Topic of Discussion: How can we spread Health Insurance throughout India (Mr. M. J. Augustine, Dabur Finance Co. Ltd.)
Source:
Mr.M J Augustine, Dabur Finance Ltd
Abstract:
Health Insurance is purely individual centered and as such is different from other segments of Insurance business. Complex in nature because of conflicts arising out of adverse selection, moral hazard, lack of up-to-date authentic data / statistics. A nation saddled with the problem of continuos fiscal deficit, health sector policy formulation and implementation is indeed an extremely difficult task, in a changing political, social, technological and institutional scenario. Yet, we have reasons to feel happy, that India has made noticeable and remarkable progress in considerably improving the health status of the people. Death rate has reduced from 40 to 9 per thousand, infant mortality rate reduced from 161 to 71 per thousand, life expectancy increased from 31 to 63 years although 4 years below the world average.
However, there are a number of problems like high incidence of communicable diseases, environmental threat, neglect of health promotional activities and considerable regional imbalance, which still remain to be tackled. At any given point of time 40 to 50 million people of the population are under medication for major ailment. Sadly, the down trodden and the less privileged, who cannot afford to spend on treatment die unnoticed and uncared for. About 200 million man-days are lost annually on account of sickness. We spend about 6% of GDP on health care. Private health care expenditure is about 4.25% of the GDP. Insurance coverage is negligible. Over the years private health care expenditure has grown at the rate of 12.84% per annum.
Health financing scene is confronted with many challenges, some of which are increasing health care costs, high financial burden on the lower middle class and the poor, increasing incidence of serious new diseases, inability of the government to provide adequate funds. When people live under the shadow of the stark realities as mentioned above, health insurance coverage certainly and imperatively is one of the financing mechanisms to eliminate the flaw in our system and to bring in succor and relief to the needy people.
Some of the inhibiting factors to reach the benefit of health insurance through the length & breadth of India are:
A. Inadequate health care infrastructure
The charts given below will indicate the number of Hospitals in the three major regions of the country:
Regional survey of Medical infrastructure in North, South & Western India:
Region Specialty General No. of Hospitals Ultra Modern Facilities (A) (B) (A+B)=C (% of C) WEST 1964 1106 3070 4.2% SOUTH 414 990 1404 3.9% NORTH 1 308 580 888 4%
Most of the major hospitals, which are few in number are located in the Metro centers and urban areas, leaving about 70% of the population living in rural India/ villages to fend for themselves. Compared to the population of a little over 1000 million, the health care infrastructure is too little to be reckoned as formidable.
B. Lack of awareness among people
Insurance business both life & non - life till two years ago was the monopoly of LIC & four public sector General insurance companies viz. National Insurance Company Limited, New India Assurance Company Limited, Oriental Insurance Company Limited and United India Insurance Company Limited. Although, these companies have done fairly well in their overall performance, they could not do much in creating insurance awareness among the people. The chart given hereunder would indicate the poor penetration of Mediclaim, the most dominant insurance product available in the country today. One can only hope that in the emerging competitive scenario, health insurance development will receive the preferred attention of all insurers. Premium Underwritten No. of policies issued (Excludes group mediclaim policies issued for covering the employees of the four insurers) Incurred Claims Rs. 160 Crores 16000 Rs. 82 Crores
C. Lack of Political Will
Health care both preventive and curative is essentially a priority area in the social sector. There seems to be no serious political will to make striking revolutionary changes in the system. "Health for all" aim articulated in the historic 1978 declaration of Alma Alta is a basic assertion that all nations should strive to improve the quality of life of the people. Many factors, such as per capita income, housing & education influence health status. Moral hazard, corruption, adverse selection, intolerable delay in the processing of claims, financial exploitation by some of the major hospitals in the private sector have a dampening effect for the promotion and spread of health insurance.
How to spread health insurance throughout India?
Existing disparities in health status must not be allowed to continue. A number of people struck by poverty particularly in the rural areas and towns are unable to avail medical services. Government alone cannot fulfill all the expectations of the entire society. The combined experience of many nations is in favor of state compulsory insurance. Health insurance should not be left to the independent will of the individual. "Sickness must not be treated as a private misfortune. It is not to be regarded as a calamity against which the individual should protect it as much as it can. It is not even to be counted as a misfortune in which the family alone should attempt to combat or prevent. Rather it is time to look upon sickness as a national misfortune. We should take it as a calamity for the entire community and therefore are to be prevented or cured by the community and the state".
Financial burden arising out of serious ailments can empty all the resources of ordinary individuals and families. This burden has to be widely distributed through out the country by contribution of many to extend financial help to the affected lots. The need for compulsory health insurance is felt more today than ever before hence, the need for legislation.
