Health insurance in India

India wants simple and cost-effective health insurance

Indian health insurance has maintained growth of over 20% for the last three years in a row. In 2017-18 it registered 21.8%.

Health insurance (excluding personal accident and travel) premiums in India have grown from $102m in 2001-02 to $5.3bn in 2017-18. The industry is expected to grow at a rate of 24-25% for the next five to six years and is projected to reach $14bn in 2022.

Rising income levels, an ageing population, growing health awareness, increasing lifestyle diseases and changing attitudes towards preventive healthcare are expected to boost Indian healthcare further.

Boom in health policies

During 2017-18, general and health insurance companies issued around 14.7m health insurance policies (excluding policies issued under personal accident and travel insurance), covering 482m lives, a growth of 10% in the number of lives covered over the previous year.

Health insurance complicated for consumers

Still there is a lot of ground to be covered. A recent study GOQii India Fit Report 2019 by preventive healthcare and fitness platform GOQii found that a large section of Indians still do not trust the Indian healthcare ecosystem that includes healthcare providers and insurance companies.

Also, those planning to buy health insurance cover find existing health insurance policies confusing, complex and expensive.

The insurance companies, despite the lack of trust, are focusing on delivering a better customer experience as every health insurance buyer compares their experience of buying a health insurance policy with their experience with digital platforms like Amazon and Uber. Their expectations increase.

Health insurance should get more ‘customer-friendly’ soon

Health insurance consumers can, however, look forward to some ‘healthy’ times soon. The IRDAI working group on standardisation of exclusions in health insurance contracts submitted its report in October last year and has recommended many important changes

to make health insurance coverage more comprehensive, efficient and customer friendly.

Several diseases that were earlier excluded will now be covered by health insurance protection and several new and advanced treatments will also be permitted under the recommendations of the working group.

Cost of healthcare rises 15% annually

The cost of healthcare is, on average, rising by around 15% annually. With rising healthcare costs, health insurance is no longer a push product but a pull product. Lifestyle diseases like hypertension, diabetes and cancer are also growing and are impacting the lives and finances of the Indian population.

Standalone health insurers in India are growing at over 40% annually with growth being driven by retail health business. The growth in the retail sector, however, is still low.

Group business accounted for 48% ($2.54bn) of the premium, followed by individual segment at 41% ($2.18 bn), and government business at 11% ($569 m).

New Year brings a better deal for foreign reinsurers’ branches in India

Insurance Regulatory and Development  Authority  of  India (IRDAI)  has  enacted  the  IRDAI (Reinsurance) Regulations 2018 and the new rules came into effect on 1 January 2019.

The new regulations consolidate the provisions governing reinsurance business in India into one set of applicable rules. They also introduce new requirements for both life and general reinsurance business.

IRDAI (Reinsurance) Regulations 2018

The new reinsurance regulations replace the IRDAI (General Insurance – Reinsurance) Regulations 2016 and IRDAI (Life Insurance – Reinsurance) Regulations 2013. They also amend, to the relevant extent, the IRDAI (Registration and Operations of Branch Offices of Foreign Reinsurers Other than Lloyd’s) Regulations 2015 and the IRDAI (Lloyd’s India) Regulations 2016.

The 2018 regulations retain the objectives of the reinsurance programme under the erstwhile regulations but the guidance towards maximising retention within India is now subject to ‘proper and adequate diversification of risks’.

Foreign reinsurers’ branches can now compete

Foreign reinsurers’ branches (FRBs) in India will now be able to bid for reinsurance contracts along with Indian reinsurers. At present, GIC Re is the only active Indian reinsurer.

The new regulations allow GIC Re to retain the right of first refusal. However, in case the FRBs offer rates lower than GIC Re and GIC Re cannot match those rates or does not exercise its right, FRBs can win those reinsurance contracts.

Equal terms for all

The new reinsurance regulations will lead Indian reinsurers and FRBs to compete for the business on equal terms. A clause in the regulations reads, “Every cedant shall be free to obtain best terms for its reinsurance protection of domestic risks, subject to the following:

“Cedants shall seek terms at least from all Indian reinsurers, who have been transacting reinsurance business (other than emanating from obligatory cession) during the immediate past three continuous years and at least from four FRBs.”

Under the previous reinsurance regulations, reinsurance contracts could be offered to the FRBs only if GIC Re did not exercise its right and refused the business.

According to the new regulations, the reinsurance renewals will have to be executed at the beginning of every financial year. Also, insurers cannot seek quotes from any Indian insurer not registered with the IRDAI to transact reinsurance business.

