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NAME: SHIVANK MALL ROLL NO: 119 SEMESTER: 5TH COURSE: BACHELOR OF BUSINESS ADMIISTRATION (HONS.) SUPERVISOR: MR. MADAN MOHAN DUTTA TOPIC: HEALTH INDUSTRY DATE: DECEMBER 4TH, 2012

Dissertation submitted in partial fulfillment of The requirements of the Graduate Degree in

BACHELOR OF BUSINESS ADMINISTRATION (HONOURS)

J.D. BIRLA INSTITUTE

At the

JADAVPUR UNIVERSITY

IN

KOLKATA

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Date: 07.12.2012 To, The Controller of Examination, Jadavpur University, Kolkata. Respected sir, This research work has been done by me and is an original work. The references used have been mentioned in the bibliography. This research is partial fulfillment of the requirement for the BBA degree to be awarded by Jadavpur University. Yours faithfully, (SHIVANK MALL)

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DECLARATIONS: To include plagiarism and ethical issues statements and word count is a formal requirement. I declare the following: (1) That the material contained in this dissertation is the end result of my own work and that due acknowledgement has been given in the bibliography and references to ALL sources be they printed, electronic or personal. (2) The word count of this dissertation is 12770 (3) That unless this dissertation has been confirmed as confidential, I agree to an entire electronic copy or sections of the dissertation to being placed on the e-learning portal, if deemed appropriate, to allow future students the opportunity to see examples of past dissertations. I understand that if displayed on the e-learning portal it would be made available for no longer than five years and that student would not be able to print off copies or download. The authorship would remain anonymous. (4) I agree to my dissertation being submitted to a plagiarism detection services, where it will be stored in a database and compared against work submitted from this or any other school or from other institutions using the service. In the event of the service detecting a high degree of similarity between content within the service this will be reported back to my supervisor and second marker, who may decide to undertake further investigation that may ultimately lead to disciplinary actions, should instances of plagiarism be detected. I declare that ethical issues have been considered, evaluated, and appropriately addressed in this research. SIGNED:

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ACKNOWLEDGEMENT

I would like to take this opportunity to express my gratitude to all those who gave me their support to complete my term paper. Further, I would like to thank the ―Director ―of our prestigious college, Prof. (Dr) Asit Dutta who gave me an opportunity to make this term paper and enrich my knowledge base further. However, it could not have been accomplished without the helpful guidance of my mentor – Mr Madan Mohan Dutta and I would like to thank him profusely for the same. I would like to express my heartfelt thanks to the Coordinators of the Learning Resource Centre of our college, who assisted me to avail the relevant books and allowed me to carry out the necessary research for my term paper. I would like to thank all my friends and colleagues from college for their great help and valuable hints to complete my term paper.

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ABSTRACT What is health insurance? Health Insurance –

Is insurance cover taken from Insurance Cos to cover medical costs due to sickness or injury for meeting expenses like doctor’s fees, medicines, hospital stay, etc

In one line health insurance means - Insurance against loss by illness or bodily injury.

Health insurance means insurance cover providing financial protection in the event of sickness or injury whereby the insurer pays the medical costs of the insured if the insured becomes sick due to covered causes, and can pay for depending on the conditions covered and the benefits and choices of treatment available under the insurance policy.

1. Medicine

2. Visits to the doctor

3. Hospital stay

4. Other medical expenses

Thus Health insurance is insurance against the risk of incurring medical expenses – in India, primarily for medical expenses incurred for hospitalization + pre & post hospitalization expenses relating to the hospitalization.

By estimating the overall risk of health care expenses, an insurer can develop a routine finance structure, such as a yearly/monthly premium or payroll tax, to ensure that money is available to pay for the health care benefits specified in the insurance agreement.

The benefit is administered by a central organization such as a government agency, private business, or not-for-profit entity.

Health insurance can be directly purchased by an individual, or it may be provided through an employer or through the government - Employee State Insurance Scheme (ESIS) premium or Central Government Health Scheme (CGHS) covering government employees etc

Health insurance in a narrow sense would be “an individual or group purchasing health care coverage in advance by paying a fee called premium”.

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TABLE OF CONTENTS

SERIAL NO. SUBJECT PAGE NO.

1 INTRODUCTION 7

2 LITERATURE REVIEW 13

3 SWOT ANALYSIS 22

4 HYPOTHESIS 24

5 RESEARCH AND METHODOLOGY 25

Introduction to Research Methodology

Qualitative and quantitative research data

6 DATA ANALYSIS 31

7 FINDINGS 36

8 RECOMMENDATIONS 37

9 CONCLUSION 38

10 CASE STUDY 42

11 ANNEXURE 46

12 BIBLIOGRAPHY 52

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INTRODUCTION

Health insurance is a formal agreement to provide and/or pay for medical care. The health insurance policy describes what medical services are ―covered‖ by the insurance company. There are medical services that are not ―covered‖ and will not be paid by your insurance company.

There are a variety of private and public health insurance programs.

Most women obtain health insurance through their employer or as a ―dependent‖ in a family plan. There also are public health insurance plans funded by the federal and state governments.

MISSION STATEMENT OF THE AUTHORITY

Ø To protect the interest of and secure fair treatment to policyholders;

Ø To bring about speedy and orderly growth of the insurance industry (including annuity and superannuation payments), for the benefit of the common man, and to provide long term funds for accelerating growth of the economy;

Ø To set, promote, monitor and enforce high standards of integrity, financial soundness, fair dealing and competence of those it regulates;

Ø To ensure speedy settlement of genuine claims, to prevent insurance frauds and other malpractices and put in place effective grievance redressal machinery;

Ø To promote fairness, transparency and orderly conduct in financial markets dealing with insurance and build a reliable management information system to enforce high standards of financial soundness amongst market players;

Ø To take action where such standards are inadequate or ineffectively enforced;

Ø To bring about optimum amount of self-regulation in day-to-day working of the industry consistent with the requirements of prudential regulation.

U.S. Census Bureau data from 2006 estimate that almost 85 percent of people in the

United States are covered by some form of health insurance; of that percentage:

● approximately 60 percent are covered by employment-based plans

● approximately 27 percent are covered by government plans (e.g., Medicare,

Medicaid, TRICARE)

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The reason the insurance coverage breakdown does not total 85 percent is because

approximately 10 percent of people in the United States are covered by more than one

insurance plan (e.g., employment-based plan plus Medicare).

Over the last 60 years India has achieved a lot in terms of health improvement. But still India is way behind many fast developing countries such as China, Vietnam and Sri Lanka in health indicators (Satia et al 1999).

In case of government funded health care system, the quality and access of services has always remained major concern.

A very rapidly growing private health market has developed in India. This private sector bridges most of the gaps between what government offers and what people need.

However, with proliferation of various health care technologies and general price rise, the cost of care has become very expensive and unaffordable to large segment of population

Present service providers : a large government health infrastructure with more than 229 medical colleges, 4400 district hospitals, 1200 district hospitals, 3190 Community Health Centers, 22,669 Primary Health Care centers and 130,000 Sub-Health Centers and on top of this there are large number of private and NGO health facilities and practitioners all over the country

India spends about 6% of GDP on health expenditure. Private health care expenditure is 75% or 4.25% of GDP and most of the rest (1.75%) is government funding.Most of the public funding is for preventive, promotive and primary care programmes while private expenditure is largely for curative care.

