Introduction
This article critically analyses the development of health insurance in India where on the one hand, 61% of India’s population is covered by government health insurance schemes; however, in the premium term, their contribution is only 11%. Further, public sector general insurance companies are doing the bulk of the health insurance business, including group insurance and government health insurance schemes. On the other hand, the individual health insurance premium is 20% of the total premium; out of this, 73% is contributed by standalone health insurance companies. The government expenditure towards health care is low at 3% of GDP, which means the health care financing is through the insurance system.
Initially, the article covers the background of insurance and health insurance in India before analysing data.
Background of the Insurance Sector in India
Health insurance in India started relatively late in the mid-1980s with the introduction of “Mediclaim” policies (indemnity type), where the cover was limited to reimbursing the cost of treatment through hospitalization. However, the history of India’s insurance sector goes back around 200 years.
The Life Insurance sector was born in India with the foundation of Oriental Life Insurance Company in 1818.The Madras Equitable Company came next in 1829. It was followed by the Bombay Mutual in 1871, Oriental in 1874, and Empire of India in 1897.The Nationalization of Indian Life Insurance Companies led to the establishment of the Life Insurance Corporation of India 1956, which acquired 254 life Companies operating at that time.
The General Insurance Sector began with Triton Insurance Company in 1850. Indian Mercantile Insurance succeeded in the year 1907. The General Insurance Sector underwent Nationalization in 1972, where 107 companies were merged under four companies, National Insurance Company, New India Assurance Company, Oriental Insurance Company, and United India Insurance Company.As a result, the General Insurance Corporation (GIC) was born in 1971. India operated under a public sector insurance regime from 1956 in Life and 1972 in non-life to 1999/ 2000, when the insurance sector was again liberalized. As of 2022, there are 23 Life insurance companies and 30 GI & Standalone Health insurance companies, while one Indian reinsurance company.
Government Health Care Expenditure
Government expenditure on health care reflects the care taken by the government on the nation’s health that contributes towards productivity. Many developed countries like the US, EU, etc., have around 10% of GDP as expenditure on health care, as can be seen from the below chart, while the US has close to 16% of the GDP. On the other hand, developing nations and south Asian countries, including India and Malaysia, have expenditures of less than 4%. A nation with low government expenditure on health care largely relies on the insurance sector to provide funding by customers paying a premium for themselves.
Background of Health Insurance in India
Traditionally, health insurance in India started in 1986 with the introduction of “Mediclaim” policies (indemnity type cover), where the cost of cover is used to get reimbursed upon customers getting hospitalized for treatment. Then non-life public sector companies manufactured such products.
Around 1993-94, LIC of India, the sole public sector life insurance company then, introduced first-time benefit-based cover where a sum assured was paid to customers on detection of certain critical illnesses such as cancer, etc. The product features were endowment type where the customer gets the sum assured either at the time of contracting a disease or till the survival at the end of the policy term.
Most of the health insurance in India was limited to medical claims till the opening of the insurance sector in the year 2000. At the time of liberalization, there were few international standalone health insurance companies lined up, like Aetna, Cigna, and others, for operation in India; however, they were looking for the lower capital requirement for health companies compared to life and non-life companies, which regulators did not allow. Star Health was the first standalone health insurance provider in India to begin its operations in the year 2006.
Spread of Insurance in India
According to the report by Niti Aayog published in October 2021 focusing on “Health Insurance for India’s Missing Middle,” below mentioned table on the spread of health insurance by the government sector, social health insurance scheme, private health insurance, and the gap those who are not covered by any health insurance scheme.
Reality Check on Health Insurance Market in India
The table below shows the spread of health insurance income in (INR, Cr) in the Indian market by the end of May for the financial year 2022-23. The premium income is shown by individual health insurance, group business, government health insurance schemes and overseas medical insurance done by general insurance and standalone health insurance companies.
