KPMG CII Health Insurance Report:04WhitepaperA4v2.

qxt 12/8/2008 4:25 PM Page 1

HealthInsuranceSummit2008
“HealthInsuranceInc.:TheRoadAhead”

9December2008
Mumbai
KPMG CII Health Insurance Report:04WhitepaperA4v2.qxt 12/8/2008 4:25 PM Page 3

Foreword

Theprivatesectorhasplayedadominantroleinfinancingthehealthcare
expenditureinIndia,withhouseholds(Outofpocketexpenditure)accountingfora
disproportionate76percentfundingofthetotalhealthcareexpenditure1.The
scenarioisnotexpectedtochangesignificantlybyFY2015iftheGovernment
fundingofhealthcareexpenditureandthehealthinsurancecontributionto
healthcarefundingcontinuestogrowatthehistoricalgrowthrates.IfIndiawants
toachieveamoredesirableproportionofoutofpocketexpenditure,asinChina
(60percent),itrequiresincreasedparticipationfrompublic,privateora
combinationofthesesectors,withprivatehealthinsuranceplayingasignificant
role.
Pradip Kanakia
HeadofMarkets
KPMGinIndia
Theprivatehealthinsuranceindustryhasbeengrowingataremarkablegrowth
rateof37percentsinceFY2002andcurrentlystandsatINR5,125crores2.Going
forward,theindustryisexpectedtogrowataCAGRof25to30percentuntilFY
20153.However,thereareseveralimpedimentstothisgrowthsuchaslevelof
awarenessacrossdiversecustomersegments,standardizationofhealthcare
treatmentsandproceduresandproductinnovation.Itiswidelyfeltthatweareat
thethresholdofanunprecedentedgrowthforthenext5to7yearsinthe
industry.However,ifwewishtomakethisfaceliftintheindustry,itisimperative
forallthestakeholderstocometogethertodriveafewkeyinitiativesthatcould
helpformthebuildingblocksandtaketheindustryinthedesireddirection.This
reportsummarizesafewkeyinitiativessuchasincreasingcustomerawareness,
standardizationandaccreditationofhealthcareproviders,buildinga
comprehensiveandsustainabledatarepository,productandchannelinnovation
andusageoftechnologythatarelikelytobecriticalforthegrowthoftheindustry.

A Vaidheesh KPMGisprivilegedtocollaboratewithCIIasKnowledgePartnerfortheCII-KPMG
Chairman–CIIWRHealthcare HealthInsuranceSummit2008onthetheme‘HealthInsuranceInc.:TheRoad
SubCommitteeand Ahead’.
Chairman–CIIHealth
InsuranceSummit2008&
ManagingDirector
Johnson&JohnsonMedical

1 WHO National Health Accounts

2 IRDA
3 Industry Discussions, KPMG Analysis
KPMG CII Health Insurance Report:04WhitepaperA4v2.qxt 12/8/2008 4:25 PM Page 4

Executive Summary and Acknowledgements

Neville Dumasia
Head-Governance,
RiskandComplianceServices
Economicgrowthisanimportantindicatorofanation’seconomicdevelopment.
Growthinturn,amongotherthings,dependsonthehealthofitspeople,for
whichnationsneedtospendsubstantialamountsonhealthcare.Totalhealthcare
expenditureinIndiahashoveredaround5percentofGDP,withpublicfunding
contributinglessthan1percentofGDP.Limitedpublicfundingonhealthcarein
Indiahasnecessitatedout-of-pocketspendingtobethedominantcomponent,
funding76percentoftotalhealthcareexpenditureinFY20064.Highrelianceon
out-of-pocketspendingalonecanposeserioushealthpolicychallengesrelatedto
financialriskprotectioninfutureyears.Indianeedstofocusonthepotentialways
topoolthisriskthroughinsuranceandreduceoutofpocketexpenditure,for
whichthereisaneedtostepuppublicandprivatesourcesofhealthcarefunding.

ThehealthinsurancesectorisoneofthemostpromisingsectorsinIndiannon-life
industrytoday.ThemarketsizecurrentlystandsataboutINR5,152croresinFY
2008,upfromINR761croresinFY2002,showingacompoundedannualgrowth
rateof37percent5.Severalfactorssuchasthechangingsocioeconomicand
demographicenvironmentofIndia,favorableregulatoryenvironmentaswellas
significantmarketingpushbyinsurancecompanieshavedriventhehighratesof
growthoftheindustry.

Goingforward,suchdriversareexpectedtopropelgrowthevenfurtherandthe
marketsizeisprojectedtobeapproximatelyINR28,000croresbyFY20156.
Ravi Trivedy However,therearevariouschallengesfacedbythekeyparticipantsofthehealth
ExecutiveDirector,
insurancevaluechain,whichcanimpacttheachievementoftheprojectedgrowth.
BusinessAdvisory
Foremostamongthesechallengesarelowawarenessabouthealthinsurance,
limitedproductofferingsbyinsurancecompanies,lackofstandardizationof
healthcareprovidersandthelackofdatathatcanempowerinformeddecisions.

Similartothekeyparticipantsofthehealthinsurancevaluechain,Indian
consumershavetheirownchallenges.Whilemostcustomersagreewiththe
conceptandnecessityofhealthinsurance,theyareskepticalabouttediousclaims
processingprocedures,limitedoptionsofhospitals/doctorsandlimitedproduct
offeringsbyinsurancecompanies.Moreimportantly,consumershavelimited
understandingofthefeaturesofhealthinsuranceproductswhichtheindustry
needstoaddressandchangetheperceptionabouthealthinsuranceinIndia.

Fromafuturepointofview,severalfactorsareexpectedtobeinstrumentalin
Shashwat Sharma overcomingthechallengesexistinginhealthinsuranceindustryandmouldingthe
Director,
futureofhealthinsuranceindustryinIndia.Thesefactorscanbeclassifiedasthe
BusinessAdvisory
‘PillarsofChange’-ConsumerAwareness,StandardizationandAccreditationof
healthcareproviders,HealthcareInfrastructureandDataandInformation
Exchangeandthe‘EnablersforGrowth’–ProductandPricingInnovation,

4 WHO National Health Accounts

5 IRDA
6 Industry Discussions, KPMG Analysis
KPMG CII Health Insurance Report:04WhitepaperA4v2.qxt 12/8/2008 4:25 PM Page 5

TechnologyandChannelInnovation.Withthesupportofthekeystakeholdersviz.
theGovernment,theRegulator,healthcareproviders,insurancecompanies,TPAs,
NGOs/SHGsandmedia,thesefactorscouldhelpcombatthechallengesand
facilitateextensivehealthinsurancecoverageinIndia.

Wewouldsincerelyliketoacknowledgeandthankthefollowingindustryleaders
forprovidingtheirvaluableviewsforthisreport(inalphabeticalorder):

• Government of India

• Mr.TarunBajaj,JointSecretary,GovernmentofIndia

• Regulator

• Dr.SomilNagpal,SpecialOfficer–HealthInsurance,InsuranceRegulatory
andDevelopmentAuthority(IRDA)

• Healthcare Providers/Health and Wellness centres/ Diagnostic

laboratories

• Dr.DeviShetty,Chairman,NarayanHrudayalaya

• Mr.NarinderKumar,GroupCFO&CompanySecretary,VLCCHealthcare
Ltd.

• Dr.NarottamPuri,President–MedicalStrategy&Quality,FortisHealthcare
Ltd.

• Mr.NimishR.Parekh,FounderandPresident,WellinformedHealthcare

• Dr.SushilShah,Chairman,MetropolisHealthServices(India)Ltd.

• Mr.VishalBali,ChiefExecutiveOfficer,WockhardtHospitals

• Insurance Companies

• Mr.C.Chandrasekharan,ChiefMarketingOfficer,ApolloDKVInsurance
CompanyLtd.

• Mr.SandeepBakhshi,ManagingDirectorandCEO,ICICILombardGeneral
InsuranceCompanyLtd.

• Dr.ShreerajDeshpande,Vice-PresidentHealthInsurance,BajajAllianz
GeneralInsuranceCompanyLtd.

• Microfinance Institutions

• Mr.SatheeshArjilli,Manager–InsuranceBusiness,BASIX

• Mr.VinayGolem,SeniorManager,SKSMicrofinancePrivateLtd.

• Reinsurers

• Mr.GirishRao,ManagingDirector,SwissReHealthcareServicesPvtLtd.

• Technology Providers

• Mr.SrivathsanAparajithan,Head-HealthcareBusinessSolutions,IBM
India.
KPMG CII Health Insurance Report:04WhitepaperA4v2.qxt 12/8/2008 4:25 PM Page 6
KPMG CII Health Insurance Report:04WhitepaperA4v2.qxt 12/8/2008 4:26 PM Page 7

Table of contents

Health Insurance: The Road Ahead 01

The Indian Health Insurance Industry 07

Voice of the Indian Consumer 13

Future Enablers and Action Steps 22

for the Health Insurance Industry

Summary 32
KPMG CII Health Insurance Report:04WhitepaperA4v2.qxt 12/8/2008 4:26 PM Page 8

Page1

Heath Insurance: The Road Ahead

Figure1:Importanceofbetterhealth Importance of Healthcare Funding7

Animportantindicatorofanation’seconomicdevelopmentandnationalwell-
beingisitseconomicgrowth.Intheearlyyears,growthinlaborandcapitalwere
consideredtobethekeydeterminantsofeconomicgrowth.Empiricalevidence
suggeststhatasignificantportionofgrowthiscontributedbyhumancapital,the
elementsofwhicharethelevelofeducationandhealthofthepeople.Research
hasestablishedthata5-yeargaininlifeexpectancyisassociatedwithannual
averageratesofgrowthofrealGDPpercapitathatishigherbyaround0.5
percent.

WhatdoesthislinkagethenmeanforIndia?Atamacroeconomiclevel,
improvementsinhealtharelikelytoresultinimprovedeconomicperformance.
Indiaisnowundergoingademographictransition,withtheproportionofworking
populationexpectedtoincreaseinthenextquarterofacentury.Thisrisingyoung
population,ifhealthyandproductive,hasthepotentialofincreasingthegrowthof
realincomepercapitabyanannualaverageof0.7percenttill2025.Giventhe
implicationsthatahealthyandhence,productivepopulationhasonIndia’s
economicperformance,thereiscompellingneedtostepuphealthcarefunding
mechanismsinIndiaforpositivereturnsinthelongrun.

Figure2:CompositionofWorldHealth
Expenditure,2005 Sources of Healthcare funding: A Global Outlook
Globally,healthcareexpenditureisfundedbypublicandprivatesources.