Recently private health care expenditure has grown at the rate of 12.84% per annum

and for each one percent increase in per capital income the private health care expenditure has increased by 1.47%. Number of private doctors and private clinical

facilities has also expanded exponentially.

Indian health financing scene raises number of challenges, which are:

increasing health care costs due to proliferation of various healthcare

technologies and increase in cost of care,

high financial burden on poor eroding their incomes,

increasing burden of new diseases and health risks and

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Neglect of preventive and primary care and public health functions due to

underfunding of the government health care & poor health care delivery.

Given the above scenario exploring health-financing options becomes critical. Here is where health insurance steps in.

Health Insurance is considered one of the financing mechanisms to overcome some of the problems of our system though at present, the insurance coverage is negligible. Health insurance is very well established in many countries. But in India it is still in a developing stage, very commonly accepted for the organized sector employees. Example - In India only about 2 per cent of total health expenditure is funded by public/social health insurance while 18 per cent is funded by government budget. In many other low and middle income countries contribution of social health insurance is much higher.

It is estimated that the Indian health care industry is now worth of Rs. 96,000 crore and expected to surge by 10,000 crore annually. The share of insurance market in above figure is insignificant. Out of one billion population of India 315 million people are estimated to be insurable and have capacity to spend Rs. 1000 as premium per annum. Many global insurance companies have plans to get into insurance business in

India. Market research, detailed planning and effective insurance marketing is likely to assume significant importance. Given the health financing and demand scenario, health insurance has a wider scope in present day situations in India. However, it requires careful and significant effort to deal with Indian health insurance market with proper understanding and training and industry standardization. AS THE NEED OF THE HOUR

IS AN INDIAN MODEL AS OPPOSED TO DIRECT ADOPTION OF MODELS ADOPTED

IN FOREIGN NATIONS - AMERICA/GERMANY ETC.

VARIOUS CATEGORIES

Health Insurance Coverage can be divided into several segments, some of which can be listed as below:

1. Government or state-based systems

There are 2 types of Government or state-based systems –

A. Employees State Insurance Scheme (ESIS)

The Employees’ State Insurance (ESI) Act 1948 is a social security scheme managed by employers for covering employee‘s earning up to Rs 7500 per month along with

their dependants and applies to

a. all power using non-seasonal factories employing 10 or more persons;

b. all non-power using factories employing 20 or more employees and

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c. Service establishments like shops, hotels restaurants, cinema, road transport

and newspapers are covered.

ESI Scheme provides protection to employees against loss of wages due to inability to work due to sickness, maternity, permanent disablement of self and dependant and death due to employment injury - as well as other benefits such as funeral expenses and rehabilitation allowance. It also provides medical care to employees and their family members without fee for service. The benefit package is quite comprehensive in its coverage of health-related expenses, going beyond the cost of medical care to include cash benefits.

ESIC is a corporate semi-government body headed by Union Minister of Labour as Chairman and the Director General as chief executive. Its members are

representatives of central and state governments, employers, employees, medical profession and parliament.

The financing of the scheme is done by Employees State Insurance Corporation (ESIC) which is made up of contributions from:

i. Employees who contribute at the rate of 1.75 per cent of their wages,

ii. Employers who contribute at the rate of 4. 75 per cent of total wage bills of their

employees and

iii. State Governments contributes 12.5 per cent of total shareable expenditure

worked out by prescribed ceiling on expenditure.

However, the actual package of benefits available is determined more by the type of facility accessed rather than the type of cover. Medical care comprises outpatient care, hospitalization or specialist treatment as well as services of the Indian systems of medicines.

The delivery of medical care is through service (direct) system and/or panel (indirect) system. It provides allopathic medical care, but medical care by other systems like ayurvedic and homeopathy in the states is also provided as per the state government decision. The medical care consisting of preventive, promotive, curative and rehabilitative types of services are provided by the scheme through its own network or through arrangements with reputed government or private institutions by concept of proper referral system and regionalisation.

It is estimated that employer managed systems cover about 20-30 million of population. The schemes run by member-based organizations cover about 5 per cent of population in various ways.

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B. Central Government Health Scheme (CGHS)

Established in 1954, the CGHS covers employees and retirees of the Central Government, and certain autonomous, semiautonomous and semi-government organizations. It also covers Members of Parliament, governors, accredited journalists and members of the general public in some specified areas.

Benefits under the scheme include medical care at all levels and home visits/care as well as free medicines and diagnostic services. These services are provided through public facilities (including CGHS-exclusive allopathic, ayurvedic, homeopathic and unani dispensaries) with some specialized treatment (with reimbursement ceilings) being permissible at private facilities.

The CGHS is a high-cost enterprise with an inequitable spread of service delivery and no control systems for checking market failures such as moral hazard.

Of the total expenditure, about a third is spent on wages and salaries of the CGHS staff !!

Another example: claims show an increasing number of cases using private sector facilities, which has budgetary implications for the Government, particularly in view of the absence of any regulations regarding prices and the large number of pensioners joining the scheme

A 2004 sample survey of CGHS bills over a 5 year period from 1999-2004 indicated there was a sharp rise in the total number of bills, the total expenditure on professional services and payments made to private providers as a proportion of all payments showed government providers claiming just one-tenth of the total payment for provision of professional services.

2. Market-based systems (private and voluntary)

Market-based systems (voluntary and private) have Mediclaim scheme which covers about 2 million of population.

3. Employer provided insurance schemes

There are many employers who reimburse costs of medical expenses of the employees with or without contribution from the employee. It is estimated that about 20 million employees may be covered by such reimbursement arrangements.

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OBJECTIVE

This topic is chosen as Indian Government is increasing funding every year to support

healthcare delivery/Health Insurance to the rural masses/needy segments in a country

having the 2nd largest population in the world

Healthcare Industry accounted for 6% of the country‗s GDP in 2007, which is very low

compared to other foreign countries.

Now the Healthcare Industry is poised for a giant leap forward and expected to

revolutionize the healthcare scenario.

Indian Healthcare Market is estimated to touch US$ 77 billion (Rs.346500 crs) by

2013.

It is expected to generate employment opportunities for 9 million people by 2012.

Of this the Health Insurance Industry is expected to be Rs.15,255crs (approx) in 2012.

Another factor for choosing this topic is my personal experience of 6 months in working

as an intern with an IRDA - accredited Third Party Administrator firm handling

issuance of health cards and settlement of claims for Insurance co.

The discussion will help update knowledge on a topic not often very well understood or

transparent to the layman.

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LITERATURE REVIEW

Health Insurance

Health Insurance-The word (According to-investopedia.com)

A type of insurance coverage that pays for medical and surgical expenses that are

incurred by the insured. Health insurance can either reimburse the insured for expenses

incurred from illness or injury or pay the care provider directly. Health insurance is often

included in employer benefit packages as a means of enticing quality employees.