| Sr. No | Types of Business | Health-Retail | Health-Group | Government schemes | Overseas Medical | Total |
| General Insurers | ||||||
| 1 | Acko General Insurance Ltd | 0 | 102 | – | 0 | 103 |
| 2 | Bajaj Allianz General Insurance Co Ltd | 115 | 325 | 108 | 31 | 579 |
| 3 | Cholamandalam MS General Insurance Co Ltd | 63 | 30 | – | 0 | 93 |
| 4 | Edelweiss General Insurance Co Ltd | 1 | 15 | – | 3 | 19 |
| 5 | Future Generali India Insurance Co Ltd | 23 | 67 | – | 1 | 91 |
| 6 | Go Digit General Insurance Ltd | 6 | 129 | – | 1 | 136 |
| 7 | HDFC Ergo General Insurance Co Ltd | 435 | 282 | – | 5 | 722 |
| 8 | Previous Year | 416 | 154 | – | 1 | 571 |
| 9 | ICICI Lombard General Insurance Co Ltd | 135 | 828 | – | 38 | 1,000 |
| 10 | IFFCO-Tokio General Insurance Co Ltd | 26 | 264 | -1 | 1 | 289 |
| 11 | Kotak Mahindra General Insurance Co Ltd | 11 | 34 | – | – | 44 |
| 12 | Liberty General Insurance Co. Ltd | 8 | 86 | – | 5 | 99 |
| 13 | Magma HDI General Insurance Co Ltd | 5 | 25 | – | – | 30 |
| 14 | National Insurance Co Ltd* | 334 | 396 | 95 | 1 | 826 |
| 15 | Navi General Insurance Co. Ltd | 5 | 4 | – | – | 9 |
| 16 | Raheja QBE General Insurance Co Ltd | 0 | 2 | – | – | 2 |
| 17 | Reliance General Insurance Co Ltd | 35 | 259 | 29 | 13 | 337 |
| 18 | Royal Sundaram General Insurance Co Ltd | 30 | 60 | – | 1 | 92 |
| 19 | SBI General Insurance Co Ltd | 64 | 198 | – | 1 | 263 |
| 20 | Shriram General Insurance Co Ltd | 0 | – | – | – | 0 |
| 21 | Tata AIG General Insurance Co Ltd | 85 | 208 | – | 45 | 338 |
| 22 | The New India Assurance Co Ltd* | 391 | 2,721 | 529 | 2 | 3,642 |
| 23 | The Oriental Insurance Co Ltd* | 254 | 902 | 27 | 1 | 1,184 |
| 24 | United India Insurance Co Ltd* | 200 | 805 | 460 | 1 | 1,467 |
| 25 | Universal Sompo General Insurance Co Ltd | 17 | 50 | – | – | 67 |
| Total | 2,243 | 7,788 | 1,248 | 151 | 11,430 | |
| Percentage of Business | 20% | 68% | 11% | 1% |
In the first two months of financial year 2022-23, the health insurance industry underwrote Rs.11,430 Cr of business; out of this, 20% of the business came from individual health, 68% from group health, 11% from government health schemes, and 1% from overseas health business.
The four public sector general insurance companies did Rs.7118 of business which is 62% of the total business, indicating that public sector companies are still doing the bulk of the health insurance business. Interestingly only 11% of the total premium is covered by government health insurance,which covers 61% of the total population indicating the smaller ticket size. Out of the group health business of Rs.7788 Cr, the four public sector companies did Rs.4823 Cr, which is 62% of the total group health business, indicating that the rest 21 non-life companies do only 38% group business. These data indicate that public sector companies take the bulk of risks in the health sector domain. Many private insurance players stopped underwriting group health insurance business post-COVID-19 due to higher risk. The penetration shown by retail health insurance in the context of an overall health insurance premium of 20% seems to be on the lower side.
Standalone health Insurance
The table below shows the new business of health insurance premium(INR, Cr) by the standalone health insurance player in the Indian market by the end of month of May for the financial year 2022-23.
| Standalone Health Insurers | Health-Retail | Health-Group | Health-Government schemes | Overseas Medical | Total |
| Nivabupa health insurance company limited | 387 | 97 | – | 1 | 485 |
| Aditya Birla Health Insurance Co Ltd | 110 | 216 | – | – | 326 |
| Care Health Insurance Ltd | 341 | 278 | – | 27 | 646 |
| Manipal Cigna Health Insurance Co Ltd | 70 | 119 | – | 0 | 189 |
| Star Health & Allied Insurance Co Ltd | 1,392 | 103 | – | 0 | 1,495 |
| Stand-alone Health sub-Total | 2,300 | 813 | – | 28 | 3,140 |
| Percentage of Standalone | 73% | 26% | 0% | 1% | |
| Industry Total | 4,543 | 8,601 | 1,248 | 178 | 14,570 |
The standalone health insurance companies primarily focus on individual health insurance while making negligible contributions towards the government health schemes comprising 61% (from table-1) of the population. The skewness of premium income between standalone and general insurance companies is shown below. On the retail health side, both are doing similar business, while in group business, the standalone contribution is around 10% of GI companies.
Discussion
The healthcare expenditure by the government in India is around 3% (world bank data) of GDP in the year 2018-19. This coverage is well below European Union and the UK at about 10%, where the health insurance system is well developed, and the health care benefits are free for the people in the UK. However, the government’s low investment in health care forces people to rely on health insurance. With a population of 135 Cr people, 70% of them, 94.5 Cr, are insured, according to the Niti Aayog report, which is quite substantial. However, despite the large population covered by the health insurance schemes, the insurance penetration under the entire non-life, including health insurance and other non-life insurance, is 1% in 2020-21. Of the large proportion of the population covered under the government health insurance scheme, 61%, only 11% of the total premium is contributed through this way. Further out of the total government health insurance premium, 62% is contributed by the public sector general insurance companies. This indicates that a high percentage of the population covered (61%) by the government health insurance schemes may not have enough coverage to meet their medical health needs because of the lower sum assured. Further, the load of group health insurance schemes is primarily taken by public sector general insurance companies by doing 62% of the total group health insurance. Individual health insurance coverage is on the lower side, visible both from the population covered (9%) and premium collected 20% of the total premium. Out of this 20% of the retail premium, the standalone health insurance companies are doing 73% of the business. So individual health insurance companies are mainly focusing on retail health insurance. Overall, the health insurance business in India is skewed toward public sector general insurance companies that contribute 62% of the total premium income. They also largely contribute towards the government health insurance 62% of the total group health insurance premium while standalone health insurance companies focus on retail health.
Conclusion
In population terms, India has insured 70% of the population; the government health insurance schemes cover 61% of this population, but the premium contribution is low at 11%. Public sector general insurance companies are taking most of the health insurance load, while standalone health insurance companies are doing retail business.
