health insurance cila

8/8/2019 Health Insurance Cila

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2J ANITA & D CHAKRAVARTHI

Why is Health Insurance important?Why is Health Insurance important?

Having health insurance is important for several reasons :Having health insurance is important for several reasons :

Rising medical costsRising medical costs

Sharing of health related riskSharing of health related risk

uncertain hospital billsExpensive/quality health care services

Money value Sick Vs Healthy

Family health insurance

Tax benefit

Productivity of workforceProductivity of workforce

Removes some of the burden from the stateRemoves some of the burden from the state

Keeping pace with the customer needs while achievingKeeping pace with the customer needs while achieving

profitabilityprofitability


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Pr gr i f lt I r b i i I diPr gr i f lt I r b i i I di

40,078

5,166,968

169703 153,097

8,637, 51

356419332,541

10,662,361

798588

0

2,000,000

4,000,000

6,000,000

8,000,000

10,000,000

12,000,000

2006-07 2007-08 2008-09

lt I r P li i Pr r d b li f b i

t

d

l

N

-lif

Lif

Policy Growth Rate

2007-08 2008-09

Standalone 282% 117%

Non-life 67% 23%

Life 110% 124%

Total 70% 29%

% share of Health insurance policies sold

2006-07 2007-08 2008-09

Standalone 0.75% 1.67% 2.82%

Non-life 96.10% 94.43% 90.41%

Life 3.16% 3.90% 6.77%

Total 100.00% 100.00% 100.00%


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Journeyof ifehealth insurance roductssince 2 3..Journeyof ifehealth insurance roductssince 2 3..

SubjectSubject ObservationsObservations

TerTer to30yearsto30years

Pre iu Pre iu

GuaranteedGuaranteed

Fro year to5yearsFro year to5years

DiseasesDiseasesCoveredCovered

Fro 5 to 00.Fro 5 to 00.

Focuson ra pant diseasesFocuson ra pant diseases

Death BenefitDeath Benefit ith introductionof Sec 0(D) ost products donotith introductionof Sec 0(D) ost products donot

have death benefithave death benefit

CoverageCoverage Only lifeassured toDependent e bersOnly lifeassured toDependent e bers

TypeType on linked to linkedon linked to linked

Max. EntryageMax. Entryage 50 to 5years50 to 5years

Max. MaturityMax. Maturity

ageage

5 to 5years5 to 5years


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Opportunities inHealth InsuranceOpportunities inHealth Insurance

Source: 2009 WHO fact sheet based on 2006 data

%

%

60%

60%

0%

0%

0.00%

.00%

.00%

6.00%

.00%

0.00%

.00%

.00%

6.00%

%

A U!

"

#A

$I A

%A

&A D A

%H I

&A I

&D I A U

&I

"

'D

( I & D O )

U!

A

otal p e n diture On He alth As % O ro s s Do e s tic roduct


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0 7.70%

32.30%

18.22%

70.40%

29.60%

14.50%

40.70%

59.30%

49.28%

25.00%

75.00%

68.55%

57.30%

12.70%11.65%

45.80%

54.20%

12.90%

0.00%

20.00%

40.00%

60.00%

80.00%

100.00%

%

AUSTRALIA CANADA CH INA INDIA UNITED 1 INDO 2 USA

H e a lth Exp en3

itu re Ratio s

Genera l4

o vern5

en t e xp en3

itu re o n h ea lth as % o fto ta l e xp en3

itu re o n h ea lth

Private e xp en3

itu re o n h ea lth a s % o fto ta l e xp en3

itu re o n h ea lth

Private Ou t6o f

6p o c

7et e xp en

3

itu re as % o fe xp en3

itu re o n h ea lth


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Given the health financing and demand scenario health insurance has a wider

scope in present day situation in India However it requires careful and significant

efforts to tap Indian health insurance market

8 9

@

A B

C

@

9 8 A B

D 9 D A B

A 98 0 %

8 . 2 0 %

6 6 . 4 0 %

0.00%

10.00%

20.00%

30.00%

40.00%

50.00%

60.00%

70.00%

%

AUSTRALI

CANADA

CH

INA

INDIA

UNITED

KINDO

USA

Pr i a t e Pre p a i Pla n s a s %o Pr i a t e Exp e n it u re O n H e a lt h



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Source:Source: Business orld (India)Business orld (India) Oct 2007

Oct 2007

ow penetrationof Insuranceand ow Govt. expenditure in India . . .ow penetrationof Insuranceand ow Govt. expenditure in India . . .