Public Sources: Publicsourcesincludeexpendituresincurredonhealthbycentral

governmentdepartments,statedepartments,publicenterprises,includingbanks
andexternalfundingforhealth.Thesourceofpublicfinancingisthegeneraltax
andnon-taxrevenues,includinggrantsandloansreceivedfrombothinternaland
externalagencies,andsocialsecurityschemesthatarefundedbymeansofa
compulsorycontributiontowardshealth.

Private sources: Privatesourcesoffundingcompriseoutofpocketexpenditure

Source:WHONationalHealthAccounts
whichincludespaymentsmadebyindividualsandhouseholdsandothersources
offundingsuchasprivatehealthinsuranceandfundingbynon-profitinstitutions
suchasNGOsandSelfhelpGroups(SHGs).

Starkdifferencesexistbetweenthecompositionofhealthcarefundinginvarious
countries,drivenbythedifferencesinincomelevels,epidemiologicalfactorssuch
ashealthandnutrition,causesofmortalityfrominfectiousdiseasesorchronic
conditionsandeffectivenessofhealthinputs.

7 Report of the National Commission on Macroeconomics and Health, Ministry of Health and Family
Welfare, Government of India, 2005
KPMG CII Health Insurance Report:04WhitepaperA4v2.qxt
Figure3:Comparisonoffundingofhealthcare
expenditure
Source:WHONationalHealthAccounts,KPMG
Analysis
12/8/2008 4:26 PM Page 9
Page2
Forexample,inadevelopedeconomysuchasJapanortheUK,government
spendingonhealthformsamajority(over80percent)ofthehealthcarefunding8.
WhilehealthinsuranceintheUKisadministeredthroughthepubliclyfunded
NationalHealthService(NHS),Japanhastwomodelsofhealthinsurance:social
insurancesystemforcorporateemployeesandnationalhealthinsurancesystem
forpeoplewhoarenotcoveredbysocialinsurancesystem9.However,incaseof
emergingeconomiessuchasChinaandIndia,out-of-pocketspendingisthe
dominantcomponentofhealthcarefunding,accountingfornearly54percentand
76percentoftotalhealthcarespendingrespectively(FY2006).
Healthcare Funding and Insurance Coverage –
The Indian Context
HealthcareexpenditureinIndiainFY2006wasapproximately5percentofGDP
comparedtoJapan(7.9percentofGDP),UK(8.4percentofGDP)andBrazil(7.5
percentofGDP).Publicsectorexpenditureonhealthcarehasprogressively
decreasedovertheyearsfromabout26percentin1995tounder20percentof
thetotalhealthcarespendinginFY2006.Consequently,theprivatesectorhas
playedadominantroleinfinancingofhealthcareexpenditure,withhouseholds
accountingforadisproportionate76percentofthetotalhealthcareexpenditure,
increasingfrom67percentin199510.
Householdsspendnearly5to6percentoftheirtotalexpenditureand11percent
oftheirnon-foodconsumptionexpenditureonhealth,asperconsumer
expendituredataofthevariousroundsoftheNationalSampleSurvey
Organization.Dataalsoshowanincreasinggrowthrateof14percentperannum
inhouseholdhealthspendingsinceFY1995-9611.
Intermsofhealthinsurancecoverage,statisticsinIndiahavenotbeenvery
encouraging.Severaldifferenttypesofinsurancecoverareavailable–
GovernmentschemessuchastheEmployees’StateInsuranceSchemeand
CentralGovernmentHealthScheme,employercoverinPSUsandtheIndian
Railways,andfinallyprivateinsuranceschemes.Ithasbeenestimatedthataround
15percentofthepopulationwascoveredundersomepre-paidschemeinIndiain
2007,withlessthan2percentshareofprivatehealthinsurance12.
Whataretheimplicationsoflimitedpublicspendingonhealthcareandlow
coverageinIndia?IncountrieslikeIndiaandanumberofotherdeveloping
countries,whichstillrelymostlyonout-of-pocketpayments,universalaccessto
healthcareiselusive.Asignificantproportionofthepopulation,whosuffersa
8 WHO National Health Accounts
9 Healthcare in Japan, National Coalition on Healthcare; National Health Services, United Kingdom
10 WHO National Health Accounts
11 Financing and Delivery of Health Care Services in India - Background Papers of the National
Commission on Macroeconomics and Health, Ministry of Health and Family Welfare, Government of
India, 2005
12 KPMG Analysis
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Page3

hand-to-mouthexistence,isforcedtomakedirectpayments,oftenwithaheavy
burdenofdebt,toaccesshealthcarefromthemarketbecausethepublic
provisionisgrosslyinadequateornon-existent.

Highrelianceonout-of-pocketspendingislikelytoposehealthpolicychallenges
relatedtofinancialriskprotectioninfutureyears.Riskpoolinginsurespeople
againstsuchrisksbytransferringthecostsofcoveringthesicktoalargenumber
ofhealthypeoplewhoneedtopayonlyasmallpremium.Indianeedstofocuson
thepotentialwaystopoolriskandreduceoutofpocketexpenditure,forwhich
othersourcesofhealthcarefundingneedtobesteppedup.

The Healthcare Funding Gap

Thekeyquestionthatarisesis,byhowmuch,andwhofundsthisgap?By
developingvariousscenarios13ofthehealthcarefundingcompositioninIndia,we
canacquireaclearperspectiveonthequantumofinvestmentsneeded,andthe
impliedgrowthratethatisrequiredtobeachievedbyvarioussegmentsofthe
economythatprovidethehealthcarefunding.

AssumingthattheIndianeconomywillwitnessarealgrowthrateof
approximately7percentuntilFY2015,theprojectedGDPislikelytobeINR98lac
croresinFY2015.Theotherimportantassumptionwouldbethatthetotal
healthcareexpenditurewillremainwithinarangeof5percentto6percentof
GDP.

Assumingthattheclaimpaymentsconstitutethehealthcarefunding,the
contributionofpublicandprivatehealthinsurancecompaniestohealthcare
fundingwouldbeapproximatelyINR16,800croresforFY201514,iftheindustry
premiumsgrowata(CAGR)of25percentto30percentbetweenFY2008andFY
2015.

GiventhatpublicexpenditurehashistoricallygrownataCAGRof10.6percent
betweenFY1995toFY200615 ,itisassumedthatthegovernmentexpenditure
shallcontinuetogrowatapproximatelythesamerateuntilFY2015.Inthiscase,
governmentexpenditurewouldamounttoapproximatelyINR98,000crores.

Thus,inthisbaselinehealthcarefundingscenarioinFY2015,Out-of-Pocket
Expediture(OPE)wouldconstitue77percentor80percent(asdepictedinTable
No.1)ofthehealthcarefunding,dependingonwhethertotalhealthcarefundingis
5percentor6percentofGDPrespectively.IfIndiawantstoachieveamore
desirableproportionofOPE,asinChina(60percent),itislikelytoentailincreased
participationfrompublic,privateoracombinationofthesesectors,implying
significantlyhighergrowthinhealthfunding.

13 Estimates based on NSS 1998; Report No. 441, 52nd Round, NSSO ; Finance and revenue accounts,
New Delhi: Ministry of Finance, Govt. of India; 2004; Finances of state governments, Mumbai:
Reserve Bank of India, Govt. of India 2005 Labor year book; Health information India, New Delhi:
Ministry of Health and Family Welfare, Govt. of India; 2002.
CSO 2004, New Delhi: National Accounts Statistics, CSO, Govt. of India; 2004.
14 Assuming a claims ratio of 60 percent
15 WHO National Health Accounts, KPMG Analysis
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Page4

Table1:Healthcarefundingscenario

“ Private Sector Insurance

will be journey in itself and will
largely be concentrated in
Urban Areas in the initial few
years. Rural and Semi Urban
health insurance penetration
will be Public Private

”
Partnership led
Mr. Girish Rao,
Managing Director,
Swiss Re India

AnalyzingthescenarioI,wheretherequiredincreaseinfundingtobringdownthe
OPEcomponentisborneonlybytheGovernment,itwouldhavetomobilize

“ Government expects to pro-

vide health insurance coverage
to more than 30 crores Indian
population in the next five years
with recent initiatives like RSBY,
nearlyINR81,220crorestoINR120,420croresofadditionalfundsinFY2015.
WhiletheGovernmenthasinitiatedschemessuchastheRashtriyaSwasthya
BimaYojana(RSBY)toreducethisfundinggap,thereisclealyaneedformany
suchinitiatives.Further,thereexistsaviableopportunityforprivatesectortoshift
asizeablepopulacefromadirectout-of-pocketexpensemodeltoaprepaid,risk-
poolingmodelasillustratedinscenario2.

”
Janashree Bima Yojana etc Thus, in order to reduce the proportion of OPE in the overall healthcare
Mr. Tarun Bajaj, funding there needs to be focused efforts from the public as well as the
Joint Secretary, private sector along with the possible public private partnership (PPP).
Government of India ExamplesofPPPcouldincludeapartner-agentmodelbasedcommunityinsurance
schemesinvolvingcooperativesocieties,governmentinitiativeslikeRSBYscheme
involvingcontributionbyinsurancecompaniesaswell.
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Page5

Health Insurance in China

The Challenge
Bytheearly1980s,thecollapseofcommunityfinancinginstitutionsinrural
areasledtonearly90croreChinesepeasantsbeinguninsured.Inthecities,
residentswerecoveredbyacity-basedsocialhealthinsuranceschemewhich
coveredonlyworkersintheformalsector,leavingtheothersuninsured.In
2003,itwasfoundthatonly55.9percentofurbanand21.4percentofrural
residentswerecovered.

The Approach
Thegovernmenthasbeendirectingnewinvestmentwithaviewtowardspro-
vidinguniversalbasichealthcare.

Rural: In2003,thegovernmentestablishedtheNewCooperativeMedical
Scheme(NCMS)–agovernmentrun,voluntaryinsuranceprogramthataimed
toinsureruralresidentsagainstcatastrophichealthexpenses.Underthis
scheme,thecentralandthelocalgovernmentswouldeachsubsidize40Yuan
perfarmer,withthefarmerpaying10Yuanasanannualpremiumforenrol-
ment.

Urban: UndertheUrbanEmployeeBasicMedicalInsurance(BMI)introduced
in1998,employercoveragewasfinancedthroughemployerfundedcollective
funds(6percentofwages)andabeneficiaryfundedpersonalaccount(2per-
centofwages);thecentralandlocalgovernmentssubsidizenon-workers’cov-
erage.