(According to- investorwords.com)

Insurance against loss by illness or bodily injury. Health insurance provides coverage for medicine, visits to the doctor or emergency room, hospital stays and other medical expenses. Policies differ in what they cover, the size of the deductible and/or co-payment, limits of coverage and the options for treatment available to the policyholder. Health insurance can be directly purchased by an individual, or it may be provided through an employer. Medicare and Medicaid are programs which provide health insurance to elderly, disabled, or un-insured individuals. There are a number of companies which provide private health insurance, including Blue Cross, United Healthcare, or Aetna. (According to –entrepreneur.com) A policy that will pay specified sums for medical expenses or treatments. Health policies can offer many options and vary in their approaches to coverage. (According to –answers.com) Health insurance is insurance that pays for all or part of a person's health care bills. The types of health insurance are group health plans, individual plans, workers' compensation, and government health plans such as Medicare and Medicaid. Health insurance can be further classified into fee for-service (traditional insurance) and managed care. Both group and individual insurance plans can be either fee-for-service or managed care plans. The following are types of managed care plans:

• Health Maintenance Organization (HMO) • Preferred Provider Organization (PPO)

The concept of health insurance was proposed in 1694 by Hugh the Elder Chamberlen from the Peter Chamberlen family. In the late 19th century, "accident insurance" began to be available, which operated much like modern disability insurance.

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Phase I

Prior to 1986, Health Insurance in India was generally available to corporate clients as

a group medical insurance for the client‘s employees.

However, for the public at large, Health Insurance in India, began with the introduction of the Mediclaim Policy by the four Public Sector Insurance Companies (National Insurance, New India , Oriental Insurance , United India Insurance) in the year 1986.

The Mediclaim Policy was a flagship scheme for the public sector insurance companies, designed to provide for reimbursement of medical expenses incurred in India by the Insured for treatment of any disease or illness or accidental bodily injuries at any clinic/nursing home/hospital, as and in patient.

The policy was aimed at the middle and higher class.

However, it was felt that the higher classes reaped maximum benefits out of this policy with the overall claims ratio ranging between 70 and 80%.

Phase II

This Mediclaim Policy was revised in 1991.

The Sum Insured ranged from Rs. 15000 to Rs. 300000 with premium as per age bands prescribed.

There were many changes made to this policy based on customer requirements like relaxations in the specialized cases where less than 24 hours hospitalization was required, and simplification of the pre-existing illnesses exclusion, most importantly doing away with sub-limits for room rent, doctors fees, diagnostics, medicines, etc – all medical expenses were covered up to the total sum insured

Acceptance of cover for persons above 60 years was subject to prescribed medical examination.

Subsequently, the maximum Sum Insured available was increased to Rs. 5 lacs in 1999.

Group Mediclaim policies for pre defined Groups were allowable with a bonus/malus clause wherein there was discount on premium for a favorable claims experience and a loading or malus for an unfavorable claims experience of the Group.

Phase III

The year 2001 saw the advent of the Third Party Administrators. They were regulated by IRDA (Insurance Regulatory and Development Authority) and mandated to provide health services. The claims servicing was now outsourced to the TPAs by Insurance

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Cos, at a remuneration of 6% of the premium collected. As on date, 28 TPAs are in operation.

It was felt that introduction of the TPA will benefit the ultimate clients.

The customer had an option to opt for TPA or otherwise.

The objectives of introducing TPAs were to improvise on customer services, and also bring about a reduction in the claims ratio by greater pro-active involvement in the area of claims.

However, this estimation has proved wrong with claims ratios increasing further and the number of customer grievances rising.

Phase IV

The policy was altered in the year 2007, to bring back the sub limits.

Deletion of the sub limits resulted in steep rise in the claims. This can be explained with an example. A person with a Sum Insured of Rs. 50000/- can avail of treatment wherein the room charges can range from Rs. 150 to Rs. 5000/- without any restriction.

Insurers therefore felt the need to again impose sub limits.

The policy terms and conditions were further clarified as regards pre-existing diseases, especially the life style diseases like hypertension and diabetes.

It is pertinent to note that we have gone back to the system of expenditure wise sub limits, akin to the Mediclaim of the eighties.

As regards pre-existing diseases, IRDA has stipulated that pre-existing disease exclusion will not operate for more than 48 months. In other words, if an insured is continuously insured for a period of four years or more, there will be no pre -existing exclusion affecting his policy. This stipulation has been reflected in the changes made.

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Controlling Authorities

1. IRDA – Insurance Regulatory Development Authority: -

Among the many revolutionary changes that have taken place since the sixty years of independence of India, one of the most noteworthy has been the enactment of the Insurance Regulatory and Development Authority Act, 1999.

This legislation was enacted to provide for the establishment of an Authority to protect the interests of the holders of the insurance policies.

It was meant to regulate, promote and ensure orderly growth of the insurance industry and for matters connected therewith or incidental thereto and further to amend the Insurance Act, 1938; the Life Insurance Corporation Act, 1956; and the General Insurance Business (Nationalization) Act, 1972.

This enactment marked a definitive point in the move towards the privatization of the insurance sector in India.

It envisaged the creation of a regulatory authority (IRDA that would oversee the operation of various players in the health insurance market and allowed for the entry of private sector entities in the Indian insurance sector, including health insurance.

The assigned powers and functions were meant to enable the Authority to perform the role of an effective watchdog and regulator for the insurance sector in India.

2. TAC – Tariff Advisory Committee

Tariff Advisory Committee (TAC) in India - controls and regulates the rates, advantages, terms and conditions that may be offered by insurers in respect of Indian General Insurance Business relating to Fire, Marine (Hull), Motor, Engineering and Workmen‘s‘ Compensation.

Tariff Advisory Committee has been designated now by IRDA as the data repository for the non-life insurance industry. The transaction level data on Motor, Health and other lines are being collected for the Repository presently.

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Role of Regulators

The government has established Insurance Regulatory and Development Authority (IRDA) which is the statutory body for regulation of the whole insurance industry.

They would be granting licenses to private companies and will regulate the insurance business.

As health insurance is in its very early phase, the role of IRDA will be very crucial.

They have to ensure that the sector develops rapidly and the benefit of the insurance goes to the consumers. But it has to guard against the ill effects of private insurance.

The main danger in the health insurance business we see is that the private companies will cover the risk of middle class who can afford to pay high premiums. Unregulated reimbursement of medical costs by the insurance companies will push up the prices of private care.

As such, a large section of India's population who are not insured will be at a relative disadvantage as they will, in future, have to pay much more for the private care.

Thus checking increase in the costs of medical care will be very important role of the IRDA.

Secondly, IRDA will need to evolve mechanisms by which it puts some kind of statue in place that private insurance companies do not skim the market by focusing on rich and upper- class clients and in the process neglect a major section of India's population.

They must ensure that companies develop products for such poorer segments of the community and possibly build an element of cross-subsidy for them.

Government companies can take the lead in this matter and catalyze new products for the poor and lower middle class as they have done in the past.

Thirdly the regulators should also encourage NGOs, Co-operatives and other collectives to enter into the health insurance business and develop products for the poor as well as for the middle class employed in the services sector such as education, transportation, retailing etc and the self employed.

