The Rising Tide of Health Insurance in India

India’s #health #insurance industry has entered a high growth phase, driven by increased health awareness, supportive government policies, rising medical costs, and #insuretech innovation. This article analyses the key trends and outlook.

Growth of Health Insurance in India

As per the Insurance Regulatory and Development Authority of India (#irdai), India’s health insurance industry has grown at a CAGR of 17% over the last 5 years.

In FY 2021-22, total health insurance premiums reached ?710 billion, a 13% increase from the previous year.

The number of Indians covered by health insurance policies rose to approximately 359 million in FY 22, up 14% year-on-year.

This growth has been fueled by rising prosperity, health awareness, medical inflation, government schemes, and insurers’ distribution innovation.

India’s health insurance penetration, measured as premium volume as a percentage of GDP, has risen steadily to 0.9% in 2022 from 0.3% in 2001. But there is still immense potential for growth considering penetration levels of 3-4% in developed markets.

Key Growth Drivers

Government Health Insurance Schemes

A major factor propelling health coverage adoption is the government’s ambitious Ayushman Bharat - Pradhan Mantri Jan Arogya Yojana (AB-PMJAY).

Launched in 2018, AB-PMJAY provides hospitalization coverage of ?5 lahk to over 10.7 crore economically vulnerable families identified based on deprivation and occupational criteria.

AB-PMJAY has already funded over 2.1 crore hospital treatments worth over ?25,000 crore, indicating strong utilization levels. 31 States and UTs have implemented the scheme so far.

The PMJAY scheme aims to significantly reduce the high out-of-pocket expenditure on healthcare facing poor households in India. According to data from National Health Accounts (NHA), over 70% of India’s healthcare spend is out-of-pocket.

Other government schemes like the ESIC for formal sector employees and central/state government employee insurance are also expanding coverage.

Rising Health Awareness

As literacy levels and health awareness improve, more Indians now proactively purchase health policies as a financial safety net against rising healthcare costs.

Private Sector Growth

India’s leading private health insurers like Starhealth Insurance , Niva Bupa , Bajaj Finserv Health HDFC ERGO General Insurance , Aditya Birla Health Insurance , Acko have seen strong growth in recent years.

The private sector accounts for around ?490 billion of total health premiums currently.

Innovative distribution models like bancassurance, corporate tie-ups and insuretech platforms have expanded private insurers’ reach.

During the COVID-19 pandemic, policy sales by private companies rose by 17% as citizens sought safety from coronavirus treatment costs.

Medical Inflation

Medical inflation has consistently exceeded 10% over the past decade, more than 3 times general inflation.

Hospitalization costs have risen manifold, making health insurance crucial.

For example, a 2015 study found that cesarean childbirth costs grew 193% from 2008 to 2014, outpacing the rise in the consumer price index.

Such high inflation makes health insurance key to managing unforeseen medical costs.

Liberalization Measures

IRDAI has introduced a slew of reforms to boost health insurance penetration and inclusion:

• Innovative covers like Arogya Sanjeevani offers basic standard coverage
• Reduced turnaround times for policy issuance and claims settlement
• Relaxed norms for insurers to introduce new products and fileings
• Drive to improve digital capabilities and data analytics in the industry

Outlook for Growth

As per a NITI Aayog report, India’s health insurance sector is poised to grow at 20-25% CAGR over the next 5 years.

Key growth factors going forward:

• Rising incomes and health awareness
• Government policy push towards universal health coverage
• Continued medical inflation necessitating coverage
• Insurtech and digital transformation of distribution
• Value-based and preventive care models to improve returns.

Considering low current penetration, India offers a vast under-tapped market for health insurance firms. Both private insurers and government health schemes have a crucial role to play in deepening access and financial protection.

With supportive drivers in place, India’s health insurance industry is ready for robust and sustainable double-digit growth in the coming decade.

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