Has resulted inhigh OutHas resulted inhigh Out ofof Pocket spendPocket spend

ninsure d

2 .

o un it

Insu ra n c e

. 9%

Pvt. se c tor

nterprise ( e lf

un ded)

. %

India n a ilw a s

0 . 9%

Pvt.H e a lth

Insura n c e

. 2% CGH S3.3 %

ESIS

3. 9%

Health Insurance Penetration in IndiaHealth Insurance Penetration in India

Current Health Insurance Scenario: IndiaCurrent Health Insurance Scenario: India


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20062006 AustraliaAustralia CanadaCanada USUS UKUK ChinaChina IndiaIndia

ifeife

expectancyexpectancy

(avg # of(avg # of

years)years)

8282 8181 7878 8080 7474 64.064.0

# of# of

PhysiciansPhysiciansper1,000per1,000

peoplepeople

2.52.5 1.91.9 2.62.6 2.32.3 1.41.4 0.60.6

Healthy lifeHealthy life

expectancyexpectancy

(avg. # of(avg. # of

years)years)

7474 7373 7070 7272 6666 6060

HealthcareHealthcare

spendspend (% of(% of

GDP)GDP)

8.78.7 1010 15.315.3 8.28.2 4.64.6 3.63.6

HealthyHealthy lifelife expectancyexpectancy ofof IndiaIndia

indicatesindicates thatthat therethere isis higher higher

needneed of of healthhealth insuranceinsurance fromfrom

ageage 6060..


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Critical question ishencehow to i prove theaccess tohealthcare

and financial protectionof thepoor . The ost obvioussolution will

be to i prove thehealth insurancepenetration

How to improve Health insurance penetration!!!?

Critical question ishencehow to i prove theaccess tohealthcare

and financial protectionof thepoor . The ost obvioussolution will

be to i prove thehealth insurancepenetration

How to improve Health insurance penetration!!!?

Regulator/Govern entRegulator/Govern entEnhance customer awarenessEnhance customer awareness

Enhance client confidenceEnhance client confidence -- real value benefits in the event of a claimreal value benefits in the event of a claim

Effective supervisionEffective supervision

Compulsory percentage of total business towards healthCompulsory percentage of total business towards health

Compulsory savings towards healthCompulsory savings towards healthTax incentives to employers for promoting group health coverageTax incentives to employers for promoting group health coverage

InsurerInsurerClients confidenceClients confidence -- warrantable claim will be paid out in a reasonable time framewarrantable claim will be paid out in a reasonable time frame

New clients have to be reachedNew clients have to be reached

Value for moneyValue for money

Design products as per clients needsDesign products as per clients needsProduct transparencyProduct transparency

Cost efficiencyCost efficiency

affordabilityaffordability

Wellness programmesWellness programmes


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Recent initiativesof IRDARecent initiativesof IRDA

CommitteeCommittee toto formulateformulate regulationsregulations

PurePure healthhealth insuranceinsurance productsproducts

AllowingAllowing thethe formationformation ofof anan standstand alonealone healthhealth insuranceinsurance companycompany

StandaloneStandalone healthhealth insuranceinsurance companiescompanies

RenewabilityRenewability

SeniorSenior citizenscitizens


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Challenges inHealth InsuranceChallenges inHealth Insurance

Medical advance bothachallenge & also i pedi entMedical advance bothachallenge & also i pedi ent

Increase inhealthcarecostIncrease inhealthcarecost

Ageing populationAgeing population

Acuteshortageof trained personnel ranging fro doctors toAcuteshortageof trained personnel ranging fro doctors to

healthcaread inistratorshealthcaread inistrators

ew e ergenceand resurgenceofold diseasesew e ergenceand resurgenceofold diseases


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I pedi ents toproviding Health Insurance.I pedi ents toproviding Health Insurance.