This could be run on no-profit-no loss basis similar to the scheme pioneered by Indian Medical Association for its members.

Special licenses will have to be given to NGO for this purpose without insisting on the minimum capital norms, which are for commercial insurance companies.

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HISTORY

In India, insurance has a deep-rooted history. It finds mention in the writings of Manu ( Manusmrithi ), Yagnavalkya (Dharmasastra ) and Kautilya ( Arthasastra ). The writings talk in terms of pooling of resources that could be re-distributed in times of calamities such as fire, floods, epidemics and famine. This was probably a pre-cursor to modern day insurance. Ancient Indian history has preserved the earliest traces of insurance in the form of marine trade loans and carriers‘ contracts. Insurance in India has evolved over time heavily drawing from other countries, England in particular. 1818 saw the advent of life insurance business in India with the establishment of

the Oriental Life Insurance Company in Calcutta. This Company however failed in 1834. In 1829, the Madras Equitable had begun transacting life insurance business in the Madras Presidency. 1870 saw the enactment of the British Insurance Act and in the last three decades of the nineteenth century, the Bombay Mutual (1871), Oriental (1874) and Empire of India (1897) were started in the Bombay Residency. This era, however, was dominated by foreign insurance offices which did good business in India, namely Albert Life Assurance, Royal Insurance, Liverpool and London Globe Insurance and the Indian offices were up for hard competition from the foreign companies. In 1914, the Government of India started publishing returns of Insurance Companies in India. The Indian Life Assurance Companies Act, 1912 was the first statutory measure to regulate life business. In 1928, the Indian Insurance Companies Act was enacted to enable the Government to collect statistical information about both life and non-life business transacted in India by Indian and foreign insurers including provident insurance societies. In 1938, with a view to protecting the interest of the Insurance public, the earlier legislation was consolidated and amended by the Insurance Act, 1938 with comprehensive provisions for effective control over the activities of insurers. The Insurance Amendment Act of 1950 abolished Principal Agencies. However, there were a large number of insurance companies and the level of competition was high. There were also allegations of unfair trade practices. The Government of India, therefore, decided to nationalize insurance business. An Ordinance was issued on 19th January, 1956 nationalising the Life Insurance sector and Life Insurance Corporation came into existence in the same year. The LIC absorbed 154 Indian, 16 non-Indian insurers as also 75 provident societies—245 Indian and foreign insurers in all. The LIC had monopoly till the late 90s when the Insurance sector was reopened to the private sector. The history of general insurance dates back to the Industrial Revolution in the

west and the consequent growth of sea-faring trade and commerce in the 17th century. It came to India as a legacy of British occupation. General Insurance in India has its roots in the establishment of Triton Insurance Company Ltd., in the year 1850 in Calcutta by the British. In 1907, the Indian Mercantile Insurance Ltd, was set up. This was the first company to transact all classes of general insurance business.

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1957 saw the formation of the General Insurance Council, a wing of the Insurance Associaton of India. The General Insurance Council framed a code of conduct for ensuring fair conduct and sound business practices. In 1968, the Insurance Act was amended to regulate investments and set minimum solvency margins. The Tariff Advisory Committee was also set up then. In 1972 with the passing of the General Insurance Business (Nationalisation) Act, general insurance business was nationalized with effect from 1st January, 1973. 107 insurers were amalgamated and grouped into four companies, namely National Insurance Company Ltd., the New India Assurance Company Ltd., the Oriental Insurance Company Ltd and the United India Insurance Company Ltd. The General Insurance Corporation of India was incorporated as a company in 1971 and it commence business on January 1sst 1973. This millennium has seen insurance come a full circle in a journey extending to nearly 200 years. The process of re-opening of the sector had begun in the early 1990s and the last decade and more has seen it been opened up substantially. In 1993, the Government set up a committee under the chairmanship of RN Malhotra, former Governor of RBI, to propose recommendations for reforms in the insurance sector.The objective was to complement the reforms initiated in the financial sector. The committee submitted its report in 1994 wherein , among other things, it recommended that the private sector be permitted to enter the insurance industry. They stated that foreign companies be allowed to enter by floating Indian companies, preferably a joint venture with Indian partners. Following the recommendations of the Malhotra Committee report, in 1999, the Insurance Regulatory and Development Authority (IRDA) was constituted as an autonomous body to regulate and develop the insurance industry. The IRDA was incorporated as a statutory body in April, 2000. The key objectives of the IRDA include promotion of competition so as to enhance customer satisfaction through increased consumer choice and lower premiums, while ensuring the financial security of the insurance market. The IRDA opened up the market in August 2000 with the invitation for application for registrations. Foreign companies were allowed ownership of up to 26%. The Authority has the power to frame regulations under Section 114A of the Insurance Act, 1938 and has from 2000 onwards framed various regulations ranging from registration of companies for carrying on insurance business to protection of policyholders‘ interests. In December, 2000, the subsidiaries of the General Insurance Corporation of India were restructured as independent companies and at the same time GIC was converted into a national re-insurer. Parliament passed a bill de-linking the four subsidiaries from GIC in July, 2002.

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Today there are 24 general insurance companies including the ECGC and Agriculture Insurance Corporation of India and 23 life insurance companies operating in the country. The insurance sector is a colossal one and is growing at a speedy rate of 15-20%. Together with banking services, insurance services add about 7% to the country‘s GDP. A well-developed and evolved insurance sector is a boon for economic development as it provides long- term funds for infrastructure development at the same time strengthening the risk taking ability of the country.

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INDIA HEALTH INSURANCE

(AS PER –EMEDICLAIM.COM) Health Insurance or Medical Insurance also known as Mediclaim is a type of insurance coverage that pays for medical and surgical expenses that are incurred by the insured. Health insurance can either reimburse the insured for expenses incurred from illness or injury or pay the care provider directly. Health insurance is often included in employer benefit packages as a means of enticing or retaining quality employees. (AS PER-MEDINDIA.COM) The industry covers a wide range of activities. These include the production of natural raw materials such as cotton, jute, silk and wool, as well as synthetic filament and spun yarn. In addition an extensive range of finished products are made. (AS WIKIPEDIA.COM) Health insurance is insurance against the risk of incurring medical expenses among

individuals. By estimating the overall risk of health care and health system expenses among a targeted group, an insurer can develop a routine finance structure, such as a monthly premium or payroll tax, to ensure that money is available to pay for the health care benefits specified in the insurance agreement. The benefit is administered by a central organization such as a government agency, private business, or not-for-profit entity. (AS MERRIAM –WEBSTER.COM) System for the advance financing of medical expenses through contributions or taxes paid into a common fund to pay for all or part of health services specified in an insurance policy or law. The key elements are advance payment of premiums or taxes, pooling of funds, and eligibility for benefits on the basis of contributions or employment without an income or assets test. Health insurance may apply to a limited or comprehensive range of medical services and may provide for full or partial payment of the costs of specific services. Benefits may consist of the right to certain medical services or reimbursement of the insured for specified medical costs. Private health insurance is organized and administered by an insurance company or other private agency; public health insurance is run by the government (see SOCIAL INSURANCE). Both forms of health insurance are to be distinguished from socialized medicine and government medical-care programs, in which doctors are employed directly or indirectly by the government, which also owns the health-care facilities.

