Download - Health Insurance Cila
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2J ANITA & D CHAKRAVARTHI
Why is Health Insurance important?Why is Health Insurance important?
Having health insurance is important for several reasons :Having health insurance is important for several reasons :
Rising medical costsRising medical costs
Sharing of health related riskSharing of health related risk
uncertain hospital billsExpensive/quality health care services
Money value Sick Vs Healthy
Family health insurance
Tax benefit
Productivity of workforceProductivity of workforce
Removes some of the burden from the stateRemoves some of the burden from the state
Keeping pace with the customer needs while achievingKeeping pace with the customer needs while achieving
profitabilityprofitability
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Pr gr i f lt I r b i i I diPr gr i f lt I r b i i I di
40,078
5,166,968
169703 153,097
8,637, 51
356419332,541
10,662,361
798588
0
2,000,000
4,000,000
6,000,000
8,000,000
10,000,000
12,000,000
2006-07 2007-08 2008-09
lt I r P li i Pr r d b li f b i
t
d
l
N
-lif
Lif
Policy Growth Rate
2007-08 2008-09
Standalone 282% 117%
Non-life 67% 23%
Life 110% 124%
Total 70% 29%
% share of Health insurance policies sold
2006-07 2007-08 2008-09
Standalone 0.75% 1.67% 2.82%
Non-life 96.10% 94.43% 90.41%
Life 3.16% 3.90% 6.77%
Total 100.00% 100.00% 100.00%
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Journeyof ifehealth insurance roductssince 2 3..Journeyof ifehealth insurance roductssince 2 3..
SubjectSubject ObservationsObservations
TerTer to30yearsto30years
Pre iu Pre iu
GuaranteedGuaranteed
Fro year to5yearsFro year to5years
DiseasesDiseasesCoveredCovered
Fro 5 to 00.Fro 5 to 00.
Focuson ra pant diseasesFocuson ra pant diseases
Death BenefitDeath Benefit ith introductionof Sec 0(D) ost products donotith introductionof Sec 0(D) ost products donot
have death benefithave death benefit
CoverageCoverage Only lifeassured toDependent e bersOnly lifeassured toDependent e bers
TypeType on linked to linkedon linked to linked
Max. EntryageMax. Entryage 50 to 5years50 to 5years
Max. MaturityMax. Maturity
ageage
5 to 5years5 to 5years
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Opportunities inHealth InsuranceOpportunities inHealth Insurance
Source: 2009 WHO fact sheet based on 2006 data
%
%
60%
60%
0%
0%
0.00%
.00%
.00%
6.00%
.00%
0.00%
.00%
.00%
6.00%
%
A U!
"
#A
$I A
%A
&A D A
%H I
&A I
&D I A U
&I
"
'D
( I & D O )
U!
A
otal p e n diture On He alth As % O ro s s Do e s tic roduct
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Opportunities inHealth InsuranceOpportunities inHealth Insurance
Source: 2009 WHO fact sheet based on 2006 data
0 7.70%
32.30%
18.22%
70.40%
29.60%
14.50%
40.70%
59.30%
49.28%
25.00%
75.00%
68.55%
57.30%
12.70%11.65%
45.80%
54.20%
12.90%
0.00%
20.00%
40.00%
60.00%
80.00%
100.00%
%
AUSTRALIA CANADA CH INA INDIA UNITED 1 INDO 2 USA
H e a lth Exp en3
itu re Ratio s
Genera l4
o vern5
en t e xp en3
itu re o n h ea lth as % o fto ta l e xp en3
itu re o n h ea lth
Private e xp en3
itu re o n h ea lth a s % o fto ta l e xp en3
itu re o n h ea lth
Private Ou t6o f
6p o c
7et e xp en
3
itu re as % o fe xp en3
itu re o n h ea lth
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Opportunities inHealth InsuranceOpportunities inHealth Insurance
Given the health financing and demand scenario health insurance has a wider
scope in present day situation in India However it requires careful and significant
efforts to tap Indian health insurance market
8 9
@
A B
C
@
9 8 A B
D 9 D A B
A 98 0 %
8 . 2 0 %
6 6 . 4 0 %
0.00%
10.00%
20.00%
30.00%
40.00%
50.00%
60.00%
70.00%
%
AUSTRALI
CANADA
CH
INA
INDIA
UNITED
KINDO
USA
Pr i a t e Pre p a i Pla n s a s %o Pr i a t e Exp e n it u re O n H e a lt h
Source: 2009 WHO fact sheet based on 2006 data
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Source:Source: Business orld (India)Business orld (India) Oct 2007
Oct 2007
ow penetrationof Insuranceand ow Govt. expenditure in India . . .ow penetrationof Insuranceand ow Govt. expenditure in India . . .
