India Market Health Insurance Update India | Issue 14 | March 2012

Introduction We are pleased to circulate our quarterly newsletter on the health insurance industry in India, covering developments in the period December 2011 to February 2012. The health insurance sector continues to record good growth and as per the statistics released by the Insurance Regulatory and Development Authority (IRDA), the industry recorded 17.5 per cent growth in gross premiums written during the period between April to December FY2011-12, as compared to the same period in the previous financial year. With the health insurance portability in place, the sector has seen a range of innovative products. Companies have started offering better features while keeping the prices consistent. The products include critical illness, travel insurance and products that reinstate the sum insured. IRDA is working to roll out both Life and Non-Life insurance cover to people with HIV/AIDS and those vulnerable to such diseases. The authority proposes to implement the orders effective 1 October 2012. As per the recent insurance fraud survey, rising incidences of fraud have impacted claim costs for insurance companies and premiums for policy holders. FY2011-12 has seen insurers working on remedies to reduce fraudulent claims, and setting up an in-house claim settlement process. We hope you continue to find the newsletter interesting and informative and welcome your comments and feedback. Towers Watson Risk Consulting, India

In this issue Industry statistics 

April to December 2011

Market update 

Company news



Other market developments



Distribution

Regulatory update Products 

New / planned launches



Government health schemes

Other 

Other industry updates

Contact details

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Industry statistics

company, aimed to benefit families below poverty line. With the change of government in May 2011, the scheme with improved insurance cover and additional benefits was announced.

April to December 2011

United India Insurance is set to deliver the Tamilnadu government-sponsored health insurance scheme earlier known as ‘Kalaignar Insurance Scheme’. The scheme is said to generate about Rs7.5 billion to the company’s premium income. The earlier scheme provided coverage of up to Rs1 lakh for a year for a poor family of four members, as against the new scheme, named ‘Chief Minister’s Elaborate Medical Insurance Scheme’ that expands the coverage to Rs1.5 lakh for specific treatments and surgeries. The scheme also provides insurance coverage for 1,016 treatments and procedures, 113 follow-up procedures and 23 diagnostic procedures.

According to the latest statistics released by the IRDA, gross premium underwritten by non-life insurers in the health segment during the period April to December FY2011-12, grew 17.5 per cent to Rs96.4 billion as compared to Rs82.1 billion in the same period in the previous financial year. Comparison of health gross written premiums by non-life insurers and standalone health insurers New India United India National

Max Bupa Health Insurance Company plans to launch critical illness cover and travel insurance in addition to their existing hospitalisation cover. The critical illness cover is likely to be given through a rider or as an attachment to the Max Bupa health insurance policies.

ICICI Lombard Oriental Star Health & Allied Insurance HDFC ERGO Bajaj Allianz General Apollo Munich

Life Insurance Corporation of India has won the Golden Peacock Innovative Product/Services Award 2011 for its health insurance product, Jeevan Arogya. It is a comprehensive health insurance policy for the entire family. A few key features include, 50% advance payment (under 57 surgeries performed in network hospitals) and quick cash facility before discharge, among others.

Chola MS General Reliance General Royal Sundaram IFFCO Tokio Bharti Axa General TATA-AIG General Future Generali General Max Bupa Health Insurance

Other market developments

Universal Sompo L&T SBI General 0

3,000

6,000

9,000

12,000

15,000

18,000

21,000

in Rs millions

April 2010 to Dec 2010

April 2011 to Dec 2011

Source: IRDA Notes: The total health premium figure includes domestic and overseas medical insurance.

Among the Public Sector Undertakings (PSUs), United India Insurance and National Insurance each registered a strong growth of 29.1 per cent and 24.8 per cent respectively. Among private players, ICICI Lombard occupied the top position with a market share of 12.7 per cent and growth of 13.2 per cent. With the exception of Reliance General, IFFCO Tokio, Star Health & Allied Insurance all the other companies recorded a growth in health insurance premiums during the period April to December FY2011-12, as compared to the same period of FY2010-11.

Market update Company news

Efforts by the PSUs to set up a captive Third Party Administrator (TPA) have not been successful. The public sector insurance players have hit a road block with the companies unable to locate a strategic partner. General insurers prefer to set up an in-house team to settle claims. The in-house claims settlement brings added advantages such as reducing claim ratios, better sense of responsibility and service towards customers, increased customer retention rate and better negotiating rates with hospitals.

