It’s a money spinner that leaves a trail of angry consumers. But, despite a mountain of client complaints, it is also the fast-growing insurance business. Health insurance grew by nearly 44% in 2006-07, which is double the growth of the entire non-life business last year. An interesting aspect of last year’s growth was the aggressive push by the private sector. Private non-life companies accounted for 38% of health insurance in India on March 2007 against 24% a year ago. As of end-March, the largest private insurance player, ICICI Lombard General Insurance, was only Rs 30 crore behind India’s largest non-life insurer New India Assurance. During the year, ICICI Lombard grew its non-life business 168% to Rs 735 crore. As against this, New India’s health business grew only 14% to Rs 765 crore. In the private sector, there is a clear segmentation. Over 80% of private health insurance is concentrated in four of the eight companies. These are ICICI Lombard, Bajaj Allianz, Royal Sundaram and Iffco Tokio. Reliance General Insurance, which is a later entrant, is turning out to be a strong contender. The Anil Dhirubai Ambani Group Company has sold over one lakh policies in the past few months and has grown its health portfolio from an insignificant Rs 8.6 crore in 2005-06 to Rs 67.7 crore in 2007-08 capturing a 2.1% market share. The private sector’s ability to handle high volume claims in this highly service-intensive business has not been fully tested. Most of them use the same third-party administrator network hired by the public sector. Some like Bajaj Allianz manage it internally through their health administration teams. The government companies have not been pushing health products and tapping the full potential of the market as they have been hit by large losses. Part of the reason for the losses is adverse selection as senior citizens are increasingly realising the need for health insurance. It is also this segment where claims have been high. The PSUs have responded by sharply increasing premium rates for senior citizens. A significant part of the growth, this year, has been on account of rate hikes. Private companies, on the other hand, have been aggressively pushing health insurance as they see this product as a `door opener’ for their agents. The feedback that non-life insurers have received is that health insurance is the only non-statutory cover that individuals are most likely to buy. Private insurers have also been aggressive in group accounts last year. Sources say the growth in health insurance may accelerate this year despite the higher base for three reasons. First, three health insurance companies are set to expand across the country increasing the market for this product. Second, the full effect of rate hikes is expected to kick in during the current fiscal which will increase realisations this year. Thirdly, PSUs are expected to fight back this year with a number of new products being lodged with the regulator. New India has recently received clearance from IRDA for a new health plan. The new scheme has sub-limits for various expenses such as room charges and surgery and is expected to help the company manage its claims better. The health insurance sold by non-life insurers does not represent entire universe of private health insurance in the country. From last year, life insurance companies, too, have started providing health insurance. ICICI Prudential has already launched its standalone product and has more schemes lined up. The biggest impact would be when LIC, with its distribution force of over one million agents launches its health plan some time this year. The corporation has already set up a health division and is now awaiting regulatory approval for products.
Source: Mayur Shetty, Times News Network
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