Results
Bytheendof2007,NCMScovered86percentoftheruralpopulation,andis
targetedtoreach100percentbytheendof2008.BMIontheotherhandcov-
ered160millionworkersandretireesin2006,andisexpectedextendcover-
agetoallurbanresidentsbytheendof2010.

Lessons for India

• IndiahasrecentlylaunchedtheRashtriyaSwasthyaBimaYojana,similarto
theChineseNCMS,tocover30crorepeoplebelowpovertylinein5years

• However,itmaybenotedthatwhilepublicinsurancehasplayedanimpor-
tantroleinChina,Indiadoesnothaveobligatorypublicinsuranceandis
bettingontheemergenceofprivatemicro-insurancepolicies

• Besides,thedifferentformsofgovernmentinthetwocountriescould
resultindifferentoutcomesforsimilarschemes

Source:Yip,W.,Mahal,A.“TheHealthCareSystemsofChinaandIndia:Performanceand
FutureChallenges”,HealthAffairs,Volume27,Number4
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Page6

The Rashtriya Swasthya Bima Yojana (RSBY)

TheRSBYisaCentralGovernmentSchemelaunchedinOctober2007to
providehealthinsurancetothebelowpovertylinefamiliesintheunorganized
sector.

Benefits
• TheSchemeenvisagestoprovidesmartcardbasedcashlessinsurance
coveruptoINR30,000onafamilyfloaterbasis

• Pre-existingdiseasesarecovered

• Hospitalizationandservicesofsurgicalnatureandpre-andpost-hospital-
izationexpensesarecovered.

Funding
• TheCentralgovernmentbears75percentoftheestimatedannual
premiumofINR750andthecostofthesmartcard

• StateGovernmentsbear25percentofthepremiumandadministrative
andothercostsofadministeringthescheme

• ThebeneficiarypaysINR30perannumasregistration/renewalfee.

Coverage
• Anestimated6croreBelowPovertyLine(BPL)workersinall600districts
inthecountryattherateof1lakhworkersperdistrictareexpectedtobe
coveredat120districtsperyearstartingfromFY2008.

Role of State Governments

• Stategovernmentsengageinacompetitivebiddingprocessandselecta
publicorprivateinsurancecompanylicensedtoprovidehealthinsurance
byIRDA.

Role of Insurer:
• Theinsurercoversthebenefitpackageasacashlessfacilitythatinturn
requirestheuseofsmartcardsissuedtoallmembers

• TheinsurerengagesintermediarieswithlocalpresencesuchasNGOs,
MFIs,etc.inordertoprovidegrassrootsoutreachandassistmembersin
utilizingtheservicesafterenrolment

• Theinsureralsoprovidesalistofempanelledpublicandprivatehospitals
meetingcertainbasicminimumrequirements(e.g.,sizeandregistration)
thataretoparticipateinthecashlessarrangement.Thesehospitalsmust
setupaspecialRSBYdeskwithsmartcardreaderandtrainedstaff

• Theinsurertracksclaims,transfersfundstothehospitalsandinvestigates
inthecaseofsuspiciousclaimpatternsthroughon-siteaudits.

WhileRSBYhassetaggressivegoalsforitself,thesuccessofthescheme
needstobeseeninIndia.Butiftheschemeisabletoachieveitsambitious
target,itcantoplayadominantroleinincreasinghealthinsurancecoveragein
India.

Source:www.rsby.in
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Page7

The Indian Health Insurance Industry

Figure4:IndiaHealthInsurancemarketsize
andgrowthrate
TheIndianhealthinsuranceindustrystandsatINR5,125croreswithonlyasmall
sectionofthetotalpopulation(around2percent)beingcoveredsofar.Witha
compoundedannualgrowthrateofaround37percent(FY2002-08),health
insuranceindustryinIndiaisoneofthefastestgrowingsegmentsamongother
non-lifeinsurancesegments.

Highgrowthratesofhealthinsuranceindustryhavebeendrivenbyseveralfactors
suchaschanginghealthcarescenario,socio-economictrendsandregulatory
changesintheindustryinIndiaasdiscussedbelow.

Source:IRDA
Key Growth Drivers

Key Growth Drivers Description Impact on Health Insurance Industry

• Increaseinpopularityofhealthinsurancein
• Privatehealthcareisbecomingpredominantwithpro- urbanareas
Changing Healthcare sce-
liferationofprivatehospitalsinurbanareasthus • Healthcarecostsaremounting,thusmaking
nario in India
increasinghealthcarecosts treatmentforcommonpeopleincreasingly
unaffordable

• Increasingprevalenceoflifestylediseasesinthe
Changing demographic • Largerafflictedpatientpopulationrequiring
country
environment treatmentandmedicalprocedures
• AgeingPopulation

• Moreinformedandawareconsumer,
• Empiricalevidenceindicatesthatthereisapositive demandingbetterfacilities
correlationbetweenhealthcarespendingpercapita • Greaterabilityandwillingnesstopayfor
Increased awareness and andproportionofpopulationcoveredbyhealthinsur- medicaltreatmentandhealthinsurancepre-
affordability ance. mium
• Indiahasseenariseinincomelevelsandliteracylev- • Percapitaspendonhealthcareisontherise.
els. Thishascreatedademandforhealthinsur-
anceproducts

• Increasedfocusonhealthinsurancewiththeemer-
genceofstandalonehealthinsurancecompanies • Increasedfocusanddistributionpushlead-
‘Push factor’ by insurance
ingtoincreasedpenetrationofhealthinsur-
companies • StrongerpushfromInsurancecompaniesalongwith ance
increasingdistributionreach

• Pricedetarifficationinnon-lifeinsuranceindustryin
Favourable Regulatory
Indiaresultingintheremovalofcross-subsidizationof • Increaseinthehealthinsurancepremium
environment
healthinsurancepoliciesinIndia

• GovernmentinitiativeslikeRSBYscheme,Janashree
Government focus on • Increasedhealthinsuranceawarenessand
BimaYojana,NationalRuralHealthMissionetctopro-
health insurance coverage
videextensivehealthinsuranceaccess

Goingforward,thesegrowthdriversareexpectedtocontinuetodrivethegrowth
ofthehealthinsuranceindustryinIndia.

15 IRDA Journals
KPMG CII Health Insurance Report:04WhitepaperA4v2.qxt 12/8/2008 4:26 PM Page 15

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Future Outlook
“ The health insurance market
will balance itself out even in
the midst of the recent financial
Thefutureoutlookofthehealthinsuranceindustryremainspositive.Theindustry
witnessedagrowthrateof52percent17 inthefirstquarterofFY2009compared
crisis- while this meltdown has toFY2008.

impacted the sale of group and Whiletheindustryiswitnessingsomedecreaseinthegrouphealthinsurance

corporate policies; we expect businessduetothecurrentfinancialcrisis,theretailmarketisexpectedtogrow
inthenearfuture.Overall,thehealthinsuranceindustryinIndiaisexpectedto
the retail market to increase
growataCAGRof25to30percenttillFY2015toreachthemarketsizeof

”
substantially approximatelyINR28,000croresbyFY201518.
Dr. Shreeraj Deshpande, TobeabletoincreasethemarketsizebyaroundINR22,900croresormorein
Vice President –
sevenyearstime,theindustryparticipantswouldrequiretomakeconcerted
Health Insurance,
effortsinthisdirection.Thebuildingblockshavetobeputinplacebythekey
Bajaj Allianz General Insurance
participantsofthehealthinsuranceindustryandtheissuesandchallengesfaced
Company Ltd.
bythemhavetobeaddressedindefiningtheseconcertedefforts,forachieving
thetargetmarketsizeandincreasedpenetrationforhealthinsuranceinIndia.

Key participants in the Health Insurance industry

“ Health insurance industry in

India is significantly under-pene-
trated and would continue to
Thehealthinsuranceindustrycomprisesseveralkeyplayersacrossitsvaluechain.

Figure5:KeyparticipantsintheHealthinsurancevaluechain
grow despite current financial

”
turmoil
Mr. Sandeep Bakhshi,
Managing Director and CEO,
ICICI Lombard General Insurance
Company Ltd.

17 IRDA Journals
18 Industry Discussions, KPMG Analysis
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Page9

Figure6:MarketshareofkeyplayersinHealth A. Insurance companies:

insuranceindustry(FY2008)
Therobustgrowthofhealthinsurancepremiumincomeinrecentyearshas
helpedensurethathealthinsuranceisconsideredafocussegmentbymost
Insurancecompanies.Healthinsuranceiscurrentlybeingofferedbynon-life
insurancecompanies,specializedhealthinsurancecompaniesandlifeinsurance
companiesinIndia.Whilehealthinsuranceformsalowproportionofthetotal
businessforlifeinsurancecompaniesinIndia(0.2percentoftheindividualregular
premiumforFY2008),itformsasignificantproportionofthebusinessfornon-life
insurancecompanies(approx.18percentofthetotalGrossWrittenPremiumfor
FY2008).19

StarHealthandAlliedInsuranceandApolloDKVInsurancearetheonlytwo
Source:IRDA
specializedhealthinsurancecompaniesinIndiatilldate.InJuly2008,BupaGroup,
aleadinginternationalhealthandcarecompanyandMaxIndiaLtd.,formedanew
partnershiptoenterthehealthinsurancemarketinIndia20.Majorhealthinsurers
fromoverseas,suchasAetna,CIGNAaswellasothermulti-nationallifeandnon-
lifecompanies,havealsoevincedinterestinenteringtheIndianhealthinsurance
market

B. Third Party Administrators (TPAs)

Figure7:MarketshareofTPAs(FY2007)
TPAswereestablishedasaresultofregulationsintroducedinFY2001.Theirkey
responsibilitiesincludeprovidingadministrationsupportforinsurers,suchas
admissionandsettlementofclaims,andestablishingprovidernetworksof
hospitalsthatpolicyholderscanutilise.ManyTPAsprovideawidervarietyofvalue
addedservicessuchasambulanceservice,medicinesandsupplies,information
abouthealthfacilities,hospitals,bedavailability,andhavemovedbeyondthe
boundariesthattheywereoriginallyintendedtofulfil.