Has resulted inhigh OutHas resulted inhigh Out ofof Pocket spendPocket spend
ninsure d
2 .
o un it
Insu ra n c e
. 9%
Pvt. se c tor
nterprise ( e lf
un ded)
. %
India n a ilw a s
0 . 9%
Pvt.H e a lth
Insura n c e
. 2% CGH S3.3 %
ESIS
3. 9%
Health Insurance Penetration in IndiaHealth Insurance Penetration in India
Current Health Insurance Scenario: IndiaCurrent Health Insurance Scenario: India
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20062006 AustraliaAustralia CanadaCanada USUS UKUK ChinaChina IndiaIndia
ifeife
expectancyexpectancy
(avg # of(avg # of
years)years)
8282 8181 7878 8080 7474 64.064.0
# of# of
PhysiciansPhysiciansper1,000per1,000
peoplepeople
2.52.5 1.91.9 2.62.6 2.32.3 1.41.4 0.60.6
Healthy lifeHealthy life
expectancyexpectancy
(avg. # of(avg. # of
years)years)
7474 7373 7070 7272 6666 6060
HealthcareHealthcare
spendspend (% of(% of
GDP)GDP)
8.78.7 1010 15.315.3 8.28.2 4.64.6 3.63.6
HealthyHealthy lifelife expectancyexpectancy ofof IndiaIndia
indicatesindicates thatthat therethere isis higher higher
needneed of of healthhealth insuranceinsurance fromfrom
ageage 6060..
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Critical question ishencehow to i prove theaccess tohealthcare
and financial protectionof thepoor . The ost obvioussolution will
be to i prove thehealth insurancepenetration
How to improve Health insurance penetration!!!?
Critical question ishencehow to i prove theaccess tohealthcare
and financial protectionof thepoor . The ost obvioussolution will
be to i prove thehealth insurancepenetration
How to improve Health insurance penetration!!!?
Regulator/Govern entRegulator/Govern entEnhance customer awarenessEnhance customer awareness
Enhance client confidenceEnhance client confidence -- real value benefits in the event of a claimreal value benefits in the event of a claim
Effective supervisionEffective supervision
Compulsory percentage of total business towards healthCompulsory percentage of total business towards health
Compulsory savings towards healthCompulsory savings towards healthTax incentives to employers for promoting group health coverageTax incentives to employers for promoting group health coverage
InsurerInsurerClients confidenceClients confidence -- warrantable claim will be paid out in a reasonable time framewarrantable claim will be paid out in a reasonable time frame
New clients have to be reachedNew clients have to be reached
Value for moneyValue for money
Design products as per clients needsDesign products as per clients needsProduct transparencyProduct transparency
Cost efficiencyCost efficiency
affordabilityaffordability
Wellness programmesWellness programmes
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Recent initiativesof IRDARecent initiativesof IRDA
CommitteeCommittee toto formulateformulate regulationsregulations
PurePure healthhealth insuranceinsurance productsproducts
AllowingAllowing thethe formationformation ofof anan standstand alonealone healthhealth insuranceinsurance companycompany
StandaloneStandalone healthhealth insuranceinsurance companiescompanies
RenewabilityRenewability
SeniorSenior citizenscitizens
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Challenges inHealth InsuranceChallenges inHealth Insurance
Medical advance bothachallenge & also i pedi entMedical advance bothachallenge & also i pedi ent
Increase inhealthcarecostIncrease inhealthcarecost
Ageing populationAgeing population
Acuteshortageof trained personnel ranging fro doctors toAcuteshortageof trained personnel ranging fro doctors to
healthcaread inistratorshealthcaread inistrators
ew e ergenceand resurgenceofold diseasesew e ergenceand resurgenceofold diseases
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I pedi ents toproviding Health Insurance.I pedi ents toproviding Health Insurance.