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SWOT ANALYSIS

Strengths:

[*]Cost advantage

[*]Asset leverage

[*]Effective communication

[*]High R&D

[*]Innovation

[*]Online growth

[*]Loyal customers

[*]Market share leadership

[*]Strong management team

[*]Strong brand equity

[*]Strong financial position

[*]Pricing

Weaknesses:

• Bad communication • Diseconomies to scale • Over leveraged financial position • Low R&D • Low market share • No online presence • Not innovative • Not diversified • Poor supply chain • Weak management team • Weak, damaged brand

Opportunities:

• Acquisitions • Asset leverage • Financial markets (raise money through debt, etc) • Emerging markets and expansion abroad • Innovation • Online • Product and services expansion • Takeovers

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Threats:

[*] Competition [*] Economic slowdown [*] External changes (government, politics, taxes, etc) [*] Lower cost competitors or imports [*] Maturing categories, products, or services [*] Price wars [*] Health Care Reform

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HYPOTHESIS

NUMBER OF MEMBERS

H0:b=0(no influence of number of members on number of policies)

Ha:b≠0 (influence of number of members on number of policies)

NUMBER OF POLICIES

H0:b=0 (no influence of number of policies on number of claims)

Ha:b≠0 (influence of number of policies on number of claims)

NUMBER OF CLAIMS

H0:b=0 (no influence of number of claims on number on members)

Ha:b≠0 (influence of number of claims on number of members)

PREMIUM PAID

H0:b=0 (no influence of premium paid on claim paid)

Ha:b≠0 (influence of premium paid on claim paid)

TOTAL SUM INSURED

H0:b=0 (no influence of total sum insured on total claims paid)

Ha:b≠0 (influence of total sum insured on total claims paid)

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RESEARCH AND METHODOLOGY

In order to produce the present information tool, the following methodology was used:

Gathering and review of all available information: Promotional materials

distributed by insurance companies, Websites, IRDA regulations, previous

analysis and Studies conducted in the sector.

Meetings with TPA department representatives in order to gather more

detailed information on products, operational mechanisms, market

conditions and arrangements.

Analysis of all data and information.

Discussion with TPA department heads and executives eliciting their

views on current improvements/ changes they would deem relevant to

their current activities

It is not the aim of the present document to be comprehensive in bringing together all evidence and details on the promotional efforts, marketing strategies and claims processing experiences related to products marketing but is a first information tool, for the fast growing sector of the insurance industry that would help any interested organization to select the procedure considered the best adapted to the specific needs of a population group, and to engage into direct contact with the concerned players (insurance companies, hospitals etc) in order to meet challenges for society.

QUALITATIVE AND QUANTITATIVE RESARCH DATA

Qualitative is used to describe certain types of information. The data collected here is quantitative data relating to the graphs and the statistics required to analyze the data. Quantitative Data – Information that can be counted or expressed numerically. This type of data is often collected in experiment, manipulated and statistically analyzed. Quantitative data can be represented visually in graphs and charts. Qualitative Data – Qualitative data is extremely varied in nature. It includes virtually any information that is not numerical in nature. ―soft‖ data that approximates but does not measure the attributes, characteristics, properties, etc., of a thing or phenomenon.

26

Research can fall into two distinct types:

Primary Data refers to the statistical material which the investigator

originates for himself for the purpose of the enquiry in hand. In other

words, it is one which is collected by the investigator for the first time.

These data are observed or collected directly from first-hand experience.

Merits

Degree of accuracy is quite high.

It does not require extra caution.

It depicts the data in great detail.

Primary source of data collection frequently includes definitions of

various terms and units used.

For some investigations, secondary data are not available.

Demerits

Collection of data requires a lot of time.

It requires lot of finance.

In some enquiries it is not possible to collect primary data.

It requires a lot of labour.

It requires a lot of skill.

SECONDARY DATA – Secondary data refers to the statistical material

which is not originated by the investigator himself but obtained from

someone else's records, or when Primary data is utilised for any other

purpose at some subsequent enquiry it is termed as Secondary data. This

type of data is generally taken from newspapers, magazines, bulletins,

reports, journals etc.

Merits

Use of secondary data is very convenient.

It saves time and finance.

In some enquiries primary data cannot be collected.

Reliable secondary data are generally available for many

investigations.

Demerits

It is very difficult to find sufficiently accurate secondary data.

It is very difficult to find secondary data which exactly fulfils the need of

present investigation.

Extra caution is required to use secondary data.

27

These are not available for all types of enquiries.

In this research, the researcher has done the secondary research and the data is collected from the annual reports from 2003-2010 of the Insurance Information Bureau. With secondary data, the researcher has used the quantitative method of research. The data used is secondary in nature and has been computed and tabulated using EIS Software and Ms. Excel Analysis of the data has been done using the statistical tools. Though there are several secondary sources form where various data‘s have been taken but the major sources from where a big portion of the numerical data exists. Let‘s just highlight those major sources: 1) IRDA 2) INSURANCE INFORMATION BUREAU 3) INVESTOPEDIA 4) INVESTORWORD The material found has been summarized, analyzed and interpreted to prepare the report. Secondary data has some advantages and disadvantages. Advantages:

Ease of Access - In years past accessing good secondary data required marketers to visit libraries or wait until a report was shipped by mail. When online access initially became an option marketers needed training to learn different rules and procedures for each data source. However, the Internet has changed how secondary research is accessed by offering convenience (e.g., online access from many locations) and generally standardized usage methods for all data sources.

Low Cost to Acquire - Researchers are often attracted to secondary data

because getting this information is much less expensive than if the researchers

had to carry out the research themselves.

May Help Clarify Research Question – Secondary research is often used prior to

larger scale primary research to help clarify what is to be learned (Step 2). For

instance, a researcher doing competitor analysis, but who is not familiar with

competitors in a market, could access secondary sources to locate a list of

potential competitors.

May Answer Research Question - As noted, secondary data collection is often

used to help set the stage for primary research. In the course of doing so

researchers may find that the exact information they were looking for is available

via secondary sources thus eliminating the need and expense to carrying out

their own primary research.

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May Show Difficulties in Conducting Primary Research – The originators of

secondary research often provide details on how the information was collected.

This may include discussion of difficulties encountered. For instance, the

secondary research may be a research report written by a large market research

company. These types of reports often include a section discussing the

procedures used to collect the data and within this may disclose problems in

obtaining the data, such as a high percentage of people declining to take part in

the research. After reading this the marketer may decide the potential information

that may be obtained is not worth the potential difficulties in conducting the

research.

Disadvantages

Quality of Researcher – As we will discuss, research conducted using primary

methods are largely controlled by the marketer. However, this is not the case

when it comes to data collected by others. Consequently, the quality of

secondary research should be scrutinized closely since the origins of the

information may be questionable. Organizations relying on secondary data as an

important component in their decision-making (e.g., market research studies)

must take extra steps to evaluate the validity and reliability of the information by

critically evaluating how the information was gathered, analyzed and presented.