AsofMarch2008,therewere28TPAsinoperation,thoughthetopthreehave
over50percentshareofthemarket21.Interestingly,asinsurershavestarted
Source:IRDA analyzingtheirclaimsexperience,someofthemhaverealizedthatbyusingaTPA
fortheadmissionandsettlementofclaims,theyhaveinfactoutsourcedtheir
mostimportantactivity.Asaresult,someinsurancecompanieshaveeither
establishedorareintendingtoestablishtheirownin-houseclaimsoperations.
Further,reinsurerslikeMunichReandSwissRehavetakenstakesinParamount
HealthcareandTTKHealthcarerespectively,whilstRelianceHealthVentures
hasacquiredamajoritystakeinMediAssist

19 IRDA
20 Insurance Business Review, July 2008
21 IRDA, KPMG Analysis
KPMG CII Health Insurance Report:04WhitepaperA4v2.qxt
“ Reinsurers can bring their
deep insight of global
experiences, data on health
insurance worldwide and can
help Indian players define their
marketing strategy through an
appropriate product / customer
”
segment grid
Mr. Girish Rao,
MD,
Swiss Re
12/8/2008 4:26 PM Page 17
Page10
C. Reinsurers
Reinsurersplayacriticalroleinthehealthinsurancevauechain.Theytakeonpart
oftheriskthatinsurersassumefromtheircustomerssothattheinsurercan
assumegreaterindividualrisks.Inthepast,mostofthetop50globalreinsurers
operatedindirectlyfromtheiroverseasofficesbysharingthereinsurancerisks
assumedbytheGeneralInsuranceCorporationofIndia.Onereasonforthiswas
thatglobalreinsurersfeltthatratesforreinsuranceproductswereinadequateand
notatallreflectiveofglobalmarketconditions22.However,withtheentryoflarge
playersintotheIndianmarket,thisseemstobechanging.
Apartfromprovidingreinsurancesupport,reinsurerscanalsosupportinsurance
companiesindefiningtheirproductandcustomersegmentsbasedontheirglobal
experience.
D. Healthcare providers
Thehealthcareindustryisestimatedtogrowatabout15percenteveryyearfor
thenextfourtofiveyears.23 Increasedfavorableregulatorydrivers,changesin
demographicsandchangesindiseaseprofilehaveledtotherapiddemandfor
qualityhealthcareprovision.
Privateplayershaveinvestedsignificantlyinthismarket,leadingto
‘corporatization’oremergenceofhospitalchains.However,thefocusofthese
playershasbeenlargelyurbanasthisiswheretheinfrastructureandpatientpool
isavailablefortheseplayers.ExamplesincludetheApollogroup,Manipal,Fortis,
MaxandWockhardthospitals.Infact,84percentofhospitalbedsaretoday
locatedinurbanareas,whereas75percentofthepopulationstillresidesin
villages24.Thisselectiveconcentrationofhealthcareprovidersisamajorconcern
tobeaddressed,especiallysincestudieshaveshownthatthoselivinginrural
areasspendaboutasmuchonhealthcareasthoseintowns.
CurrentlyhealthcareprovidersarenotbeingregulatedinIndiawithregardto
standardizationandaccreditationnorms.Thishasresultedineachhealthcare
providerbeingsignificantlydifferentfromtheotherintermsofthehealthcare
costs,processesandqualityamongstothers.
E. Distribution channel partners
Agentsandbrokersarethekeydistributionchannelsforsellingretailandgroup
healthinsurancerespectively.Bancassuranceisalsoevolvingasanimportant
distributionchannelforretailhealthinsurance.Theusageofdirectdistribution
channelsliketheinternet,telemarketingetcislimitedinIndiacurrently,butwill
gainimportanceastheindustrymatures.Thisformofdistributionispopularinthe
developedcountriesandiscatchingoninIndiaaswell.
22 “Indian Health Insurance- A major opportunity”, Watson Wyatt
23 Foreign Investments in Hospitals in India: Status and Implications, WHO India
24 “The Private Health Sector in India : Nature, Trends and a Critique”, CEHAT
KPMG CII Health Insurance Report:04WhitepaperA4v2.qxt 12/8/2008 4:26 PM Page 18

Page11

F. Regulators
TheInsuranceRegulatoryandDevelopmentAuthority(IRDA)regulates,promotes,
ensuresorderlygrowthoftheinsuranceandthereinsurancebusinessinIndiaand
protectstheinterestsofthepolicyholders.Currently,healthinsuranceformsa
partofthenon-lifeinsurancebusinessandisbeinggovernedbythenon-life
insuranceregulationsinIndia.TheIRDAisconsideringannouncingseparate
guidelinesforhealthinsurancetopromotesustainablegrowthofthehealth
insuranceinIndia.TheIRDAhasalsorecommendedloweringoftheminimum
capitalrequirementforstand-alonehealthinsurancecompaniesfromINR100
crorestoINR50crores25.Thismoveisexpectedtoencouragetheentryofstand
alonehealthinsurancecompaniesinIndia,andmayalsofacilitatetheemergence
ofRegionalhealthinsurancecompaniesinIndia.

Despiteawellestablishedindustrystructureinthehealthinsuranceindustryin
India,theindustryhasnotbeenabletoachieveitstruepotential.

Issues and Challenges existing in the Health

Insurance Industry in India
ThesignificanteconomicgrowthinIndiaattheturnofthemillenniumhasleftits
medicalcareandhealthinsurancesystemsstrugglingtokeepupwiththegrowing
healthcaredemandsofitspeople.Indiaischaracterizedbyagrowing(butstill
relativelysmall)middleclassandalarge(butshrinkingandmostlyrural)near-
subsistencepopulation.Giventhepopulation,geographicalsizeofthecountry,
differentlevelsofevolutionwithintheurbanandruralstrataofthesociety,itisnot
surprisingthatplayersarefacedwithvariouschallengesinincreasinghealth
insurancecoverage.

25 ‘New Health Insurance Law on the Anvil’, Business Standard, October 2008
KPMG CII Health Insurance Report:04WhitepaperA4v2.qxt 12/8/2008 4:26 PM Page 19

Page12

IssuesandChallengesfacedbyvariousparticipantsoftheHealthInsuranceValueChain

Thus,therearesignificantchallengesbeingfacedbytheexistingparticipantsof
thehealthinsurancevaluechainwhichhaveimpactedthegrowthofthehealth
insuranceindustryinIndia.Whilethesechallengesneedtobeaddressedto
increasethehealthinsurancecoverageinIndia,thereisalsoaneedtounderstand
thechallengesfacedbytheIndianconsumerintheexistingmarketenvironment.
KPMG CII Health Insurance Report:04WhitepaperA4v2.qxt 12/8/2008 4:26 PM Page 20

Page13

Voice of the Indian Consumer

Theendeavorofhealthinsuranceistoprovideconsumerswiththeoptionsor
productsthatcanaddressissuesofpreventionandtreatmentofillness,leadto
wellnessandtherebyhelpthemtoleadlonger,healthierandhappierlives.Thus,
understandingthevoiceoftheIndianconsumersiscriticaltounderstandthe
healthinsuranceneedsoftheconsumers.

Methodology
TounderstandthevoiceoftheIndianconsumer,KPMGcommissionedIMRB
InternationaltocarryoutaQualitativeConsumerResearchstudy.Thestudy
involved13FocusGroupDiscussions(FGDs)acrosssixcities(twocitieseachin
metro,Tier1andTier226 segments)inIndia.ThecitiesincludedMumbai,
Chennai,Ahmedabad,Lucknow,CochinandPatna.

Therewerearound6-8participantswithdiverseprofessions(salariedaswellas
selfemployed)pergroup.SeparateFGDswereconductedfortheholdersand
non-holdersofhealthinsuranceinSocio-economicclass(SEC)A/B1(Upperstrata)
andSECB2/C(Lowerstrata)27.

Itwasfoundthatwhiletheconsumersdiffersignificantlyintheirprofiles,theyare
homogenouswithrespecttotheirhealthinsuranceawarenessandneedswhich
werecapturedduringtheconsumerresearch.

Thestudyalsorevealedthatcharacteristicsofconsumerswithandwithout
insurancecoversdifferedsignificantlyasshownbelow:

Typical characteristics of a consumer with Typical characteristics of a consumer without

an insurance cover an insurance cover

•Moderatelevelofawareness,knowledgeandeducation
•Professionthatiseitherhighlypayingorhasconsistent
incomestream
•Taxpayingcitizen
•Preferstosecurethefuture,andiscautiouswithfinan-
cialmatters
•Likestoplanthingsandorganizethem
•Viewsinsurancefromsecurityaswellasinvestment
standpoint
•Likestostrikeabalancebetweenriskandreturns.
•Lowlevelofawareness,knowledgeandeducation
•Earnslowlevelofincomesorhasnosuretyofregular
incomes;typicallyunemployedoremployedinlower
orderjobs
•Accordslowprioritytoinsurance,primarilyduetolack
offundsandpresenceofotherinvestmentneeds
•Fewdependants
•Focusesonimmediatefutureneedsratherthandistant
ones
•Securityaboutfuturemeanseducatingchildrenand
makingthemselfdependent.

26 Metro – Cities with population more than 40 lac , Tier 1 - Cities with population between 15 lac and
40 lac , Tier 2 - Cities with population between 5 lac and 15 lac
27 SEC classification is based on Chief wage earner’s (CWE) occupation and education level
SEC A: CWE is graduate/ post graduate and is primarily employed at executive positions or is an
industrialist/businessman
SEC B: CWE is a post graduate or below and is primarily employed at clerical/supervisory level or is a
small businessman
SEC C: CWE is educated till class XII and is primarily employed at clerical/supervisory level or is a
skilled worker/petty trader/shop owners
KPMG CII Health Insurance Report:04WhitepaperA4v2.qxt 12/8/2008 4:26 PM Page 21

Page14

Perception about Health Insurance in India

Thefocusgroupdiscussionshaverevealedseveralinterestingobservations.While
asignificantportionofconsumersareawareofhealthinsuranceandits
importance,thereareseveralperceptions–bothnegativeandpositive,thathave
astronginfluenceontheirbuyingdecisions.Interestingly,consumersacrossSEC
segmentsandcitiessharemanyoftheseviews.Thisdemonstratesthat
addressingsomeofthenegativeperceptionsandcapitalizingonthepositiveones
arelikelytoplayavitalroleinincreasinghealthinsurancecoverageinIndia.We
discussthemindetailbelow.
Figure8:PerceptionsaboutHealthinsuranceinIndia

Characteristics have been classified into Core, Primary and secondary segments based on
the level of emphasis with which these characteristics were mentioned during the focus
group discussions
KPMG CII Health Insurance Report:04WhitepaperA4v2.qxt 12/8/2008 4:26 PM Page 22

Page15

Negative Perceptions: Impediments to buying Health

Insurance
Thestudyhasthrownlightonseveralpossiblereasonsthatconsumershavecited

“ Claims are not guaranteed.