ack ofDataack ofData
Moral Hazard/Adverse SelectionMoral Hazard/Adverse Selection
Co plex natureof theproductCo plex natureof theproduct
Medical InflationMedical Inflation
ew treat entsew treat entsUnnecessary treat entsUnnecessary treat ents
Difficulty inpricingDifficulty inpricing
Govern ent provisionofhealthcareGovern ent provisionofhealthcare
ong ter natureong ter nature
Changing lifestyleChanging lifestyle
MisMis selling/fraudselling/fraud
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How to itigate/address these i pedi entsHow to itigate/address these i pedi ents
InsurerInsurer
Designing a less complex productsDesigning a less complex products
Transparency in the product featuresTransparency in the product features
Clarity in policy terms, conditions & exclusionsClarity in policy terms, conditions & exclusions
Efficient backEfficient back--office support for underwriting and claims processingoffice support for underwriting and claims processing
Higher ReinsuranceHigher Reinsurance
Need for quicker services.Eg: Toll free no.s, cashless, quickNeed for quicker services.Eg: Toll free no.s, cashless, quick
responseresponse
Expense analysis on a regular basisE
xpense analysis on a regular basisProduct innovationProduct innovation
Efficient training of sales forceEfficient training of sales force
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How to itigate/address these i pedi entsHow to itigate/address these i pedi ents
PolicyholderPolicyholder
Pay attention to policy conditionsPay attention to policy conditions
Read the exclusions and limitations very carefullyRead the exclusions and limitations very carefully
Compare premium costs, deductibles, coCompare premium costs, deductibles, co--paymentspayments
Take an informed decisionTake an informed decision
TPATPA
Proper infrastructureProper infrastructure
Speedy claim settlement processSpeedy claim settlement process
Less paper workLess paper work
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How to itigate/address these i pedi entsHow to itigate/address these i pedi ents
Regulator/Govern entRegulator/Govern ent
Come out with health insurance regulationsCome out with health insurance regulations
Centralized data base for health insurance experience statisticsCentralized data base for health insurance experience statistics
Provider ratingProvider rating
Cap on renewal premiumsCap on renewal premiums
Ensure that a decent portfolio of health coverage represent theEnsure that a decent portfolio of health coverage represent therural sectorrural sector
Guard against ill effects of privatizationGuard against ill effects of privatization
Further tax incentivesFurther tax incentives
Compulsory savings towards health careCompulsory savings towards health careShould emphasize the need to employShould emphasize the need to employ actuarialactuarialmethodsmethods in various aspects of life and nonin various aspects of life and non--lifelifebusinessesbusinesses
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Health insurance as compared to life insurance from an actuarialHealth insurance as compared to life insurance from an actuarial
perspectiveperspective
Insured event: Definition of the insured eventInsured event: Definition of the insured event
Flexibility: Flexibility to the customer regarding the insured eventFlexibility: Flexibility to the customer regarding the insured event
Claim amounts: Often large and volatile increases in claim amounts due toClaim amounts: Often large and volatile increases in claim amounts due to
medical advances etc.,medical advances etc.,
Claim frequency: Multiple claims in a year and large number of small claimsClaim frequency: Multiple claims in a year and large number of small claims
Data: lack of credible and adequate dataData: lack of credible and adequate data
Effect of certain rating factors on cost of the claimsEffect of certain rating factors on cost of the claims
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How Actuarial Principlescan itigate the risks.How Actuarial Principlescan itigate the risks.
Health insurerhas tocater for any risks inherent in theHealth insurerhas tocater for any risks inherent in the
portfolio:portfolio:
PricingPricing
UnderwritingUnderwriting
BusinessBusiness
MarketingMarketing
Economic.Economic.
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Pricing anhealthproduct is very difficult and posesa great challenge forPricing anhealthproduct is very difficult and posesa great challenge forobvious reasons.obvious reasons.
hilepricing it isnot just thepriceof the benefit .hilepricing it isnot just thepriceof the benefit .