Not Specific to Researcher‘s Needs – Secondary data is often not presented in a

form that exactly meets the marketer‘s needs. For example, a marketer obtains

an expensive research report that looks at how different age groups feel about

certain products within the marketer‘s industry. Unfortunately, the marketer may

be disappointed to discover that the way the research divides age groups (e.g.,

under 13, 14-18, 19-25, etc.) does not match how the marketer‘s company

designates its age groups (e.g., under 16, 17-21, 22-30, etc). Because of this

difference the results may not be useful.

Inefficient Spending for Information – Since the research received may not be

specific to the marketer‘s needs, an argument can be made that research

spending is inefficient. That is, the marketer may not receive a satisfactory

amount of information for what is spent.

Incomplete Information – Many times a researcher finds that research that

appears promising is in fact a ―teaser‖ released by the research supplier. This

often occurs when a small portion of a study is disclosed, often for free, but the

full report, which is often expensive, is needed to gain the full value of the study.

Not Timely – Caution must be exercised in relying on secondary data that may

have been collected well in the past. Out-of-date information may offer little value

especially for companies competing in fast changing markets.

Not Proprietary Information – In most cases secondary research is not

undertaken specifically for one company. Instead it is made available to many

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either for free or for a fee. Consequently, there is rarely an ―information

advantage‖ gained by those who obtain the research.

STATISTICAL TOOLS USED

REGRESSION - A statistical measure that attempts to determine the strength

of the relationship between one dependent variable (usually denoted by Y) and a

series of other changing variables (known as independent variables).

The two basic types of regression are linear regression and multiple regression.

Linear regression uses one independent variable to explain and/or predict the

outcome of Y, while multiple regression uses two or more independent variables

to predict the outcome. The general form of each type of regression is:

Linear Regression: Y = a + bX

Multiple Regression: Y = a + b1X1 +

b2X2 + B3X3 + ... + BtXt

Where:

Y= the variable that we are trying to predict

X= the variable that we are using to predict Y

a= the intercept

b= the slope

In multiple regression the separate variables are differentiated by using

subscripted numbers.

Regression takes a group of random variables, thought to be predicting Y, and

tries to find a mathematical relationship between them. This relationship is

typically in the form of a straight line (linear regression) that best approximates all

the individual data points. Regression is often used to determine how many

specific factors such as the price of a commodity, interest rates, particular

industries or sectors influence the price movement of an asset.

The regression analysis is done through the Microsoft Excel 2007.

The P value is a probability, with a value ranging from zero to one. It is the

answer to this question: If the populations really have the same mean overall,

what is the probability that random sampling would lead to a difference between

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sample means as large (or larger) than you observed? A hypothesis is like a

statement, in an essay it is usually a statement you write at the beginning and the

whole essay is about you proving that statement, with evidence and research etc.

there are basically two types of hypothesis. They are:

NULL HYPOTHESIS: A type of hypothesis used in statistics that proposes

that no statistical significance exists in a set of given observations. The null

hypothesis attempts to show that no variation exists between variables, or that a

single variable is no different than zero. It is presumed to be true until statistical

evidence nullifies it for an alternative hypothesis.

ALTERNATE HYPOTHESIS: An alternative hypothesis is one that specifies

that the null hypothesis is not true. If the probability value (sometimes called the

"p-value") is small then the result is called statistically significant and the null

hypothesis is rejected in favour of the alternate hypothesis. The alternative

hypothesis is false when the null hypothesis is true and true when the null

hypothesis is false.

CORRELATION: A correlation is a single number that describes the degree of

relationship between two variables. It tries to find out the extent to which values

of the two variables are "proportional" to each other. In case of positive

correlation both the variables are directly related, while in a case of negative

correlation both the variables are inversely related. Correlation is represented by

‗r‘.

Where:

n= number of pairs of data

x= independent variables

y= dependent variables

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DATA ANALYSIS (Refer to table 1) The Data has been collected from IIB (Insurance Information Bureau) data base which is represented in a Table form. This Table shows the relationship between and the other factors such as year, number of policies, number of members, number of claims, etc in the form of the table. It is on the basis of the table that further regression analysis is done. Influence of number of policies on number of members Taking number of members as the independent variable and number of policies as the dependent variable the following regression equation is constructed. Y= α + β x Y= 1501141.906 + 0.098006283x In the above equation α is given by 1501141.906 and β is given by 0.098006283. The hypotheses stated are as follows. Ho: (No influence of Number of Members on Number of Policies) Ha: (influence of Number of Members on Number of Policies). If the computed p <significance level (0.05) then the alternate hypothesis is accepted. Since, p value is 0.000127557 which is less than the 0.05 so Ha is accepted. When the t value>table value then the alternate hypothesis is accepted that is, Ha is accepted and Ho is rejected. At 95% confidence level the R2 value is 0.957610941. This means that 95.76% of the influence of the members on policies is explained. The correlation is 0.978575976. Since the correlation is positive, it means that there is a direct relationship between policies and members.

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Influence of Number of Policies on Number of Claim Taking Number of Policies as the independent variable and Number of Claim as the dependent variable the following regression equation is constructed. Y= α + β x Y= -871685.984 + 0.598748446x In the above equation α is given by -871685.984 and β is given by 0.598748446. The hypotheses stated are as follows. The two hypotheses stated: Ho: (No influence of Number of Policies on Number of Claims) Ha: (influence of Number of Policies on Number of Claims) If the computed p <significance level (0.05) then the alternate hypothesis is accepted. Since, p value is 0.000146022 which is less than the 0.05 so Ha is accepted. When the t value>table value then the alternate hypothesis is accepted that is, Ha is accepted and Ho is rejected. At 95% confidence level the R2 value is 0.955270963. This means that 95.52% of the influence of the members on policies is explained. The correlation is 0.977379641. Since the correlation is positive, it means that there is a direct relationship between policies and members.

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Influence of Number of Claims on Number of Members Taking the Number of Claims as the independent variable and Number of members as the dependent variable the following regression equation is constructed. Y= α + β x

Y= 640098.0763 + 16.2518403x

In the above equation α is given by 640098.0763 and β is given by 16.2518403. The hypotheses stated are as follows.

The two hypotheses stated: Ho: (No influence of Number of Claims on Number of Members) Ha: (influence of Number of Claims on Number of Members). If the computed p <significance level (0.05) then the alternate hypothesis is accepted. Since, p value is 8.61121E-07 which is less than 0.05. The null hypothesis (Ho) is rejected. When the t value>table value then the alternate hypothesis is accepted that is, Ha is accepted and Ho is rejected. At 95% confidence level the R2 value is 0.994228148. This means that 99.42% of the influence of the members on policies is explained. The correlation is 0.997109898. Since the correlation is positive, it means that there is a direct relationship between policies and members.