Companies put their best foot
forward to sell a policy, but lack
fornotbuyinghealthinsuranceinIndia.Someofthemostpertinentonesinclude:

a. Problems with Claims processing: Problemswithclaimsprocessing,

experiencedeitherfirsthandorbypeergroups,deterconsumersacross
segmentsfrombuyinghealthinsurance.
enthusiasm during claims
i. Consumersbelievethatreimbursementofclaimsfrominsurance

”
processing.
companies,forcashpaidinhospitals,requirenumerousfollow-ups
SEC B2/C,
Tier 2 city, ii. Incaseofcashlesstransactions,theperceptionisthatthereisaneedto
Non -holder of health insurance submitseveraldocuments

iii.Anotherpredominantperceptionisthatinsurancecompaniesrejectclaims
ondubiousgrounds,renderingtheinsurancepolicyfutile.

Suchinstancesdiscourageconsumersfrominvestinginhealthinsurance

“
policies.Negativeexperienceswithclaimsprocessingcouldalsoleadto
Offered only mainly for big
negativepublicity,makinginsurancepolicieslesspopular
critical diseases….I would
b. Limited product coverage: Healthinsuranceplansdonotcoveroutpatient
rather die than have these
careandcertainailmentssuchasdiabetes,bloodsugar,eyeanddental

”
diseases. surgeries.Theviewisthatthepolicycovershealthproblemsthathavealow
SEC B2/C, probabilityofoccurring,renderingthepremiumpaidfutileifhospitalization
Tier 2 city, doesnotoccurinaparticularyear
Non-Holder of health insurance
c. Less importance given to health insurance: Formostconsumers,theneed
tosaveandinvestforahome,education,vehicle,children’smarriageandother
lifecycleneedstotakeprecedenceovertheneedforahealthinsurancepolicy.
Amisconceptionprevalentamongmanyconsumersisthatthereturnon
investmentinhealthinsuranceislow,withlittlerewardiftheymakenoclaims.
Inaddition,severalconsumers,particularlyyoungeragegroups,tendto

“ Meant for people over 45

years who are prone to
believethatpeopleover45yearsofagewhoaremorepronetoailments,
needahealthinsurancepolicy.

diseases
”
Thereisthereforeatendencytoinvestinahealthinsurancepolicyonlywhen
extrafundsareavailable,orifconsumershavefacedhardshipsinthepast
SEC A/B1,
duringamedicalemergency.Oneofthereasonsforthiscouldbethe
Tier 2 city,
Non-holder of health insurance confusioncreatedbymultipleparticipantsaboutinsurancebeingan
investment/savingsproductorrisktransfermechanismintheconsumer’s
mind.
KPMG CII Health Insurance Report:04WhitepaperA4v2.qxt 12/8/2008 4:26 PM Page 23

Page16

d. Limited options of doctors and hospitals: Insurancecompanieshavetheir

ownnetworkofhospitalsandseldomreimburseproceduresperformedin
hospitalsoutsideofthenetwork.

i. Intheeventthataconsumerusesanon-networkhospitalduringan
emergency,thepolicybecomesineffectual

ii. Further,Indianconsumerstendtoestablishacomfortlevelwithdoctors.
Theyarereluctanttoswitchtootherprovidersiftheirdoctorsarenotpartof
thenetwork

“
e. Agent and Payment Related Issues: Insuranceadvisorsdonotsuggest
Agents are not able to
suitableoptionstoconsumers,hideinformation,areunawareoftheproducts
advice properly, they are less theysellorcoercethemintobuyingpoliciesthatarenotsuitedtotheirneeds.

”
knowledgeable Thishascreateddiscontentamongconsumersthatagentsdonotactintheir
SEC A/B1, interestandinsteadoftreatingadvisorsastrustedpartners,several
Tier 2 city, consumersarewaryofthem.Anothercommongrievanceofconsumersis
Non-holder of health insurance thattherearefewoutletstodepositpremiums.Moreover,whilecompanies
havebeenencouragingtheuseofinternettopayinsurancepremiums,
consumersinnon-metrosmakelimiteduseoftheinternet.

“ Difficult to understand its

various jargons and
WhilethesereasonsfornotbuyinghealthinsurancearesimilarforSECA,BandC
Consumersegments,thereareseveralotheraspectswherethesereasonsdiffer
paperwork
SEC A/B1,
Tier 2 city,
”
Non-holder of health insurance
forSECB2/C,whicharecitedbelow:

a. Complicated policy document: Consumersfinditdifficulttounderstandthe

variousjargonsandpaperworkinvolvedinthehealthinsurancepolicy

b. Limited awareness: Limitedawarenessabouthealthinsurancehasledtonon-

considerationofthisoptiontoasignificantnumberofpeople

c. Expensive: Consumersperceivethathealthinsurancepoliciesareexpensive

“ The premium is
expensive. It is only meant for
people belonging to high
andaremeantfortherichandtheeducatedonly.

Ithasbeenfoundthatconsumerswithahealthinsurancecoversharesimilar
viewsasthosewithout,intermsoftheirskepticismtowardsclaimsprocessing,
class or upper middle class

”
limitedcoverageintermsofproducts,anddoctorsandnetworkhospitals.While
SEC 2/C, thisskepticismhasbeenbasedonexperience,manyoftheothernegative
Tier 2 city, perceptionsstemfromafundamentallackofawarenessabouthealthinsurance–
Non-holder of health insurance itsimportance,productsavailableandtheprocesses.
KPMG CII Health Insurance Report:04WhitepaperA4v2.qxt
Page17
“ An insurance policy cover
ensures lower stress during
emergencies. One can focus on
treatment of the disease rather
than worrying about arranging
funds
SEC A/B1, ”
Tier 1 city,
Holder of health insurance
“
Insurance is preferred as it
acts as a tax saver scheme.
Also, the premium is quite small
as compared to the benefits
which accrue through this
”
SEC A/B1,
Metro,
Holder of health insurance
“ As soon as there is an
emergency, an agent should be
there throughout with the
insured persons to take care of
all the formalities
SEC B2/C,
Metro, ”
Non-holder of health insurance
12/8/2008 4:26 PM Page 24
Positive Perceptions: Perceived benefits about ‘Health
Insurance’
Despitethenegativeperceptionsofpeopleabouthealthinsurance,thereareclear
benefitsofhealthinsuranceasperceivedbyconsumerswhoarecoveredundera
policy.
a. Cashless Hospitalization: Oneofthekeyadvantagesofhealthinsurancehas
beenfoundtobecashlesshospitalization.Thisgivestheinsuredthebenefitof
startingthetreatmentoncehispre-authorizationisapprovedbytheinsurance
company/TPA.Inaddition,thisgivesthefamilythetimeandpeaceofmindto
concentrateonthepatientandthetreatmentandrelieffromarrangingfor
funds
b. Tax benefit: Taxbenefitsoninvestmentsinhealthinsuranceforselfand
dependantsbecomesamajordriverforconsumerstoinvestinapolicy
c. Financial Independence and Security: Consumersconsiderhealthinsurance
tobeameansofensuringtheirfinancialindependenceandsecurity.Health
insurancesavesthemfromborrowingmoneyfromotherpeopleduringan
emergencyandhelpspreserveothersavingsforlateruse.
Whileconsumerswhodonotholdhealthinsurancewerefoundtobeawareof
thesebenefits,thepainpointsoverpoweredthebenefitsperceived.However,
theywerefoundtobeopentotheideaofbuyinghealthinsuranceprovidedthe
insurancecompaniesrevisetheirofferingstomatchtheirexpectationsofan
’Modelhealthinsuranceofferings’.
’Model Health Insurance Offerings’ – What the
Indian Consumer wants
Howdifferentisthe‘ModelHealthInsuranceOfferings’thattheconsumershave
envisagedfromtheexistingproductofferings?Thefindingsrelatetotheissues
thatconsumersfaceintheexistinghealthinsurancepolicies.
Largely,newideasofconsumerswerearoundthefollowingthemes:
a. Ease of claims disbursement: Currently,consumersfindtheclaims
disbursementprocesstobevague,fraughtwithproblemsandwithnosurety
ofreimbursementofclaims.Instead,theywishtohaveahasslefreeclaims
disbursementprocess,inwhichtheinsuranceagentispresentatthehospital
totakecareoftheformalitiesduringanemergency.Useofmedicalcardsthat
arelikecreditcards,whichcanswipedathospitals,mayprovetobean
innovativeandhassle-freeprocess
KPMG CII Health Insurance Report:04WhitepaperA4v2.qxt 12/8/2008 4:26 PM Page 25

Page18

b. Increased hospital network coverage: Consumerspreferthattheirinsurance

policytocoveragreaternumberofhospitalsandcertainDoctors,particularly
‘FamilyDoctors’intheirnetwork

c. Product and Pricing Innovation

i. Product Innovation

“ Specialized plans which

cover usual visits to the
gynecologist and tests done
i. Coverage of incidental costs and more diseases: Whilehospitalization
formsasubstantialcostinmedicalcare,pre-hospitalizationentailsvisits
tospecialists,diagnostictestsetc.,andpost-hospitalizationcarealso
entailhighcosts.Therefore,coverageoftheseexpensesisdesirable.
for specific reason
SEC A/B1,
Metro,
”
Holder of health insurance
Consumersalsoexpectcoverageofdiabetes,bloodsugar,dental
ailments,surgeriessuchaseyesurgeries,rootcanaletcthatdonot
requirehospitalization,andspecializedcoverageforwomentobepartof
their’ModelHealthInsuranceofferings’

ii. Long term policies: Consumerswishtotakelonger-termhealth

“ A scheme can be insurancepoliciescomparedtotheexistingone-yearpolicies.Consumers

alsomentionedaneedforbundlinghealthinsurancewithlifeinsurance
launched where for once a
iii.Simple policy documents: Smallpointerssuchasprintingpolicy
large premium is taken for 25-
documentsinlocallanguagescanbeveryusefulinhelpingconsumers
30 years for the whole family understandtheirhealthinsurancepolicybetter.Consumersalsowantthe
and yearly top ups like mobile policydocumenttobesimpleandeasytounderstand
plans
”
SEC B2/C,
Tier 2 city,
Non-holder of health insurance
ii. Pricing Innovation: Currentlyformostpolicies,thefrequencyofpayment
ofpremiumisyearly.However,severalconsumershavesuggestedan
alternativepossibilityofaone-timepremiumwithlife-longcoverage.Thisis
especiallypreferredbyself-employedpeoplewhocouldhaveaspurtin
earningsduringaparticularyear,whichcanbeinvestedinapolicyasaone-
timeinvestment.Anotheralternativeisthepaymentofaone-timelarge
premium,followedbyyearlytop-upstocoverafamilyforalongperiod

d. Regular benefits to insurance holders: Apartfromthecoveragebenefitto

theinsured,consumersalsodemandedregularbenefits.Annualhealthcheck
ups,substantialreductioninpremiumfora‘noclaim’yearetc,weresome
exampleswhereconsumersfeltthattheycouldgainsomebenefitfromtheir
associationwiththehealthinsurancecompany.