Distribution Cigna TTK Health Insurance would be utilising the vast TTK’s distribution channels to sell its health policies. TTK has been known for its strong distribution and marketing network with about 400 distribution stores of TTK Prestige, 1.6 lakh pharmacies of TTK Healthcare and 20,000 direct dealers.

Regulatory updates Exposure Draft - HIV/AIDS

State Bank of India (SBI) aims to extend mediclaim and accidental insurance cover for its savings account customers with nominal charges. The facility would be extended to all savings account holders irrespective of their account size.

As directed by the Delhi High Court last September, the IRDA has circulated draft norms to provide insurance cover for people affected or vulnerable to HIV/AIDS, under health insurance policies of both Life and Non-Life insurance companies.

Star Health and Allied Insurance has reported a Rs6 billion loss in premium income as the AIADMK government has scrapped the Kalaignar Insurance Scheme managed by the

People who are HIV negative can be covered under a critical illness policy, as a rider that would provide a lump-sum in case the insured contracts the disease. The insured would also be

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given a life time pension if he/she contracts the disease during the tenure of the policy and by including AIDS death as an insured event in a health policy. HIV/AIDS would also be covered under group schemes catering to various segments of population. IRDA has instructed the insurance companies to capture necessary information to underwrite the risk in accordance with the underwriting policy. Claims of people who are HIV-negative at the outset and subsequently found to be HIV positive cannot be rejected. Companies are requested to charge a suitable premium and load, accordingly. The guidelines are to be made effective from 1 October 2012.

Other regulatory updates The IRDA has directed insurers to pull out products in the pipeline that have an age restriction. It has declined to approve health insurance products that cannot be renewed beyond a particular age. Withdrawing the cover when policyholders cross a certain age defeats the purpose of health insurance, thus the products that will be launched henceforth cannot turn down renewal requests, unless fraudulent. For the current policies with an age limit, the new directions of the regulator may not apply. The IRDA is working to rollout norms for the health insurance sector to bring down customer grievances and give a boost to the sector. The IRDA is also looking to standardise policy wordings, coverage and exclusions under health insurance policies. These guidelines will also include claim settlement procedures and are expected to provide a framework to be followed by insurers. It will help achieve higher customer satisfaction and offer greater transparency. These guidelines will also aim at increasing health insurance penetration. The regulator is looking forward to create a health insurance council on the lines of Life Insurance Council (LIC) and General Insurance Council (GIC). The IRDA is likely to set up a forum to promote health insurance and facilitate effective dialogue between service providers (hospitals), insurance companies, TPAs and consumers in general. The forum would help in evolving policies and processes for the health insurance sector. The members of the forum would include CEOs of health and life insurance companies, TPAs, officials from the labour and health ministry and representatives of health service providers. The forum would also enable the evolution of a regulatory structure to take care of the growing needs of the sector.

Products New / planned launches Star Health and Allied Insurance Company has reformed its existing product – ‘The Family Health Optima’. The product has been tweaked such that if the sum insured is exhausted, the same can be reinstated and can be availed for illnesses other than the one already claimed. This facility is available up to 50% and 100% of the sum insured for policyholders with sum insured of Rs3 lakh and Rs4 lakh onwards respectively. No additional premium would be charged for reinstatement. The company has increased the number of day-care