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(Refer to table 2) The Data has been collected from IIB (Insurance Information Bureau) data base which is represented in a Table form. This Table shows the relationship between and the other factors such as period, premium paid and claim paid in the form of the table. It is on the basis of the table that further regression analysis is done. Influence of premium paid on claims paid

Taking premium paid as the independent variable and claims paid as the dependent variable the following regression equation is constructed. Y= α + β x Y= -76.30121673 + 0.974292843x In the above equation α is given by -76.30121673 and β is given by 0.974292843. The hypotheses stated are as follows. Ho: (No influence of premium paid on claims paid) Ha: (influence of premium paid on claims paid). If the computed p <significance level (0.05) then the alternate hypothesis is accepted. Since, p value is 6.15882E-06 which is less than 0.05. The null hypothesis (Ho) is rejected. When the t value>table value then the alternate hypothesis is accepted that is, Ha is accepted and Ho is rejected. At 95% confidence level the R2 value is 0.98733347. This means that 98.73% of the influence of the members on policies is explained. The correlation is 0.993646552. Since the correlation is positive, it means that there is a direct relationship between policies and members.

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(Refer to table 3) The Data has been collected from IIB (Insurance Information Bureau) data base which is represented in a Table form. This Table shows the relationship between and the other factors such as age, Total Amount of Sum Insured and Total Amount of Claim Paid in the form of the table. It is on the basis of the table that further regression analysis is done. Influence of Total Amount of Sum Insured on Total Amount of Claim Paid

Taking Total Amount of Sum Insured as the independent variable and Total Amount of Claim Paid as the dependent variable the following regression equation is constructed. Y= α + β x Y= 1067593155 + 0.007651303x In the above equation α is given by 1067593155 and β is given by 0.007651303. The hypotheses stated are as follows. Ho: (No influence of Total Amount of Sum Insured on Total Amount of Claim Paid) Ha: (influence of Total Amount of Sum Insured on Total Amount of Claim Paid). If the computed p <significance level (0.05) then the alternate hypothesis is accepted. Since, p value is 0.022795529 which is greater than 0.05. The null hypothesis (Ho) is rejected. When the t value>table value then the alternate hypothesis is accepted that is, Ha is accepted and Ho is rejected. At 95% confidence level the R2 value is 0.496972392. This means that 49.69% of the influence of the members on policies is explained. The correlation is 0.704962689. Since the correlation is positive, it means that there is a direct relationship between policies and members.

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FINDINGS

The regression analysis between the number of policies and number of member

of health insurance show that the number of members has a significant impact on

the number of policies of the health insurance. As number of members increases

number of policies also increases. Thus as number of members of health

insurance increases it would generate more number of policies.

The regression analysis between the number of claims and number of policies of

health insurance show that the number of policies has a significant impact on the

number of claims of the health insurance. As number of policies increases

number of claims also increases. Thus as number of policies of health insurance

increases it would generate more number of claims of the people injured.

The regression analysis between the number of members and number of claims

of health insurance show that the number of claims has a significant impact on

the number of members of the health insurance. As number of claims increases

and when paid then the number of members also increases. Thus as number of

claims paid by the Insurance Co. increases people will tend to become members

of the Insurance Co. and thus the number of members will increase.

The regression analysis between the claim paid and premium paid of health

insurance show that the premium paid has a significant impact on the claim paid

of the health insurance. As premium paid increases the amount of claiming also

increases which increases the claim paid also. Thus as premium paid of health

insurance increases it would generate more claims to be paid.

The regression analysis between the total amount of claim and total sum insured

of health insurance show that the total sum insured has a significant impact on

the total amount of claim of the health insurance. As total sum insured increases

total amount of claim also increases. Thus as total sum insured of health

insurance increases it would generate more total amount of claim.

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RECOMMENDATIONS

The Indian health insurance industry has a significant presence in the Indian economy as well as on the people of Indian economy living outside india. Therefore it is important to determine the day to day threats and opportunities, which comes along its way

The health insurance sector should try to reduce the timing of claim paid for

attracting more number of people to buy policy.

The sector should look into other advertisement aspect and try to improve on

that.

The sector should encourage agents or commission system for middle men in

order to create employment opportunities for many.

The companies should try to find ways to enter into new insurance areas which

should be beneficial for them.

The sector should come up with new research and development in the diagnoses

area to improve the overall health of the economy.

The government should come up with new policies and incentives to boost the

sector.

The companies should find out the effective manner of advertisement in a cost

manner.

The companies should gather and analyse all information of the new market

before entering the market.

The companies should offer various bonus offers to attract more customers to

increase the number of member or number of policies.

The sector should try to develop medicines for non curable diseases such as

cancer etc.

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CONCLUSION

Limitations of the Study

As per direct observations by working in a TPA firm for 6 months.

Data regarding claims pertain to pure claims costs (expenses of

administration, interest not included).

Data maintained by TPAs as per international coding of disease includes

unspecified diseases

Designed from the outset to be solely based on the information that the TPA can provide, the present document has its obvious shortcomings.

On the one hand due to its clear informative purpose, the document does not provide an analysis of the relevance of the various available health insurance products, based on their comparative main features or on their marketing experience in particular settings.

But on the other hand because of lack of availability of interaction with insurance representatives or for reasons related to the competition that has already started to be felt with by private players in the fast changing healthcare & insurance scenario, many questions pertaining to the operational mechanisms and development strategies adopted by the insurance companies have been raised for consideration of public good.

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FUTURE SCOPE

The generally optimistic perception for the growth of health insurance is certainly supported by the growth in the number of policyholders, but the profitability of this line of business remains an issue. The health insurance sector had a loss ratio of about 78% in 2003, which deteriorated to 98% in 2004-05. Currently, available figures suggest that the claims ratio stands at 110% - 120%.

Growth in policyholder numbers, more effective third party administration and an effective network of hospitals is expected to see the numbers improve. Other changes have been effected to encourage growth in this sector. For example:

1. Life insurers have been allowed to sell health insurance. Initially, life insurers

were only allowed to sell certain types of health covers as a supplement to a life

policy. However, the (IRDA) has allowed life insurers to sell pure health

insurance products subject to product specific approvals.

2. The standard mediclaim policy has undergone several revisions and

modifications. In recent years, private health insurers, such as Apollo DKV, have

been offering fresh products with increased covers and sums insured.

3. The growing expense of health care in India. Private hospital rates are still low

compared to the rates charged in more developed countries, but high when

compared to average Indian earnings. It is no longer uncommon for Indian

employees to now expect that health care will be part of an employment

package.

4. With the opening up of the market to private competition, the claims process has

become much less cumbersome.

Support for a health insurance market has also come from some less obvious sources. Indian states have started relying on insurance policies to meet some of their legal obligations to provide health care to their citizens. The central government has also proposed the introduction of free health care insurance for the poor. This plan is meant to cover every poor family for INR 30, 000 (c. US$750) per annum. The central government will pay 75% of the premium, leaving the remaining 25% to be covered by state governments.

The IRDA has also encouraged Micro-insurance as a means of extending the availability of health insurance to areas of the market that, geographically and economically, may not have been at the forefront of Insurers‘ business plans.

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The Legal Playing Field

At the same time as the market grows, the IRDA and the Courts are stepping in to create a more consumer friendly playing field, particularly as regards the treatment of senior citizens; the operation of the pre-existing diseases exclusion, and the reluctance of insurers to renew policies where the claims experience has been bad.

