July , 2018
Health Insurance - An underused segment in India
15:41 pm

Ellora De

Many Indians are yet to accept health insurance as a financial tool for medical emergencies. They usually postpone investing in health insurance unless they are faced by a challenging situation. Though the Indian health insurance market has been witnessing growth, it lags behind other countries in terms of penetration.

Insurance Regulatory and Development Authority of India (IRDAI) Chairman T. S. Vijayan at a FCCI event in December 2017, said, “There is a need to bring down out of pocket expenses of patients, which is currently at about 62% of all healthcare costs. This is extremely high and leads to impoverishment of patients. In comparison, out of pocket hospital expenses in developed countries such as the U.S. and the U.K. is around 20%.”

According to Reserve Bank of India data, expenditure on social services by the Centre and the states, as a proportion of GDP was 7% in 2016-17 (budget estimate), with education and health sectors accounting for 2.9% and 1.4%, respectively whereas, according to an economic survey tabled in the Indian Parliament in January 2017, the world average is 5.99%.

Health Minister J. P. Nadda in a written reply to the Lok Sabha in 2016 had said, “Percentage of persons having covered under any health insurance scheme is 14.1% in rural areas and 18.1% in urban areas.”

The above reported statistical data indicate an urgent need in increasing health insurance coverage among Indians. It also indicates that the potential for health insurance in India remains high.

K.G. Krishnamoorthy Rao, MD and CEO of Future Generali India Insurance, told BE, “Health insurance in India constitutes 27% of the general insurance premium segment and is the fastest growing portfolio. Out of Rs. 4375 lakh persons covered under insurance, more that 75% were covered under government schemes, 16% under the non-government group health plans and about 7% under individual retail health plans. The cost of treatment in India has been on a rise. The per capita expenditure on health in nominal terms has increased close to 45% from 2010 to 2016. However, it is still “minimal”, compared to other countries. But this can change as the centre plans to launch its ambitious Pradhan Mantri Rashtriya Swasthya Suraksha Mission (PMRSSM) - Ayushman Bharat. This scheme is expected to bring down the out of pocket expenditure on health significantly. However implementation would be the key factor.”

We can divide the Indian insurance sector in two different branches –

Public Health Insurance: Public health insurance is subsidised or paid for entirely by public (government) funds.

Private Health Insurance: Private health insurance is paid for in part or entirely by the individual entity being covered. In some cases, insurance premiums are borne by the employers on behalf of their employees.

A manager of a private insurance company who did not want to be named informed BE that private insurance policies are more customer-oriented as they do not have divisions in caps (such as, slabs like doctors’ fees, room rent etc.) in the context of the sum assured and most of the private insurers’ policies offer assured ad hoc sum. The number of tieups with medical facilities is more in case of private insurers. He also informed that customer services of private insurers are friendlier and some of them even offer 24x7 customer services.

On the other hand, Pradip Ganguly, an experienced health insurance agent, opined, “I would always prefer government supported insurance company, for example, National, New India, Oriental, United India, as we do not know where the private health insurance companies are going to stand in the market in future. In that case, we always encourage customers to take policies from government health insurance companies.”

Ganguly also said, “Private health insurance market players have brought some appreciable policies for senior citizens, which is absent for most government insurance companies.” He also added, “Government has launched Preferred Provider Network (PPN) facilities in recent past, by which insured people are more benefitted.”

Some essential Dos and Don’ts in reference to health insurance

The Dos

 One should go for a health insurance policy only after thoroughly knowing about various offers of different health insurance policies covering one’s medical needs.

 The policy coverage is also very important keeping in mind the growing medical cost.

 To know in detail the ins and outs of one’s health insurance policy.

 It is good to remember that if the policy is taken at an early age, the benefit is always more.

The Don’ts 

 One should always reveal all facts related to his / her health to the agents / insurance officers to avoid ordeal at the time of claim settlement.

 Premium should be continued properly and timely to get the benefits of the policies.

A brief view of the claim settlement process

Many individuals are deprived from the benefits of health insurance as they do not know the chronological steps involved in the process. In case of a planned hospitalisation, the insurance company should be informed well in advance. Insurance companies might engage the services of Third Party Administrators (TPA) for handling the claim process or have an in-house claim settlement department. TPAs are intermediaries between insured individuals and the insurance company and help in processing insurance claim. Apart from planned hospitalisation, a health insurance claim can be settled through a cashless facility or through reimbursement.

Cashless claim settlement

A cashless claim settlement facility is where the insurance company directly settles the medical bills with the hospital. One is, thus, spared the burden of footing the bills. Most health insurance plans provide cashless claim settlement facility provided one avails treatments at a Preferred Provider Network (PPN). A Preferred Provider Network is a hospital which is tied-up to the insurance company. Taking treatments in a PPN would only qualify for cashless claim settlement.

Reimbursement claim settlement

There are a few plans where the claim is settled through reimbursement. If, in a cashless health plan, one does not avail treatments in a networked hospital, the claims would be settled through reimbursement. Under a reimbursement claim, one has to first foot the medical bills and avail hospital treatments. After the patient is discharged, all the relevant medical bills are to be submitted along with the discharge summary to the insurer for the expenses to be reimbursed from the respective health insurance provider.

Cashless claim settlement:


In cashless claim an individual does not have to bear the medical costs. The insurance company/TPA settles the bills directly with the hospital.


Treatment to be taken only in network hospitals.


The claims get settled instantly.

Reimbursement claim settlement:


Medical costs have to be borne by the individuals first. The costs are reimbursed after the discharge and then the necessary bills have to be submitted to the insurers/ TPA.


Treatment can be taken in any hospital.


Reimbursement claims take time.


IRDA has reportedly classified health insurance as a separate category and has permitted the insurers to tie-up with banks. This step has helped health insurance. The health insurance segment will get a boost if the government or IRDA can enhance this initiative. Health insurance segment still remains an unexplored territory in India. Overall awareness is needed to optimally explore this unexplored segment.

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