ack ofDataack ofData

Moral Hazard/Adverse SelectionMoral Hazard/Adverse Selection

Co plex natureof theproductCo plex natureof theproduct

Medical InflationMedical Inflation

ew treat entsew treat entsUnnecessary treat entsUnnecessary treat ents

Difficulty inpricingDifficulty inpricing

Govern ent provisionofhealthcareGovern ent provisionofhealthcare

ong ter natureong ter nature

Changing lifestyleChanging lifestyle

MisMis selling/fraudselling/fraud


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How to itigate/address these i pedi entsHow to itigate/address these i pedi ents

InsurerInsurer

Designing a less complex productsDesigning a less complex products

Transparency in the product featuresTransparency in the product features

Clarity in policy terms, conditions & exclusionsClarity in policy terms, conditions & exclusions

Efficient backEfficient back--office support for underwriting and claims processingoffice support for underwriting and claims processing

Higher ReinsuranceHigher Reinsurance

Need for quicker services.Eg: Toll free no.s, cashless, quickNeed for quicker services.Eg: Toll free no.s, cashless, quick

responseresponse

Expense analysis on a regular basisE

xpense analysis on a regular basisProduct innovationProduct innovation

Efficient training of sales forceEfficient training of sales force


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PolicyholderPolicyholder

Pay attention to policy conditionsPay attention to policy conditions

Read the exclusions and limitations very carefullyRead the exclusions and limitations very carefully

Compare premium costs, deductibles, coCompare premium costs, deductibles, co--paymentspayments

Take an informed decisionTake an informed decision

TPATPA

Proper infrastructureProper infrastructure

Speedy claim settlement processSpeedy claim settlement process

Less paper workLess paper work


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Regulator/Govern entRegulator/Govern ent

Come out with health insurance regulationsCome out with health insurance regulations

Centralized data base for health insurance experience statisticsCentralized data base for health insurance experience statistics

Provider ratingProvider rating

Cap on renewal premiumsCap on renewal premiums

Ensure that a decent portfolio of health coverage represent theEnsure that a decent portfolio of health coverage represent therural sectorrural sector

Guard against ill effects of privatizationGuard against ill effects of privatization

Further tax incentivesFurther tax incentives

Compulsory savings towards health careCompulsory savings towards health careShould emphasize the need to employShould emphasize the need to employ actuarialactuarialmethodsmethods in various aspects of life and nonin various aspects of life and non--lifelifebusinessesbusinesses


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Health insurance as compared to life insurance from an actuarialHealth insurance as compared to life insurance from an actuarial

perspectiveperspective

Insured event: Definition of the insured eventInsured event: Definition of the insured event

Flexibility: Flexibility to the customer regarding the insured eventFlexibility: Flexibility to the customer regarding the insured event

Claim amounts: Often large and volatile increases in claim amounts due toClaim amounts: Often large and volatile increases in claim amounts due to

medical advances etc.,medical advances etc.,

Claim frequency: Multiple claims in a year and large number of small claimsClaim frequency: Multiple claims in a year and large number of small claims

Data: lack of credible and adequate dataData: lack of credible and adequate data

Effect of certain rating factors on cost of the claimsEffect of certain rating factors on cost of the claims


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How Actuarial Principlescan itigate the risks.How Actuarial Principlescan itigate the risks.

Health insurerhas tocater for any risks inherent in theHealth insurerhas tocater for any risks inherent in the

portfolio:portfolio:

PricingPricing

UnderwritingUnderwriting

BusinessBusiness

MarketingMarketing

Economic.Economic.


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Pricing anhealthproduct is very difficult and posesa great challenge forPricing anhealthproduct is very difficult and posesa great challenge forobvious reasons.obvious reasons.

hilepricing it isnot just thepriceof the benefit .hilepricing it isnot just thepriceof the benefit .