Withtheunderstandingoftheconsumers’viewsaboutthe‘ModelHealth
InsuranceOfferings’andthereasonsfornotbuyinghealthinsurance,thekey
forincreasingcoverageofhealthinsuranceinIndiaistodesignandimplement
strategiestodesignhealthinsuranceofferingsthatmeetatleastsomeofthe
consumerpreferencesandaddresssomeofthechallengesfaced.
KPMG CII Health Insurance Report:04WhitepaperA4v2.qxt 12/8/2008 4:26 PM Page 26

Page19

Reaction of Consumers to new models of Health

Insurance
Withtherecentspurtingrowthofthehealthinsurancemarket,companiesare
keentotryoutdifferentplanstoensureextensivepenetrationofhealthinsurance
inIndia.ToassisttheIndiancompaniesinthisregard,weattemptedtotestthe
acceptabilityoftwosuccessfulglobalhealthinsurancemodelsamongstIndian
consumers.Theconsumerswereexposedtotwonewtypesofhealthinsurance
planstogaugetheirwillingnesstoinvestinthesetypesofplans.

Globally successful health insurance models - ‘Managed Healthcare’ and ‘Health

Savings Account’

Managed Healthcare:
Internationaltrendsindicatethatinsurancecompanieshavebeenabletoinfluencehealthcareproviderstocutcostsand
improvethequalityoftheirservicesthroughtheadoptionofthemanagedhealthcaremodel.Itisthemostpopularhealth
insurancemodelintheUS.

Typical features include:

• Integrationofhealthcareservicedeliveryandhealthcarefinancingfunctions
• Healthcareservicedeliveryincludeseithertie-upwithexistingprovidersorbuildingonesownprovidernetworkandis
intendedtoreduceunnecessaryhealthcarecosts.Thisisdonethroughavarietyofmechanismsincludingeconomic
incentivesforphysiciansandpatientstoselectlesscostlyformsofcare,programsforreviewingthemedicalnecessity
ofspecificservices,increasedbeneficiarycostsharing,controlsoninpatientadmissionsandlengthsofstay,the
establishmentofcost-sharingincentivesforoutpatientsurgery,selectivecontractingwithhealthcareproviders,etc.
• Consumershavetotakeservicesonlyfromthenetworkinordertohavetheirhealthcarepaidbytheplan.

Health Savings Account (HSA):

VariouscountriesliketheUS,SouthAfrica,Canada,Singapore,ChinaandHongKonghaveexperimentedwiththisconcept
andhaveachievedvaryingdegreesofsuccessinHSAsbeingacceptedasaviableandlong-termoptionforfinancing
healthcareexpenses.Forexample,inSouthAfrica,itformsaround50percentofthehealthinsurancemarket.Thereisno
uniformarchitecturethatthevariousproponentsofHSAhaveadopted.Eachcountryhasadoptedandstructureditasper
theneedsoftheirpeople.

Typical Features:
• Tax-exemptsavingsaccountsimilartoanIndividualPensionAccount,butearmarkedformedicalexpenses.Depositsin
theaccountaretax-exemptfortheaccountholdersandcanbeeasilywithdrawntopayforroutinemedicalbills
• HSAworksinconjunctionwithaspecial‘high-deductible’healthinsurancepolicyresultingintheprovisionof
comprehensivehealthinsurancecoverageatthelowestpossiblenetcost
• Theinsurancecompanypaysformajormedicalexpenses(coveredexpensesinexcessofthedeductibleamount)while
theHSAaccountholderpaysforthe‘minor’medicalexpenseswithtax-exemptmoneyfromhisHSA.Unutilized
balancesintheHSAcanbeaccumulatedtowardsindividualretirementaccounts.
KPMG CII Health Insurance Report:04WhitepaperA4v2.qxt
Managed Health Care Concept
Thisplancontrolsthefinancingand
deliveryofhealthservicesto
memberswhoareenrolledinthis
plan.Underthisplanthereisan
existingcontractwithhealthservice
providerslikehospitals,doctorsthus
forminga‘providernetwork’.
Memberswillhavetotakeservices
fromthisnetworkonlyinorderto
havetheirhealthcarepaidbythe
plan.Incaseamembertakesservice
fromabodyoutsidethis‘network’,
theplanwillnotpayfortheir
healthcareunlessitwaspre
authorizedoranemergency.
ManagedcarePlanhasbeenparticularly
popularinTier-2cities
12/8/2008 4:26 PM Page 27
Page20
Plan 1: Managed Healthcare
Asaconcept,thisplanwaslikedandappreciatedbymostconsumers.
However,peoplewerequiteapprehensiveabouttheclauseofpre-authorization
inanemergency.
Affirmative points about the plan:
a. Cashless hospitalization: Consumersappreciatedthattherewouldnotbe
anyhassleofarrangingforcashatatimewhenthefocusshouldbeon
treatment.Thiswouldalsoavoidthetediousprocessoffollowingupwith
insurancecompaniesforclaims
b.‘Right’ treatment: Doctorswillbeencouragedtousetherighttreatment
insteadofadministeringneedlessproceduresandtestsinanattemptto
makesomemoremoney.Patientswillnothavetofacethetraumaof
unnecessarytreatmentsandtheywouldbeassuredthattherighttreatment
isbeinggiventothem
c. Emergency cases/pre authorized to be considered: Itwasunderstood
thataccidentcaseswilldefinitelybetakenasemergencycase,and
authorizationsinsuchcaseswouldbeabigreliefforpatients.
Apprehensions about the plan:
a. Fear of treatment compromise: Manyconsumerssharedafeelingthatin
ordertosavemoneyfortheinsurancecompanies,networkhospitalswill
tryandkeeppeopleawayfromthehospitals.Eveniftheygetadmission,
theywilltryandhastenthetimespentinthehospital,thuscompromising
onthetreatmentregimen
b.Restrictions in the choice of hospital/doctor: Consumersarecomfortable
inreceivingtreatmentfromtheirfamilydoctorordoctorstheyarefamiliar
with.Also,theremaybesmallerhospitalswhichpeoplefindeasytoaccess
owingtotheirconvenience.Thesedoctorsandhospitalsmightnotbepart
oftheinsurancecompanynetwork,andpeoplefearthattheymaybeforced
togotofarawayplacesfortreatment
c. Unclear clause of ‘pre-authorization’ or ‘authorization in an emer-
gency’: Whileconsumersviewedthisasoneofthepositivepointsabout
theplan,theyalsoneedmoreclarityontheprocessofpre-authorization.
Manywereskepticalandneededtoknowhowcompanieswoulddefinean
‘emergency’.
Overall,thisplanhadhigheracceptanceamongstSECA/B1consumersandtier
2cities.
KPMG CII Health Insurance Report:04WhitepaperA4v2.qxt 12/8/2008 4:26 PM Page 28

Page21

Health Savings Account Plan 2: Health Savings Account

Concept
Taxsavingsemergedasthemostdominantadvantageofthisplan.Thegeneral
Thisplanallowsmemberstocreate feelingwasthatthelock-inperiodislengthyandifreviewed,wouldmakethe
planmuchmorecustomer-friendly
fundsorsavingsaccountswith
banks/insurancecompaniesthat
Affirmative points about the plan:
aretobeusedforhealthcare a. Taxsavings:Theplanwasappreciatedfortheoptionoftaxsavingandwas
expensesonly.Inthisplanthereare wellreceivedbytaxpayersegment
twoparts b. Goodbalanceofsavingtaxandassuringsecurity:Theplanwasappreciated
•Healthinsuranceplan forthedualbenefitofsecurityandtaxsaving.Theconceptappealedto
respondentssinceitoffersconsumerstheflexibilitytohaveacheckover
•Medicalsavingsaccount
theirownmoney.
Individualwillbecontributingto
medicalsavingsaccountsregularly Negative points about the plan:
andwithdrawincaseofhealth a. Lowinterestrates:Theconcernofgettinglowerreturnswasprevalentinthe
mindsofrespondents.Theyexpecttogethigherreturnstomakeitmore
emergencies.Theuserisgenerally
appealing
providedwithaspecialdebitcard b. Limitontheinsurableageofconsumer:Respondentswereoftheopinion
whichhecanusetopayformedical thattheirinsurancecovershouldbeforlifesincethemoneywouldbe
expensesfromhismedicalsavings lockedintheschemeforaverylongtime.However,theyalsofearedthat
account.Howeverifthebalancein premiumsmightbehighastheygetolder
theaccountrunsout,userhasto c. Notsuitableforolderinvestors:Respondentswereoftheopinionthatto
availthetotalbenefitofsuchascheme,itisimportantthatonestarts
payfromhisownpocket.
investingatanearlyage.Suchaschemebeyondmiddleagewouldprovide
nobenefittothem.
Thepremiumherewillbedivided
intotwocomponents:
TheHSAPlanhasbeenparticularlypopularintheMetros
•Oneusedforhealthinsurance
whichwillprovide
comprehensivehospitalization,
criticalillnessandout-patient
care
•Secondpartwillbefor
investmentthatcanbe
shelteredfromtaxationuntil
withdrawn

Deposittomedicalsavingsaccount
maybemadebyanypolicyholder,
byanemployeronbehalfofa
policyholderoranyotherperson. Overall,thisplanhadhigheracceptanceamongstSECA/B1consumersand
metrocities.Theplanwasalsofoundtohavehigheracceptanceamongst
Howeveriffundsarewithdrawnfor
salariedconsumersasitwasviewedasataxsavingtool.
areasonotherthanaqualified
medicalexpense,thewithdrawn
fundscanbeliabletoincometax
andpenalty.Onceapersonreaches
retirementageorbecomes
disabled,fundscanbewithdrawn
withoutpenalty.
KPMG CII Health Insurance Report:04WhitepaperA4v2.qxt 12/8/2008 4:26 PM Page 29

Page22

Future enablers and action steps for the

health insurance industry

Figure9:PillarsofchangeandEnablersfor Fromthefutureperspective,severalinitiativesareexpectedtobeinstrumentalin
growthforhealthinsuranceindustry
overcomingthechallengesexistinginthehealthinsuranceindustryinIndiaand
mouldingthefutureoftheindustry.