Thereare various factors that should go intopricingThereare various factors that should go intopricing
Expected Business volumesExpected Business volumes
Target marketTarget market
Realistic proportionsRealistic proportionsRobust pricing modelsRobust pricing models
Deviations from assumed should be addressedDeviations from assumed should be addressed
Simulation techniquesSimulation techniques
Synergy or CannibalizationSynergy or Cannibalization
Correlation with other productsCorrelation with other products
Experience AnalysisExperience AnalysisAnalyzing inAnalyzing in--house experiencehouse experience
Credibility approachCredibility approach
Goodness of fit test to check the distribution of claimsGoodness of fit test to check the distribution of claims
Analysis by professionalAnalysis by professional
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Reinsurancearrange entsReinsurancearrange ents
Effect on claims size as well as premium flowEffect on claims size as well as premium flow
Solvencyand regulatory require entsSolvencyand regulatory require ents
Analyzing the effects of various solvency guidelinesAnalyzing the effects of various solvency guidelines
Analyzing Tax regimesAnalyzing Tax regimes
Effect on overall profitabilityEffect on overall profitability
Capital requirementCapital requirement
Investment incomesInvestment incomes
Though nonThough non--life is short term, IBNR reserves for health are longlife is short term, IBNR reserves for health are long
tailed. Hence, time value of money is important for both life andtailed. Hence, time value of money is important for both life andnonnon--life business.life business.
Investment structure is an important criterion in choosing the bestInvestment structure is an important criterion in choosing the best
price for a productprice for a product
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Manage ent outlookManage ent outlook
Risk appetite of the company needs to be considered in pricingRisk appetite of the company needs to be considered in pricingThis aspect needs to be quantified in reinsurance arrangement,This aspect needs to be quantified in reinsurance arrangement,
investment profile and capital structure of the companyinvestment profile and capital structure of the company
ReservingReserving
Is reserving purely a mathematical exercise?Is reserving purely a mathematical exercise?
An Actuary needs to understand the behaviour of claims andAn Actuary needs to understand the behaviour of claims and
constantly devise tools/methods for claims reserving purposeconstantly devise tools/methods for claims reserving purpose
Employing a professional with required knowledge and experienceEmploying a professional with required knowledge and experience
is a mustis a must
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Inanut shell variousstatistical tools that areessential for
perfor ing theabove functionsand any oreare
Inanut shell variousstatistical tools that areessential for
perfor ing theabove functionsand any oreare
Decision theoryDecision theory
ossDistributionsossDistributions
Ruin TheoryRuin Theory
Credibilityand Bayesian StatisticsCredibilityand Bayesian Statistics
Markov ChainsMarkov Chains
Generalized inear ModelsGeneralized inear Models
Ti eTi e seriesanalysisseriesanalysis
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InIn thethe lightlight ofof thethe aboveabove thethe recentrecent initiativeinitiative byby thethe RegulatorRegulator toto focusfocus
oreore onon riskrisk basedbased pricingpricing whichwhich involvesinvolves thethe availabilityavailability ofof thethe strongstrongdatadata basebase andand alsoalso variousvarious analysisanalysis regardingregarding pricingpricing toto easureeasure thethe
underwritingunderwriting i pacti pact testingtesting thethe profitabilityprofitability ofof productsproducts etcetc..emphasizesemphasizes thethe needneed toto employemploy actuarialactuarial methodsmethods inin variousvarious
aspectsaspects ofof lifelife andand nonnon--lifelife businessesbusinesses..
InIn addition,addition, oneone shouldshould bearbear inin mindmind thatthat thethe anan insuranceinsuranceproductproduct isis notnot boughtbought butbut soldsold inin manymany casescases.. OneOne majormajor
reasonreason thatthat cancan bebe attributedattributed toto thisthis isis thethe lacklack ofof customercustomer
awarenessawareness (other(other reasonsreasons couldcould bebe complexcomplex naturenature ofof thethe
product,product, presencepresence ofof manymany playersplayers inin thethe market,market, customerscustomers
ignoranceignorance etcetc..,),)
Therefore,Therefore, itit isis veryvery importantimportant toto enhanceenhance thethe customercustomer
awareness,awareness, whichwhich isis currentlycurrently atat aa lowlow levellevel.. ToTo achieveachieve thisthis
means,means, thethe Government,Government, InsurerInsurer andand thethe RegulatorRegulator hashas toto playplay
aa veryvery importantimportant rolerole asas discusseddiscussed aboveabove..
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