Thereare various factors that should go intopricingThereare various factors that should go intopricing

Expected Business volumesExpected Business volumes

Target marketTarget market

Realistic proportionsRealistic proportionsRobust pricing modelsRobust pricing models

Deviations from assumed should be addressedDeviations from assumed should be addressed

Simulation techniquesSimulation techniques

Synergy or CannibalizationSynergy or Cannibalization

Correlation with other productsCorrelation with other products

Experience AnalysisExperience AnalysisAnalyzing inAnalyzing in--house experiencehouse experience

Credibility approachCredibility approach

Goodness of fit test to check the distribution of claimsGoodness of fit test to check the distribution of claims

Analysis by professionalAnalysis by professional


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Reinsurancearrange entsReinsurancearrange ents

Effect on claims size as well as premium flowEffect on claims size as well as premium flow

Solvencyand regulatory require entsSolvencyand regulatory require ents

Analyzing the effects of various solvency guidelinesAnalyzing the effects of various solvency guidelines

Analyzing Tax regimesAnalyzing Tax regimes

Effect on overall profitabilityEffect on overall profitability

Capital requirementCapital requirement

Investment incomesInvestment incomes

Though nonThough non--life is short term, IBNR reserves for health are longlife is short term, IBNR reserves for health are long

tailed. Hence, time value of money is important for both life andtailed. Hence, time value of money is important for both life andnonnon--life business.life business.

Investment structure is an important criterion in choosing the bestInvestment structure is an important criterion in choosing the best

price for a productprice for a product


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Manage ent outlookManage ent outlook

Risk appetite of the company needs to be considered in pricingRisk appetite of the company needs to be considered in pricingThis aspect needs to be quantified in reinsurance arrangement,This aspect needs to be quantified in reinsurance arrangement,

investment profile and capital structure of the companyinvestment profile and capital structure of the company

ReservingReserving

Is reserving purely a mathematical exercise?Is reserving purely a mathematical exercise?

An Actuary needs to understand the behaviour of claims andAn Actuary needs to understand the behaviour of claims and

constantly devise tools/methods for claims reserving purposeconstantly devise tools/methods for claims reserving purpose

Employing a professional with required knowledge and experienceEmploying a professional with required knowledge and experience

is a mustis a must


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Inanut shell variousstatistical tools that areessential for

perfor ing theabove functionsand any oreare

Inanut shell variousstatistical tools that areessential for

perfor ing theabove functionsand any oreare

Decision theoryDecision theory

ossDistributionsossDistributions

Ruin TheoryRuin Theory

Credibilityand Bayesian StatisticsCredibilityand Bayesian Statistics

Markov ChainsMarkov Chains

Generalized inear ModelsGeneralized inear Models

Ti eTi e seriesanalysisseriesanalysis


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InIn thethe lightlight ofof thethe aboveabove thethe recentrecent initiativeinitiative byby thethe RegulatorRegulator toto focusfocus

oreore onon riskrisk basedbased pricingpricing whichwhich involvesinvolves thethe availabilityavailability ofof thethe strongstrongdatadata basebase andand alsoalso variousvarious analysisanalysis regardingregarding pricingpricing toto easureeasure thethe

underwritingunderwriting i pacti pact testingtesting thethe profitabilityprofitability ofof productsproducts etcetc..emphasizesemphasizes thethe needneed toto employemploy actuarialactuarial methodsmethods inin variousvarious

aspectsaspects ofof lifelife andand nonnon--lifelife businessesbusinesses..

InIn addition,addition, oneone shouldshould bearbear inin mindmind thatthat thethe anan insuranceinsuranceproductproduct isis notnot boughtbought butbut soldsold inin manymany casescases.. OneOne majormajor

reasonreason thatthat cancan bebe attributedattributed toto thisthis isis thethe lacklack ofof customercustomer

awarenessawareness (other(other reasonsreasons couldcould bebe complexcomplex naturenature ofof thethe

product,product, presencepresence ofof manymany playersplayers inin thethe market,market, customerscustomers

ignoranceignorance etcetc..,),)

Therefore,Therefore, itit isis veryvery importantimportant toto enhanceenhance thethe customercustomer

awareness,awareness, whichwhich isis currentlycurrently atat aa lowlow levellevel.. ToTo achieveachieve thisthis

means,means, thethe Government,Government, InsurerInsurer andand thethe RegulatorRegulator hashas toto playplay

aa veryvery importantimportant rolerole asas discusseddiscussed aboveabove..


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health insurance cila

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