KPMGbelievesthatachievingthefuturegrowthpotentialisdependentonthe
abilityofthekeystakeholdersviz.Government,Regulator,healthcareproviders,
insurancecompanies,NGOs/SHGs,TPAs,distributionchannelpartners,health
centersandthemediatostrengthentheindustryaroundthe‘Pillars of Change’
and ’Enablers for Growth’.

Whilethe’PillarsofChange’arecriticalforbuildingarobusthealthinsurance
industry,the‘EnablersforGrowth’arecriticalforthepropellingthegrowthofthe
industryinthefuture.

Figure10:Keystakeholdersofthehealthinsuranceindustry

“
Insurance companies must Thissectiondiscussestheexpected’PillarsofChange’and‘EnablersforGrowth’
recognize that health is not a oftheHealthInsuranceindustryinIndiaandsomeofthepertinentactionsteps
whichneedtobeconsideredbyvariousstakeholderstoimplementthese
“top-of-mind” recall for most
changes.
customers. It is essential that
education on health and well-
Pillars of Change
being is imparted as part of the
distribution process to ensure Pillar1:ConsumerAwareness

that wellness and health TheIndianhealthinsuranceindustryfacesachallengeoflowlevelsofawareness

amongconsumersoftheneedsandpotentialbenefitsofahealthinsurance
promotion become a part of the
policy,andthislackofawarenesscreatesahindrancetoexpandingcoverage.
customers’ lifestyle and reduce UnlesstheIndianconsumersaremadeawareofthehealthinsuranceconceptand
long term health risks.
”
itsbenefits,theindustryisnotlikelytobeabletoachieveitsgrowthpotential.

Mr. Nimish R Parekh,

Founder & Director,
Wellinformed Healthcare
KPMG CII Health Insurance Report:04WhitepaperA4v2.qxt 12/8/2008 4:26 PM Page 30

Page23

Consumerresearchhasrevealedtwoimportantaspectsrelatedtotheawareness

“ Increasing awareness is
critical for increasing health
insurance penetration. All the
oftheconsumersabouthealthinsurance:

• Theconsumershavelimitedawarenessaboutthehealthinsuranceproducts,
theirfunctionalitiesandtheirfeaturesandbenefits
stakeholders including
• Theconsumerswhoareawareabouthealthinsurancehaveseveralnegative
Insurance companies, perceptionsaboutthesame,whichimpacttheirpurchasedecision.
Healthcare providers, Regulator,
Government, Industry bodies, Thus,theobjectiveofcreatingconsumerawarenessneedstobetwofold:
TPAs must come together to
• Increaseawarenessofthehealthinsuranceconcept,itsfunctionalities,
increase awareness of Health featuresandbenefits
Insurance in India
Mr. C. Chandrashekhar,
”
Chief Marketing Officer,
Apollo DKV Insurance Company Ltd.
• DeveloppositiveperceptionabouthealthinsuranceamongsttheIndian
consumers.

Toachievetheseobjectives,someofthekeyactionstepsforthevarious
stakeholdersinclude:

“
Currently, insurance Apartfromtheseactionsteps,stakeholdersshouldsupporttheGovernment,the
regulatorandtheinsurancecompaniesinincreasinghealthinsuranceawareness
companies have minimal
inIndia.
interactions with the consumers
directly. They should explore the

means of increasing their
communication levels with their
customers
“
We need to use the high awareness levels of life insurance
amongst the citizens in the country to propel the Health Insurance
sector,the community needs to know the gross truth that we take life

”
insurance to secure the lives of those we leave behind but health
Dr. Narottam Puri, insurance is a step we take to increase our life span of those who
President – Medical Strategy & Quality,
Fortis Healthcare Ltd. are dear to us
”
Mr. Vishal Bali, CEO, Wockhardt Hospitals Group, India
KPMG CII Health Insurance Report:04WhitepaperA4v2.qxt 12/8/2008 4:26 PM Page 31

Page24

Pillar 2: Standardization of Healthcare costs and

Accreditation norms
Anoffshootofthelackofstandardizationofhealthcareprovidersisthediffering

“
Standardizations and
Accreditations of healthcare
providers are necessary to
improve quality of healthcare
qualitiesofservice,costs,procedures,treatmentsacrossdifferentproviders.This
hasresultedinlowcustomersatisfaction,unethicalpracticessuchaslong
hospitalstays,expensivetreatmentsanddrugs.Forbuildingastrongand
consistenthealthcareinfrastructure,standardizationofhealthcarecostsand
introductionofaccreditationnormsisapre-requisite.

”
in India
HealthcareinIndiaistheresponsibilityofeachIndianstate.Therehavebeen
Dr. Sushil Shah,
Chairman, attemptsinsomestatestoinstitutionalizeuniformstandardsforhospitals.Apart
Metropolis Health Services India Ltd. fromthissomeeffortshavebeenmadebyconsumerbodies,groupsofhealth
professionals,hospitalorganizationsandnon-governmentalorganizationstohelp
medicalbodiesadoptstandardsforaccreditation.Butwhatislacking,isa
concertedefforttomonitorthefunctioningofhospitalsinIndiaandthestringency
ofcompliancetoestablishedstandards28.

Figure11:StandardsandAccreditationsforhealthcareprovidersinIndia

Source:“Accreditationofhospitals:AnOverview”:Dr.GarimaChandra,ExpressHealthcareManagement

28 “Accreditationofhospitals:AnOverview”:Dr.GarimaChandra,ExpressHealthcareManagement
KPMG CII Health Insurance Report:04WhitepaperA4v2.qxt 12/8/2008 4:26 PM Page 32

Page25

Someofthekeyinitiativesandactionstepsforthevariousstakeholdersinclude:

“ “
Unlike the insurance There are significant amount of issues with pre-authorization
sector, there is no regulatory process of insurance companies. Companies should work towards
body for healthcare; the standardizing the authorization forms, treatment procedures and
pressing need in healthcare
sector today is regulated and
medical implants etc
”
Dr. Narottam Puri, President – Medical Strategy & Quality, Fortis Healthcare Ltd.
organized growth
”
Dr. Shreeraj Deshpande,
Vice President – Health Insurance,
Bajaj Allianz General Insurance

“
Company Ltd Health insurance companies should come together to work
jointly with health care providers. This will ensure uniformity and
transparency in treatment and outcomes, costs and will help

”
product design immensely
C. Chandrashekhar, Chief Marketing Officer, Apollo DKV Insurance Company Ltd.
KPMG CII Health Insurance Report:04WhitepaperA4v2.qxt 12/8/2008 4:26 PM Page 33

Page26

Pillar 3: Healthcare Infrastructure

ForthegrowthofhealthinsurancecoverageinIndia,thereisaneedtodevelopa
networkofhealthcareinfrastructuretodeliverqualityhealthcaretothecon-
sumers.

Someofthekeyinitiativesandactionstepsforvariousstakeholderstoimprove
healthcareinfrastructureinIndiainclude:

“
Healthcare providers and

“
Health Insurance companies Private hospitals will continue to focus on urban areas.
should view each other as Government needs to play a greater role in providing healthcare

”
partners in ensuring quality access in rural areas
healthcare to all the Indians Dr. Narottam Puri, President – Medical Strategy & Quality, Fortis Healthcare Ltd.

Mr. Sandeep Bakhshi,

MD & CEO,
ICICI Lombard General Insurance
”
Company Ltd.
KPMG CII Health Insurance Report:04WhitepaperA4v2.qxt 12/8/2008 4:26 PM Page 34

Page27

Pillar 4: Data and Information Exchange

Buildingacomprehensiveandsustainabledatarepositoryandinformation
exchangemechanismsiscriticalforbuildingarobusthealthinsuranceindustryin
India.Thecomprehensivedatabasecouldhelpinthedevelopmentofnewprod-
ucts,analyzingexistingandemergingtrends,promotingnewresearch,testingof
neworalternativehypothesesandmethodsofanalysis.

IRDAhasalreadyinitiatedstepsinthisdirection.TariffAdvisoryCommittee(TAC)
hasbeendesignatedbyIRDAasthedatarepositoryforthenon-lifeinsurance
industryinIndia.Presently,thetransactionleveldataonMotor,Healthandother
linesarebeingcollectedfortherepository.Thesummaryreportsforhealthinsur-
ance(2003-04,2004-05and2005-06)arealsoavailableinthepublicdomainon
TAC'swebsite.

Whilethesestepsmarkthebeginningofthedataandinformationexchangesys-
teminIndia,thereisstillalongwaytogo.Variousstakeholdersinthehealth
insuranceindustryhavesignificantamountofinformationaroundconsumers,dis-
easepatternsetcwhichisnotbeingsharedamongstthem.

Someofthekeyinitiativesandactionstepsforvariousstakeholderstohelp
ensuredataandinformationexchangeinclude:
KPMG CII Health Insurance Report:04WhitepaperA4v2.qxt
“
Health Insurance is not so
much about insurance as it is
about health care. You can’t
count your premium without
paying attention to a person’s
health status and long term
”
health risks
Mr. Nimish R Parekh,
Founder & Director,
Wellinformed Healthcare
12/8/2008 4:26 PM Page 35
Page28
Enablers for Growth
Enabler1:ProductandPricingInnovation
Productandpricinginnovationisexpectedtobethekeydriverforpenetrationof
HealthInsuranceinIndia.BasedontheConsumerResearchitwasevidentthat
theIndianconsumersdesirenewproductstobeintroducedintheIndianmarket.
Developmentandintroductionofnewproductsattheoptimumpricehasthe
potenialtonotonlydrivethepenetrationofhealthinsuranceinIndia,butalso
helpreducetheclaims’costbeingincurredbyexistinginsurancecompaniesin
India.
Productandpricinginnovationincreasetheoptionsavailabletotheconsumersin
termsofnumberofproductsavailable,diseases/illnessescovered,improvecus-
tomersatisfaction,providebetteraccesstocosteffectiveandqualityhealthcare
andreducefraud.
Someofthekeyinitiativesandtheactionstepsforthevariousstakeholders
include:
KPMG CII Health Insurance Report:04WhitepaperA4v2.qxt 12/8/2008 4:26 PM Page 36