Awareness Creation
Insurance awareness as discussed earlier, is very poor in our country. If a product is to be marketed and sold, the users should know the salient features of the product. The terms and conditions, the formalities to be completed in the event of a claim are virtually not known to the existing customers and prospective buyers. This is more relevant in the case of an intangible product like insurance, which cannot be tasted or smelt. It is high time for insurers to seriously address this problem and initiate appropriate steps to create enough awareness to generate interest in health insurance coverage.
Specially trained agents and Multichannel distribution
Specially trained agents are an effective source of distribution. It is difficult and impractical for insurers to open offices in every village and town in the next 3 to 5 years. Insurers will be wiser to utilize the services of the branches of banks, co¬operative societies, affinity groups like travel & transport operators, NGOs, Gram Panchayats, Municipal Bodies, distributors of consumers products, well known shops in certain pockets and other widely known outlets.
Tie up - with Hospitals 1
Tie up with hospitals has not outlived its purpose, although the experience of insurers in the past has not been very satisfactory or encouraging. Upfront payments for admission in the major hospitals for serious ailments by the policyholders are a perennial problem to be tackled by insurers. Many people do not go for health insurance because of the fear of being called upon to meet all expenses relating to hospitalization first and wait for the cumbersome procedures of getting reimbursement from insurers. This is one of the major deterrents for the meaningful spread of health insurance. Insurers and hospitals must develop effective and fool proof mechanism by which patients can get admitted and treated within the framework of the policy conditions without direct payments to the hospital. The modalities can be worked out mutually between hospital authorities and insurers. Policyholders can be provided with hospital admission cum identity cards duly signed by the concerned parties viz. insurers, hospital & the policyholder.
Third Party administrator (TPA)
Many countries particularly in the west and the U.S.A. avail the services of TPA. TPAs work for three entities i.e. hospitals, insurers and policyholders. In an agreed contract basis they make hassle free admission and treatment and seek reimbursement from the insurance company that has issued the policy. Here again the modalities will have to be worked out by TPAs, hospitals and insurers. TPAs are certainly one of the catalysts for change in health insurance implementation system leading to spread of health insurance faster. The initiative being taken by IRDA to bring in TPAs in the system is really appreciable.
Health Care Infrastructure
Every measure shall be aimed at improving the health status of citizens. There is no point in people going for health insurance policies if availability and accessibility of health care infrastructure viz. hospitals and nursing homes are non existent in many parts of the country. As is common knowledge, health care infrastructure is far from satisfactory in our country. Can our people look for good hospitals and nursing homes in villages either in government or private sector? If the spread of health insurance as a mechanism and financial aid is to be taken throughout India, it is necessary for all concerned to accept the challenges and do everything possible to develop adequate health care infrastructure of world standards. Health insurance and health care infrastructure are inseparable and one can not succeed without the other. Health care infrastructure both preventive and curative has no boundary. It shall be for all the places and for all the people. Perhaps the beautiful words of John Wesley may be quite relevant in the context: "Do all the good you can By all the means you can In all the ways you can, In all the places you can, To all the people you can As long as ever you can"
Attractive Products & Pricing
Health insurance for hospitalization cannot be considered as a loosing business. It has the potential to grow as a stand-atone business. Considering the social objective of health insurance it would be prudent for insurers to make the products attractive, consumer friendly and financially affordable.
Post Claim Service
The essence of service is tested only through quick and proper settlement of genuine claims. Inordinate delay in this vital area of service can drive away existing customers and prospective buyers from insurers. The perception of the people that insurers are lethargic and indifferent in settlement of claims must be removed by extending excellent service to the customers when the claims are reported.
Publicity & Advertisement
During popular festivals in each region insurers can channelise their efforts in meeting people collectively and explain to them the benefits of the health insurance. Literature printed in regional language can be distributed. Advertisements in vernacular newspapers, channels like Television & Radio and Internet will go a long way in popularizing health insurance.
Observance of Special Sales Promotion periods
Under proper monitoring system by IRDA and the Head offices of insurers, special sale promotion period can be organised at least once a year through out the country and that can be another effective step for the spread of health insurance sooner than later. To bring in competitive spirit among the insurers and to achieve positive results, incentives in the form of Certificates of Merits, trophies and shields can be instituted.
I may be excused if I may say that even the insurers do not properly understand the value addition and the potential of health insurance. From the commercial point of view, health insurance business has the potential to achieve a turnover of Rs.45000 Crores premium in the next 10 years considering the sheer size of the insurable population approximating 300 Million. From the social objective point of view, it has the inherent potential of a much sought after business and pursuing this business in all the seriousness that it deserves is indeed a service to the nation.
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