Historically, Indians have had poor access to health insurance. While COVID-19 has certainly prompted more Indians to seek health cover, universal coverage still remains a distant objective. Individuals’ caution in buying health cover—and companies selling it—limits the adoption rate. For individuals, attentiveness comes from potency. For some insurers, it comes from the devastation caused by COVID-19, which has also hurt their financial position.
COVID-19 has given a boost to health insurance, but universal coverage is still far away, of which 362 million were covered through the government’s Pradhan Mantri Jan Arogya Yojana, which addresses issues of coverage limits and access to quality healthcare. comes with. The remaining 136 million—or about 10% of the country’s population—were covered either by organizations for which a member of their family worked or themselves.
Data on how this number increased during the pandemic is not yet available. However, data from the General Insurance Council, an industry body, shows ₹58,572 crore as health premiums paid by policyholders in 2020-21, including the first wave of the virus. This equates to a year-on-year growth of 13%, which is the same as in 2019-20.
A large portion of these premiums are coming from the retail set-up, reflecting the increasing tendency of individuals to cover themselves instead of relying on their employers. This share was 45% in 2020-21, which is the highest in four years. Meanwhile, in the first four months of 2021-22, which included the second Covid-19 wave, total health premiums grew at a sharp 34% year-on-year basis. While this would have added a few million to the covered population, India still needs to bring 700-800 million more people into this fold.
push to pull
Another data point that reflects individualized adoption of health insurance is how plans are being purchased. The three main sales channels – insurance brokers, self insurers and individual agents – sold 86% of health policies and collected 77% of health premiums in 2020-21. While insurance brokers grabbed their share, the other two saw a slight decline in 2019-20.
One reason was the emerging online sales channel, which is serviced by the likes of policybazaar.com and coverfox.com. They are aggregators—they sell plans from several insurance companies—as well as vendors. In health insurance, the share of online policies sold has increased from 2.6% in 2018-19 to 5.4% in 2020-21. Its share in health premiums is even higher at 7.9%.
Changing trends underpin the evolution of health insurance from a push product (aggressively sold by individual agents) to a pull product (purchased by the individuals themselves).
covid loss
The COVID-19 pandemic has come as both a boon and a curse for insurance companies. On the one hand, the unpredictability and damage caused by the virus has done more to impress upon people the need for health insurance as a risk-mitigation tool. On the other hand, hospitalization claims arising out of the pandemic have hit profitability.
In the past, health was a profitable part of private insurance companies. The pandemic has changed that. The total health claim numbers during the pandemic are not available, but a lot can be gleaned from the quarterly results of ICICI Lombard General Health Insurance, a listed company. In 2019-20, it made an operating profit of ₹493 crores from its health portfolio. During the first wave, its profits declined significantly, but it was still profitable. However, in the quarter that saw the second wave, the insurer reported an operating loss of ₹516 crore in its health portfolio.
degree of development
With a third wave expected, COVID-19 remains a strong threat to the health business of insurers in the near term. The question before them is how far they are willing to go to acquire new customers in the long run at the risk of seeing a short-term spike in their claims due to COVID-19.
Several private insurers among the top 10 insurers by premium share in the retail health segment have registered sharp growth during the last 18 months. Notable among them are market leaders Star Health, Care Health, Niva Bupa Health and Aditya Birla Health. Four public sector insurers, which in normal times lose money on their health portfolios, lag behind their private peers in terms of growth. Covid-19 is likely to increase coverage. But given that only 40% of Indians have health cover, and only 10-15% is through insurers, the distance to cover is huge.
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