Focus on maximising retention within the country

The new regulations lay down the following objectives for the reinsurance programme of every Indian insurer.

1. Maximise retention within the country, subject to proper and adequate diversification of risks
2. Develop adequate technical capability and financial capacity
3. Secure the best possible reinsurance coverage required to protect the interest of policy holders and (retro)cedants at a reasonable cost
4. Simplify the administration of business

The new regulations stipulate that all Indian insurers are to maintain the maximum possible retention commensurate with their financial strength, the quality of risks and volume of business.

In life insurance, IRDAI has said the insurers should retain at least 25% of sum assured under pure protection and 50% for other categories of products.

India’s reinsurance market

India’s reinsur ance mar ket is estimated to be wor th around INR50,000 crore ( $7bn) and most of it is catered for by GIC Re. It is expected that, keeping in mind the current rate of growth of the Indian insurance industry, the country’s reinsurance market will double within the next 10 years.

Currently, 10 global reinsurance entities operate in the Indian reinsurance market through their branches. These include Munich Re, Swiss Re, SCOR, Hannover Re, RGA Life Reinsurance Company of Canada, XL Insurance, Gen Re, AXA France Vie, Allianz Global Corporate & Specialty and Lloyd’s of London.

Local presence can enhance involvement with the Indian market

Middle East (re)insurers have been active in India for a long time and reinsurers, including prominent names like Trust Re, Kuwait Re, Qatar Re and Oman Re, write various lines of business on a treaty and facultative basis. While not huge writers of Indian business, the activity of these reinsurers is commensurate with their appetite.

Local presence enhances involvement

Speaking with India Rendezvous Daily, J B Boda Group managing director Rohit Boda said, “Local presence is the first step for the Middle East insurance industry to have enhanced involvement with the Indian market. Writing proportional contracts in the country is also a welcome move, as ceding companies prefer to have across the board participation.

“Milli Re from Turkey has also been active in India and writes proportional contracts in addition to their XL programmes,” said Mr Boda.

“An opportunity worth exploring for the Middle East players lies in providing capacity for specialised class of business like cyber and title insurance which are often talked about in addition to extended warranty business.”

Capacity for specialised business classes can add value to the relationships

He said, “Allotting capacity for these classes of business, which are still new to Indian insurance customers, will be an entry point for newcomers and will be a value-add to existing relationships.

“Insurance penetration in India is quite low compared to the most developed economies, hence India offers ample scope with growing challenges.

“The Indian market opened up in 2000-2001, got an exposure to the outside world and today we are a young country with around 18 years of experience. Evolution and development of any economy is an ongoing process,” said Mr Boda.

Both challenges and opportunities

He said, “In spite of the challenges, there is a lot of capacity that is flowing in the country from the developed markets of UK, USA and Bermuda in addition to the Asian major reinsurance markets like Singapore. The best example of this would be health and agriculture.

“There is a lot of talk about specialised lines of insurance but they are seldom seen. Also there is a lack of skilled expertise in the country to manage underwriting and claims for these specialised lines of business.”

"Energise insurance in India" essay competition 2019 – from the winners

Mr Nirjhar Majumdar, winner
- Life Insurance Corporation of India

India is home to 1.3bn people, comprising about 18% of the world’s population but the insurance industry contributes only 2% of the world’s premium. Insurance penetration stands at 3.69%, which is appallingly low, but last year the insurance industry grew by 10.1% as compared to the world figure of 1.5%. Insurers can make the best use of market size through more need-based products, customer engagement drives and relationship-based marketing. The essay competition is a great effort on the part of Asia Insurance Review to generate fresh ideas to take the industry forward and through this initiative the magazine is doing great service to the Indian insurance industry.

Mr Arun Agarwal, runner up
- independent director, Kotak General Insurance Company

Indian insurance penetration and density are amongst the lowest in the world. Moreover, India’s ease of doing insurance business is a far cry from the best of global standards. The government has a clear policy objective: To have a fully insured/pensioned India. The insurance regulator must, therefore, become a change agent for making India’s present secure and future safe by letting insurance become inclusive and also promote its export potential through a globally competitive Indian (re)insurance hub.

The topics chosen for the India Insurance Industry essay competition ‘Energise Insurance in India’, as part of the 12th India Rendezvous, organised by Asia Insurance Review and GIC Re would seem to suggest that there is a market yearning for this. It is hoped this message reaches the Indian insurance regulator in its most serious and pristine form.