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procedures to 101 (previously 12) and increased the ‘room rent' allowed in various categories of cities and towns. United India Insurance Company, has launched ‘UNI Criticare’. The policy covers 11 critical diseases and targets people in the age group 21-65 years. Apollo Munich Health Insurance, recently announced the launch of ‘Optima Restore'. The product is said to be based on an extensive research and analysis of over 250 global products. It offers a ‘restore' benefit that automatically reinstates the basic sum insured in case it is exhausted within the policy year. In case of a claim-free year, the insurer will increase the basic sum insured by 50 per cent. Two subsequent claim-free years will enhance the basic sum insured to 200 per cent. The product also offers additional benefits such as life-long renewability, no geographical restrictions, and no sub-limits. The maximum sum insured under this policy is Rs15 lakh. Bajaj Allianz General Insurance launched a critical illness plan for women covering eight major illnesses including breast cancer, fallopian tube cancer, uterine or cervical cancer, ovarian cancer, vaginal cancer, paralysis, multi trauma and burns. The product is available between the ages 25 years to 55 years with a sum insured ranging from Rs50,000 to Rs2 lakh. Cholamandalam MS General Insurance Co Ltd has launched the ‘Chola Family Floater Health line Insurance Policy’ offering hospitalisation coverage for young and growing families. Key features of this policy include the age of entry up to 65 years, renewal till lifetime of the customer and no medical check–up up to 55 years. This policy offers cover for self, spouse and up to three dependent children under one floater sum insured. In addition, the policy offers maternity cover and Ayurvedic treatment. Universal Sompo General Insurance Co Ltd, in association with Karnataka Bank, Allahabad Bank and Indian Overseas Bank has launched a health insurance policy called ‘K Family Care’. The policy covers expenses that include consultation, hospitalisation for covered treatments and expenses.

Government health schemes The government initiated Rashtriya Swasthya Bima Yojana (RSBY) scheme that has been effective since April 2008 has approximately 28 million subscribers and has processed 3.2 million claims. The labour ministry estimates the funds to go up by Rs190 million for FY 2011-12 and has requested the planning commission to allocate funds. Mid-way through the year, the RSBY had exhausted its funds and the ministry was then forced to ask for contingency funds that came with a delay. Non-payment of premium to the insurance companies in turn resulted in non-payment of claims to the hospitals resulting in hospitals not admitting RSBY patients. The third phase of the (RSBY) will be extended to Mahatma Gandhi National Rural Employment Guarantee Act (MNREGA) beneficiary families and those in the unorganised sector, besides Below Poverty Line (BPL) families. Those who have worked for 15 days or more during the previous financial year under MNREGA will be eligible for the RSBY cover. According to the Memorandum of Understanding (MoU) involving the Centre, the State Government and New India

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Assurance Co Ltd. the cover would be extended to street vendors, industrial workers, taxi drivers, domestic workers and persons with 70 per cent disability.

Other Other industry updates Insurers are adopting various ways to curb fraudulent claims. These include surprise doctor visits (from the insurer) to patients in hospitals and homes, fraud monitoring by way of scrutinising insurance proposals and claims and using the support of external agencies in suspicion of fraud. In addition to the above, other counter-fraud steps like sharing claims data and blacklisting 'tainted' hospitals that submit inflated bills are in place. Organisations excluding parental coverage from group policies are now negotiating better deals for their employees. 25 per cent of such companies have tied up with insurers to extend exclusive benefits of a group policy to the employee’s parents. The company brings together employees interested in buying insurance for their parents and approach insurers.

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Contact details Towers Watson's Risk Consulting team covers the length and breadth of India with associates based in Mumbai and Gurgaon.

R Krishnamurthy – Managing Director - Products, Distribution and Markets, India Dr Rajeshree Parekh – Asia Pacific Director, Health and Corporate Wellness Vikas Newatia – Director & Practice Leader, General Insurance Consulting, India

Emails: [email protected] [email protected] [email protected]

Mumbai

Gurgaon

511/512, Solitaire Corporate Park

404B, 4th Floor, Centrum Plaza

Andheri-Kurla Road, Andheri East

DLF Golf Course Road, Sector-53

Mumbai 400 093

Gurgaon 122002

Tel: 91 (22) 4232 9900

Tel: 91 (124) 432 2800

Fax: 91 (22) 2837 0700

Fax: 91 (124) 432 2801

The Indian Market Non Life Insurance Update has been prepared by Towers Watson for general information purposes only and does not constitute professional advice. The information, opinions and projections contained in this Newsletter are derived from various sources and have not been independently verified by Towers Watson. If you require professional advice or require any further information please contact any of the above named individuals.

ABOUT TOWERS WATSON Towers Watson is a leading global professional services company that helps organisations improve performance through effective people, risk, and financial management. With 14,000 associates around the world, we offer solutions in the areas of employee benefits, talent management, rewards, and risk and capital management. For more information, please visit www.towerswatson.com

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