Page29

“
The accent of healthcare Case study: Wellness Products offered by Insurance companies
providers and health insurance
• OfferedbyInsurancecompanieslikeCIGNA,PhiladelphiaInsurance,United
companies in India must move HealthcareintheUSandBUPA,PrudentialintheUK
from being 'curative' to
'preventive'- this will ensure Features:
• Coversbenefitsthatencouragehealthybehaviorsorlifestylechanges
good health among common
intendedtoimprovehealth,qualityoflifeandresultinavoidingthecosts
people and be less expensive in associatedwithbehavior-inducedchronicillness
the long run
”
Dr. Sushil Shah,
Chairman,
Metropolis Health Services India Ltd.
• Offersfinancialincentivessuchaslowerpremiums,co-paymentsor
deductiblesforparticipationinawellnessprogram
• Examples:Nutritioneducation,physicalactivityeducation,weightloss,
stressmanagement,maternitymanagement,diabeteseducation,and
asthmaandhearthealthylifestylemodifications

Win-Win situation:

“
In the last decade or so • Advantageforconsumers:Products/healthplansareofferedatdiscounted
there has been a sea change in rates
• Advantageforinsurancecompany:Thereductioninriskforeachindividual–
the consumer's perception
Preventivemorethancurative;leadingtolowerclaimsratio
about Health Centers (weight-
loss/slimming). They have come
to acknowledge their significant
role in the preventive healthcare
domain, as opposed to a belief
held earlier that one should go to
such centers only to look better.
In keeping with this realization,
health centers and health
insurance companies can work
together to offer these services
to the Indian consumers

Mr. Narinder Kumar, ”

Group CFO & Company Secretary,
VLCC Health Care Ltd.
KPMG CII Health Insurance Report:04WhitepaperA4v2.qxt 12/8/2008 4:26 PM Page 37

Page30

Enabler 2: Technology

“
Technology like mobile
Asatransaction-intensiveindustry,healthinsuranceisexpectedtocontinueto
phones can play a significant benefitfromtheefficienciesthattechnologybringstotraditionallypaper-driven
role in increasing penetration of processes.Buttheindustryisatacrossroads:Itnotonlymustimproveexisting
Health Insurance in India
”
processes,itmustalsodevelopnewprocessesandcapabilitiestomeetnew
customerdemands.
Mr. Sandeep Bakhshi,
MD & CEO,
ICICI Lombard General Insurance Therearevarioustouch-pointswheretechnologycanhelpcreateandmonitor
Company Ltd. processesinamuchmoreefficientmanner.Someofthekeyinitiativesandthe
actionstepsforthevariousstakeholdersinclude:

“
Addressing how healthcare access and insurance can be
provided to the non-urban population is one of the most critical
aspects. Using technology such as data mining and monitoring
patient records, it is possible to identify niche audiences and create
customized products- this will eventually help in increasing
penetration
”
Mr. Srivathsan Aparajithan, Head- Healthcare Business Solutions, IBM India
KPMG CII Health Insurance Report:04WhitepaperA4v2.qxt
Page31
“ “
Tie ups with health clubs,
rotary clubs and other social
organisations is a good way of
increase penetration and
awareness of health insurance,
given the nature of the captive
”
audience
Mr. Vishal Bali,
CEO,
Wockhardt Hospitals Group, India
12/8/2008 4:26 PM Page 38
Enabler 3: Innovative Distribution Channels
ToincreasethepenetrationofHealthInsuranceinIndia,thereisaneedto
exploreinnovativedistributionchannels.Someofthekeyinitiativesandtheaction
stepsforthevariousstakeholdersinclude:
Product bundling can be the key for increasing penetration of
Health Insurance in rural areas. Health Insurance can be bundled
with products of other companies with significant rural presence.
Rural banks can also be key to help spread the reach and reduce
distribution costs
”
Mr. C. Chandrashekhar,
Chief Marketing Officer,
Apollo DKV Insurance Company Ltd..
KPMG CII Health Insurance Report:04WhitepaperA4v2.qxt 12/8/2008 4:26 PM Page 39

Page32

Summary

TheindustryhasgrownataCAGRof37percentoverthelast6yearsandis
poisedtogrowataCAGRof25-30percenttoreachamarketsizeof
approximatelyINR28,000croresbyFY2015,whichtranslatestoanincremental
growthofaroundINR23,000croresinthenext7years.KPMGbelievesthat
achievingthisgrowthisdependentontheabilityofthekeystakeholdersviz.
Government,Regulator,healthcareproviders,insurancecompanies,NGOs/SHGs,
TPAs,distributionchannelpartners,healthcentersandthemediatostrengthen
theindustryaroundthe‘PillarsofChange’and‘EnablersforGrowth’.

Whilethe‘PillarsofChange’arecriticalforbuildingarobusthealthinsurance
industry,the‘EnablersforGrowth’arecriticalforthepropellingthegrowthofthe
industryinthefuture.Inanutshell,themostcriticalparadigmsinclude:

• Increasingcustomerawarenessabouthealthinsuranceanditsbenefits

• Standardizationandaccreditationofallhealthcareproviderstohelpensure
qualityhealthcare

• Enhancinghealthcareinfrastructureespeciallyintier2/3andruralareasinIndia

• Buildingacomprehensiveandsustainablehealthinsurancedatarepositorylike
acreditinformationdatabasemanagedbyCreditInformationBureau(India)
Ltd.

• Encouraginginnovationaroundproducts,channelsandusageoftechnology.

Thus,thereisaneedforconcertedeffortbyallthestakeholdersofthehealth
insuranceindustrytocollaborateandpavetheroadaheadfortheIndianhealth
insuranceindustry.
KPMG CII Health Insurance Report:04WhitepaperA4v2.qxt 12/8/2008 4:26 PM Page 40

Page33

List of Abbreviations

BPL BelowPovertyLine

CAGR CompoundedAnnualGrowthRate

CGHS CentralGovernmentHealthScheme

ESIS Employees’StateInsuranceScheme

FGD FocusGroupDiscussion

FY FinancialYear

GDP GrossDomesticProduct

GWP GrossWrittenPremium

INR IndianRupee

IRDA InsuranceRegulatoryandDevelopmentAuthority

MFI Microfinanceinstitutions

NCMS NewCooperativeMedicalScheme

NGO Non-GovernmentOrganization

OPE Out-of-PocketExpenditure

OTC OvertheCounter

PHC PrimaryHealthCenter

PPP Public-PrivatePartnership

PSU PublicSectorUnit

RSBY RashtriyaSwasthyaBimaYojana

SEC SocioEconomicClass

SHG SelfHelpGroup

TAC TariffAdvisoryCommittee

TPA ThirdPartyAdministrators
KPMG CII Health Insurance Report:04WhitepaperA4v2.qxt 12/8/2008 4:26 PM Page 41

Page34

About KPMG in India

KPMGisaglobalnetworkofprofessionalfirmsprovidingAudit,TaxandAdvisory
services.Weoperatein145countriesandhave123,000peopleworkingin
memberfirmsaroundtheworld.TheindependentmemberfirmsoftheKPMG
networkareaffiliatedwithKPMGInternational,aSwisscooperative.EachKPMG
firmisalegallydistinctandseparateentityanddescribesitselfassuch.

TheIndianmemberfirmsaffiliatedwithKPMGInternationalwereestablishedin
September1993.Asmembersofacohesivebusinessunittheyrespondtoa
clientserviceenvironmentbyleveragingtheresourcesofaglobalnetworkof
firms,providingdetailedknowledgeoflocallaws,regulations,marketsand
competition.Weprovideservicestoover5,000internationalandnationalclients,
inIndia.KPMGhasofficesinIndiainMumbai,Delhi,Bangalore,Chennai,
Hyderabad,KolkataandPune.ThefirmsinIndiahaveaccesstomorethan3000
Indianandexpatriateprofessionals,manyofwhomareinternationallytrained.We
strivetoproviderapid,performance-based,industry-focusedandtechnology-
enabledservices,whichreflectasharedknowledgeofglobalandlocalindustries
andourexperienceoftheIndianbusinessenvironment.
KPMG CII Health Insurance Report:04WhitepaperA4v2.qxt 12/8/2008 4:26 PM Page 42

Page35

About CII

TheConfederationofIndianIndustry(CII)workstocreateandsustainan
environmentconducivetothegrowthofindustryinIndia,partneringindustryand
governmentalikethroughadvisoryandconsultativeprocesses.

CIIisanon-government,not-for-profit,industryledandindustrymanaged
organisation,playingaproactiveroleinIndia'sdevelopmentprocess.Founded
over113yearsago,itisIndia'spremierbusinessassociation,withadirect
membershipofover7500organisationsfromtheprivateaswellaspublicsectors,
includingSMEsandMNCs,andanindirectmembershipofover83,000
companiesfromaround380nationalandregionalsectoralassociations.

CIIcatalyseschangebyworkingcloselywithgovernmentonpolicyissues,
enhancingefficiency,competitivenessandexpandingbusinessopportunitiesfor
industrythrougharangeofspecialisedservicesandgloballinkages.Italso
providesaplatformforsectoralconsensusbuildingandnetworking.Major
emphasisislaidonprojectingapositiveimageofbusiness,assistingindustryto
identifyandexecutecorporatecitizenshipprogrammes.Partnershipswithover
120NGOsacrossthecountrycarryforwardourinitiativesinintegratedand
inclusivedevelopment,whichincludehealth,education,livelihood,diversity
management,skilldevelopmentandwater,tonameafew.

Complementingthisvision,CII'stheme"India@75:TheEmergingAgenda",
reflectsitsaspirationalroletofacilitatetheaccelerationinIndia'stransformation
intoaneconomicallyvital,technologicallyinnovative,sociallyandethicallyvibrant
globalleaderbyyear2022.

With64officesinIndia,8overseasinAustralia,Austria,China,France,Japan,
Singapore,UK,USandinstitutionalpartnershipswith271counterpart
organisationsin100countries,CIIservesasareferencepointforIndianindustry
andtheinternationalbusinesscommunity.

Confederation of Indian Industry

105,KakadChambers,132,Dr.A.B.Road,
Worli,Mumbai-400018
Phone:022-24931790,
Fax:022-24939463,24945831
Website:www.ciionline.org
KPMG CII Health Insurance Report:04WhitepaperA4v2.qxt 12/8/2008 4:26 PM Page 43

Acknowledgement

This report was written with valuable inputs from Shalini Pillay, Avani Shah, Nidhi Goel, Pratixa Davawala,
Shouvik Paul, Gaurav Mahant, Swati Shankar, Naren Gorthy, Ashish Singla, Kavya Shetty and Riddhi Kaul.
KPMG CII Health Insurance Report:04WhitepaperA4v2.qxt 12/8/2008 4:26 PM Page 44

in.kpmg.com

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