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Health insurance industry is entering a period of financial stress, driven by two critical factors. One is medical inflation where the cost of healthcare is rising faster than expected, impacting insurers' cost structures. The other is the increasing claim frequency where more policyholders are utilizing their health insurance benefits, mounting the volume of claims, said Arun Ramamurthy, co-founder, Staywell.Health.
Consumer medical premiums that are flat or marginally increased are insufficient to offset healthcare costs, exhibiting pressure on insurer's balance sheets in the long run. Without action, the industry's response could result in decreased coverage or removal of products that consumers depend on, ultimately affecting consumers. An ecosystem to protect both policyholders and insurers can ensure sustainability of this sector. Only innovation with dynamic pricing, increased competitive preventive health care and technology can mitigate expenses and enhance efficiency with claims, he added.
We see that health insurance should more appropriately be viewed as an essential safeguard instead of an 'optional financial product'. With steadily rising medical costs, an increase in chronic diseases related to lifestyle, and the unexpectedness of emergencies, one hospitalization can wipe out years of savings. It is here health insurance provides risk protection, something discretionary spends can't. Health insurance helps access quality healthcare without having to take on debt, said Ramamurthy.
Although there is a strong presence of insurers, health insurance penetration in India is low because the distribution has not caught up with the needs of the consumer. The space is still largely untapped via traditional agents which require offline processes, slowing outreach and rate of coverage. But this can be handled through multi-channel modes including telesales, POS agents, digital marketplaces and embedded insurance models. Only if this is fixed, can it lead to a transformative adoption especially in Tier-2 and, Tier-3 cities, also helping to bring millions of underinsured families into coverage, he said.
Conventional ‘one-size-fits-all’ covers leave plenty of gaps whether it is for the elderly, pre-existing diseases, travel etc. Inventing modular covers, disease specific riders, wellness-indexed pricing and simple claims can create a relevant insurance experience. There is a need to innovate using data and AI to personalize products and share costing. We see that in India where inaccessibility can lead to exclusion of groups in crisis, innovation needs to consider not only affordability, but accessibility. The claims support should allow health insurance to be available to every person, he noted.
To fulfil the objective of ‘Insurance for All’ a reality by India’s centenary year 2047 will necessitate systemic changes. There are many challenges from a demand standpoint like awareness, affordability, and trust. On the supply side, insurers need to simplify their products, digitize distribution, and have a greater depth of relationships with hospitals and networks. Regulatory frameworks that support innovation while maintaining strong consumer protection are needed. Here a campaign similar to the mutual funds campaign can go a long way in creating awareness and establishing penetration in the market, said Ramamurthy.
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