"Innovate" or "Evaporate" Health Insurance Sector in India

Dr. Vijay Pithadia 

India has approximated median denomination inhabitants of 250 million of which only 70 million are insured. Insurance in India is now a US$ 7.5 billion industry and is poised to grow at a rate of 20% per year as the industry is privatized and opened to the participation of foreign companies. In spite of the fact that insulated from direct foreign investment in its insurance sector until recently, India has set amelioration in course through the Insurance Regulatory Development Act (IRDA) which was made official by the Indian Parliament in late 1999. After studying this lesson, the professional will be able to grasp the current trends that are going to affect the Health Insurance sector and its impact on the health status of the society. In the present paper I tried to explain the role of IRDA, and its influence on the Insurance sectors. The professional can rate highly the role of Health Insurance sector in improving the quality of health and emblematic of people life it is controlled to contribute in future course of time.


There is an ocean of transformation come to pass and going to occur in the Health Insurance sector, both sublunary and sovereign. Globally, with noteworthy reference to the increasing cost etc., many large insurance companies are planning to buy up hospitals and run on their won. The experiments are going on. As a result of which many private organizations, corporate sector leaders drafted plans to enter in to Health Insurance field. There is little or no surprise to note that the med claim is absolutely not the answer to the health care needs of the one billion people of this country. And Apollo Group under the great visionary chairmanship of Dr. Pratap C. Reddy, who also pioneered the idea way back in 1980's, is preparing to make its presence felt substantially. Given the pressure on the Public health care distribution system and the general shortage of resources being capable by government, private health care and in turn the Private Insurance companies have large business potential.

What the country to day lacks is a far-reaching health care policy to improve the infrastructure in the health sector. This will lead to an improvement in the health care segment and will also enable Insurance companies to extend health insurance cover to a larger segment of the population. If there are insufficient numbers of quality hospitals where the policyholders can be treated, then the number of policies issued will have to be limited. The health care infrastructure can also grow to some extent on the performance of the health Insurance sector, both directly and indirectly.


The New health Insurance players can look towards a substantial portion of the 200-300 million strong middle classes for health insurance business. This will in turn provide a fillip to the growth of the health care delivery system, both qualitatively and quantitatively. The poor who are not in a position to pay the premiums demanded by the private players will have to be looked after by the public health care system till they graduate to the premium paying stage. The government can help in relieving some burden on the poorer sections of the society. It is important to note that the private companies should be very cautious in preparing the organization and the executive channels to take care not to allow any possibility of formation or development of a nexus between the doctors and the policyholders. The involvement of experienced and qualified personnel at various levels of organization would be very useful, and much more so if it is a medical doctor. It is also necessary to develop systematic structures to provide preventive health care and also too early detection of disease processes, to the policyholders. This aspect can help the insurer to contain the futuristic expenditure, as well as the risk management.

