart / Amazon, Uber / Ola, Zomato, etc, and sharing avocado toasts photos on Instagram.

Private Stand-alone Health insurance providers have the smallest number of coverage with ~ 45 million people. However, the premium collected per capita is the highest at ~ 70 USD annually. There is significant variation in the premium collected among the individual players though - again I have no clue on why would there be such a wide variation.

c) Highly skewed geographical distribution: There's a clear-as-daylight takeaway on how skewed the geographical distribution of Health insurance is in India.

Maharastra is leading the baton with ~ 30% of India's gross premiums but has just ~8% of overall India's population. It also means that states like UP with ~ 16% of India's population must be having < 6% of gross premiums collected.

Open questions:

a) Why is the Gross premium per person ~ 15 USD for the private players? Shouldn't it be higher and more like 50-60 USD? I don't have the answer to it and requires further digging.

b) What is the split of 'Retail' and 'Corporate' plans for the private health insurance covers?

If any of you can help in finding it, an ice-cream treat is on me.

Ensuring Insurance

Now that we have gotten a handle on the broad numbers, let's come to the part on what can change to increase the private health insurance adoption to 25-30% from the current ~ 10%.

With the income and wealth distributions that we have in India, going beyond 30% adoption for private players would be a tall ask. The macro-economics of India have to change drastically to facilitate that.

That said, it still allows enough headroom for the private industry to grow at least twice what it currently is at, which also wouldn't be a cakewalk either.

As we covered earlier, the ~150 million people already covered under some private insurance would primarily be what we sometimes call India-1. Sure there may be some growth opportunities there but this segment is fairly ventured into.

The next set of people are primarily going to come from India-2 and India-3. There would be a unique situation for the health insurance players to navigate through - customers with tighter spending propensity, lower awareness, and maybe also a lower appreciation for health insurance. <Feel free to correct me on this as this is a conjecture>

So to solve the myriad of challenges the private players would find themselves in, they would do themselves a favor with simplifying the health insurance products and buying journey.

Keep it simple, but maybe not silly

Insurance in India is still a 'push' product and not a 'pull' product. It's also not exactly your latest swanky gadget that you want to window shop digitally. So it doesn't help if the insurance product comes packaged with a bunch of complex jargon and if-else scenarios, almost to the point of competing with a legal agreement in terms of being dense.

Mahavir Chopra, ex-CBO at Coverfox opined sometime back with:

"The health insurance products available in the market today are built with the assumption that an adviser or agent will advise on them or sell them. They cannot be understood by an average person on the street on his own."

I can't agree more on this. A document chock full of terms like co-payment, co-morbidities, pre-hospitalization, post-hospitalization, permanent exclusions, waiting periods apart from verbose obfuscation hampers insurance to become a commodity product.

A past Product Manager at Go-Jek also re-counted a similar experience with buying Health insurance in India and touched upon similar items. Thread here which received a fairly viral response - without any mutation.

So maybe we can siphon out the essential details from a health policy document after putting in a decent amount of hours. But someone who hasn't had access to the tools, training, and resources that we have, you could very well sell snake oil in that document and they won't be able to spot it.

So coming back to the initial point, that to reach out to the next strata of people for buying health insurance, simplifying the health policy document and the buying journey becomes a crucial point.

Some of the new-age companies have identified this gap. Toffee Insurance, Acko Insurance are some of the new players who have understood the need to simplify the insurance industry and bring tailor-made products instead of a one-size-fits-all solution. Just go to any of their websites and you can see the difference they have made in simplifying the product buying process. That said, there's a mountain to be scaled and the industry has just put on the backpacks.

The other major incumbents need to step up their game on delivering a great product with full transparency instead of relying on obscure sales tactics through the feet on the ground.

Harping on about Insurance

The reason I chose to discuss Health insurance is that there's an undeniable positive social impact of having wide-spread health insurance. At the risk of wearing rose-tinted glasses, Insurance is one of the best applicable social-security tools under the ambit of capitalism. People pool in resources to manage risk for that one person who may have to access the pool should things go sideways for him/her.

Take a moment to think about it. The cook I mentioned about, he took debts to service the health needs of the family. Chances are, some people like him would default on those loans. That may lead to distressing emotional states, potential abuse, or worse. Affecting a family of five individuals. The negative domino effects are multi-faceted.

In fact, as per the estimates by the government itself, 50-60 million people fall back in poverty each year in India because of unexpected health costs. That's twice the population of Canada and ten times the population of Singapore.

And the costs we are talking about aren't necessarily gargantuan sums, to the tune of 1,000-3,000 USD per family.

Solving problems like awareness and access to Health insurance among the masses has a step-function impact. We can keep on talking about changing the world and quoting Steve Jobs on making a dent in whatever, but as long as the next person on the street isn't covered for basic facilities, society doesn't improve as a whole.

Ensuring mass awareness and access to health insurance would enable these tens of millions of families to live a more safeguarded life.

Wrapping it up

Overall, what gives me hope is the fact that the Health insurance industry is witnessing a healthy growth YoY (15-20%). To sustain that YoY growth, however, would require increased efforts as the next incremental growth is always harder, if not necessarily costlier. And with this, I will pause lest it becomes a PRD.

In a future post, I will cover some musings around the advent of Teleconsultations. The Ken recently did a piece around teleconsultations and having some first-hand experience on building one in a past stint, I think it may be worthwhile to write about it.

Now to the most important question, how did you like Zach Snyder's Justice League?