insurance. An understanding of the key issues and challenges for health insurance in india is vital to the development of a new strategy or amendment of an existing one.
Tariffed regime: with claims to premium ratio at 130%, the health
insurance sector in india has been a loss making portfolio. However, this was triggered on account of complacency in underwriting skills, and competing on price for health products, while seeking cross subsidization of this loss making segment by profitable businesses(motor). Dearth of underwriting skills: insurers lacked rational pricing. A shift to the detariffed regime, will now cause cross subsidization to end and will give impetus to health insurance as a profit making business. However this poses a new problem for non-life insurers honing appropriate underwriting skills that were dormant enough to disappear in the tariffed regime will be a staggering task. Price hikes and attrition: appropriate pricing strategies would imply that insurers have to be on their toes in order to address customer reaction to their price hikes. This reaction may include attrition which is further aggravated by the yearly renewal of policies and thus a corridor for customers to step down, in turn making it herculean for insurers to acquire new customers. Thus a price hike to be complemented/ justified by customized product solutions, creative bundling and unbundling of risks, increased awareness of products, and innovations in various facets of the marketing value chain from product design to pricing to distribution channels. Moral hazards dilemma: on one hand, insurers have to seek to reduce moral hazard and adverse selection, whilst on the other hand, by virtue of judicious acumen, they have to seek to increase number of policies sold, for insurance as a concept to make sense via pooling of risk on account of law of large markets. Information asymmetry and fraudulent claims: reducing informations asymmetry and installing effective systems preventing fraudulent claims are the need of the hour. These would also help reduce errors of omission wherein a valid claimant is denied claim amount or has to face unnecessary delays. Provider unpreparedness: there is no standardization with respect to treatment protocols and quality, either through
registration or accreditation. There is no way of controlling claims as
prices vary from one hospital to another and over time. Intermediary unpreparedness: Third party administrators were rammed in the scene in lieu of the procedural handling of cashless transactions, unfortunately, without provision of adequate information systems and streamlined processes. Thus training TPAs and extending support to them via responsive and effective claim settlement tools is an impending need. This would help insurers reduce the incongruence between themselves and the TPAs; who by most customers are regarded as the face of the insurer, thus a cardinal touch point. Regulatory barrier: the 26% foreign equity cap is definitely a challenge and it is difficult to find a local partner in a risky, less understood business which was de-regulated only 6 years ago. Additionally, there exists a high capital requirement of USD 22 million suggesting that in the first few years of operations, insurers will have to charge premiums that are sufficient to compensate for the investment, however, sacrificing volumes on account of price sensitivity and once again posing a hindrance in achieving the law of large numbers. Payer unpreparedness: the insurer is unable to design schemes that are profitable due to lack of comprehensive data on health requirements and usage patterns of different socio economic segments.