Since after the nationalization few decades ago, and now opening up of the Insurance sector to private players, particularly with foreign players (partial participation) the people of India particularly the middle class (about 200-300 million strong) are looking for a bright future and security through the insurance sector. This futuristic hope and expectations are more evident in the field of health Insurance sector, mainly due to the escalating medical care. Hence Health Insurance and its need for appropriate development in all respects is a must now and for future. The role of IRDA is going to be very important in monitoring the activities of insurance at large.
It is to be expected and rightly so, that the to-day's customer // client is gradually becoming aware of his rights and expects 'QUALITY' and value added services from his vendor. The Health Insurance sector is no exception. The demands of the policyholders of a health insurance are the same if not more. People may compromise with any service to some extent, but not with his health and his demand for quality is rightly acceptable.
Are we to-day ready to face such challenging situation? Yes, provided we act fast and keep pace. Keep up to date. The medical science is subliminal self growing and developing fast and very fast. And as such the concepts and functioning of Health Insurance also varies. The current trends in the practice of medical profession, e.g. Defensive medicine are going to tell upon the Health Insurance sector too. However the IRDA is going to be an effective regulator of all activities and also acts as a guiding principle in almost every activity.
It is only appropriate to consider here, that the opening up of the insurance sector has raised high hope among people both in India and abroad. There are high expectations about how private insurer will fulfill the aspirations of the customers (clients or the insured) in India by catering to all types of Health insurance including Managed Health care. But the pace at which the privatization modalities, viz., granting of licenses and starting of the insurance operation in the last one year has begun to dilute those expectations. Some of the major Health insurance players of the world like Cigna; Aetna and others are still watching the Indian Insurance market from the fence. Others, who have got the license for the general insurance, are not too keen or enthusiastic about the Health insurance, particularly about the Managed Health Care. If the insurance reforms do not cater to the acute need of the customers for Health care, the rationale for opening the insurance sector to competition may be at state.
Hence it is necessary that both the IRDA and the private Insurance should move in quickly to promote the Health Insurance among the needy. Considering the current trends, that are expected to take shape shortly, the private players are expected to consider seriously The Managed Health care systems to look after their clients. As a result the third party Administrators (TPAs) are now going to become a main stay of the Health Insurance Industry. The IRDA recently has notified the draft regulations during May 2001. They are briefly as follows.
1. Third party administrators will be allowed to enter into agreement s with more than one insures for reducing health insurance services; but as TAPs they are barred from becoming directors of an insurance company, insurance agents, or an intermediary.
2. The TPA will be required to start with a minimum working capital of Rs. ONE CRORE.
3. The license will be renewed every Third year by the IRDA.
4. TPAS would also have to maintain and report to the IRDA on transaction carried out on behalf of the insurer. But this would not include trade secrets, including identity and addresses of policyholders.
5. The IRDA has also drawn up a code of conduct' for the TPAs refraining them from trading in information, submitting wrong information to insures and making advertisement s with out prior approval of the insurer among other things.
6. A TPA also has to undergo a training of minimum three months in the field of Health insurance and have access to competent medical professionals to advise the insurance companies and the client on various matters.
7. The TPA has to spell out the scope of services that it will deliver, while getting in to an agreement with an insurance company.
The above draft guidelines are open for suggestions till May 15, to develop the guidelines keeping in view developing them further to the local requirement, and the final regulations will be published after wards.
The IRDA is shortly coming out with norms for the policyholder’s protection and also TPAs for the Rs. 90,000 crore Health Insurance Sector by the end of April 2001 (vide supra). According to IRDA chairman, N.Rangachary, the regulators are in the process of drafting several norms and it would be ready by the end of April 2001. Although TPAs initially wanted marketing rights of insurers, he said there has been some amount of understanding between the insurers and TAPs to develop the health insurance sector. As mentioned earlier, the IRDA sources said that the health insurance sector in India was estimated at Rs. 90,000 crore and is, expected to grow by ten percent every year. The TPAs, which may be hospitals or other agencies, can accelerate this growth rate by assisting insurers through faster claim settlement, quality hospital services etc. The following data indicates the status of select Asian Countries, with reference to their National incomes and their Health expenditure both in public and private sectors.
The data shows the need for an insight in to the Health care expenditures of those countries and also the necessary steps that may have to be taken to improve the health status of their people. The data may also suggest the improvements that can be envisaged thro. The Health Insurance sector It is also hoped that the efficient and active Health Insurance management may bring down the per capita expenditure on Health, both at an individual and group level.
National Income and Health expenditure of Select Asian Counties (in US Dollars)
Per capita income GNP
Per capital total health expenditure
% of GNP
Public sector Health expenditure per capital
% of T.H.E public sector
Private sector Health Expenditure per capital
% of T.H.E. Private sector
Sri Lanka

T.H.E. = Total Health Expenditure

Begun in 1992, reform of India's Health Insurance sector aims to harmonies the Indian economic and accounting system with international standards of capital adequacy, prudential regulations, and accounting and disclosure standards. In the past few years, the worldwide trend of consolidation and convergence has also begun to manifest itself in the Indian insurance industry. New technology has had significant impact on India's health insurance sector as new private sector hospital and foreign collaboration hospitals offer customers the option for better health.
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