Senior citizens had been complaining about the reluctance of Insurers to issue policies to them, and the inclusion of disadvantageous terms when policies were offered – such as hefty increases in premium rates, added exclusions and conditions, etc. In May 2007, the IRDA set up a Committee on Health Insurance for Senior Citizens to make recommendations. Its members included representatives from the General Insurance Corporation of India, Oriental and Apollo DKV as well as others. The Committee reported in November 2007 and made the following main recommendations:

Senior Citizens should have some assurance that their policies will be renewed.

The Industry should adopt standard terms and conditions, such as for the

definition of pre-existing diseases.

The Committee also said that policy wordings should be simpler for the lay

person to follow, suggesting that uniform terminology be used by all Insurers to

lessen confusion in the public mind.

The IRDA considers after evaluating the Committee recommendations for formal adoption as per File & Use procedures. This is the process whereby a non-tariffed product is brought to market. It must first be filed with the IRDA, and only thereafter can it be sold. During the filing stage, the IRDA has been paying particularly close attention to exclusion clauses in general and the pre-existing disease exclusion in particular.

The Courts have taken a similar interest. The Judgment in New India Assurance v Akshoy Kumar Paul was handed down by the Delhi High Court in November 2007 and has only recently been reported. The Court had to consider whether, on renewal, a state owned Insurer could refuse to renew or insert an exclusion clause if it did renew. The Insured had held the policy for 5 years, renewing it on 4 occasions. In the preceding year, he had suffered a heart attack. It was held that New India must renew, and the ‗renewal of an insurance policy means repetition of the original in a manner that the old policy gets revived on the same terms and conditions as were incorporated in the original policy‘. The exclusion clause was not permitted.

Although it interferes with principles of privity of contract, the judgment can be justified by reference to earlier decisions to the effect that state owned Insurers have special obligations to act fairly because they are state owned and therefore an extension of the state. It remains to be seen whether the obligation to renew on the same terms will be extended to private Insurers.

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Today's Status of Health Insurance in India in brief

1. Health Insurance is a loss making portfolio with loss ratios ranging from 110

to 140%.

2. Health Insurance is not reaching the masses, but helping a pocket full of

people who have planned their health insurance versus requirements well.

3. Health Insurance is viewed as an income flow by Health Service providers.

It is an open secret that the costs of health services are doubled if the patient

has an insurance policy covering him.

4. Insurers are grappling with this ever increasing portfolio and trying to bring

about a balance.

5. Authorities are concerned and would like to set right the issue.

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CASE STUDY

Health India TPA Services Pvt Ltd

Health India was incorporated in the year 1997 with its Head Office at Commercial Union House, 2nd Floor, 9 Wallace Street, Fort, and Mumbai – 400 001and Offices in Bangalore, Chennai, Kolkata, Delhi, Hyderabad, Ahmadabad and resident representatives in other major cities of India.

Health India has already established a wide network of Quality Hospitals, Nursing Homes, Diagnostic Centers, Medical Consultants, and General Practitioners etc. all over India with a focus to offer innovative client focused health care services and customer benefit solutions in healthcare to individuals, Corporate & Groups.

Health India has combined expertise from Insurance, medicine, finance, hospital administration, I.T. and other service fields with backup of network of hospitals spread across the cities in India for TPA services.

Health India has established State of the Art operational (TPA servicing) facility in an independent building at Vikhroli (Mumbai) spread across 7000 Sq. Ft. office area fully equipped with modern communication systems and Top of the Line Computerized processing centre. The centre houses Health India‘s 24 x 7 Call Centre and all other operational departments.

Services provided by Health India:

1. Third Party Administrator (TPA Services) to Health Insurance Sector corporate

Beneficiary Enrolment Services

24 x 7 Call Centre & Help Line Management.

Customer Relations Management.

Cashless Hospitalization.

Provider (Hospital) Billing Services.

Claim Processing / Adjudication.

Claim payments / Claim float management.

Access services to Medical & Health Provider network.

Beneficiary Enrolment Services.

Medical Investigation services.

2. Pre-policy Processing & Health checkups – Life Insurance &Non-Life Insurance companies

Beneficiary Network of quality Diagnostic Centers.

Beneficiary Network of physicians and consultants.

Beneficiary Logistic Support.

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Beneficiary Call Centre - Health checkup related.

Beneficiary Fixing up Appointments with Diagnostic Center as per the Proposer`s

Convenience.

Beneficiary Pre-requisites for tests and details of appointment conveyed to

proposer.

Beneficiary Reports received from DC are scrutinized for completeness and

deficiency, if any retrieved from DC.

Beneficiary Reports dispatched to insurance companies as per instruction.

Beneficiary MIS as per requirement of Insurance Company.

Medical Investigation services.

3. Claim Processing

Beneficiary Pre-authorization for cashless hospitalization.

Beneficiary Claims review and analysis.

Beneficiary Payment of claims.

Beneficiary Provider Payments and Float management.

4. Claim Investigation

Medicalim

Death Claim

5. Wellness Programme for Corporate & Groups & Individuals

Annual health checkup for employees.

Pre-employment checkups.

Stress management programmes.

24 X 7 Medical Helpline – Call Centre.

Medic & Paramedic services.

Health counseling / Seminars & Workshops.

6. Empanelment of MSP (Medical Service Providers)

Ties for Providers

Presently serving - a) Birla Sun life. b) TATA-AIG.

Health India TPA Services Pvt Ltd, Kolkata Branch

Is servicing ICICI Lombard GIC Ltd for their mass policy covering Weavers all over India

The scheme is monitored and funded by Govt of India - Ministry of Textiles covering members of weavers‘ co-operatives and samitis.

44

The insurance cover of Rs.15,000 per annum per person covering pre-existing disease and maternity benefits upto Rs.2,500 intends to lend a helping hand for medical expenses for hospitalization (Rs.7,500 per annum per person) and for OPD treatment (Rs.7,500 per annum per person) to earning weavers and dependants (eg

husband/wife, unmarried children) which is a boon for the welfare of the weavers whose daily income may not be more than Rs.70-100 per day and that too with daily income not assured

Health India handles servicing of approx 400,000 weavers in the 4 states allotted to

them (ie West Bengal, Orissa, Bihar, and Jharkhand) – as a TPA including settlement of claims

Scheme commenced in 2007 and has been renewed every year showing the government‘s resolve to support workers - weavers on handlooms which are household industry in many centres and districts - an art now competing with mass production of other textile materials.

Earlier, the weavers had to sell off properties or go the moneylender for their financial requirement in medical emergency – in the first year of insurance as per feedback from hospitals even cows and bullocks were sold to meet hospitalization (always an emergency as medical treatment would be postponed as much as possible for lack of an alternative funding)!

Illness often meant financial catastrophe which often meant a person who is hospitalized spends more than 50% of his annual income on health; 24% of those hospitalized fell below the poverty line and out of pocket expenses could push 2.2% of

the population below the poverty line in a year – a situation now corrected with government funded insurance for the weavers family and other BPL families.

In the initial years insurance awareness levels were low. Rural Service Providers (Hospitals etc) having 10- 15 beds lacked skilled manpower to interact with the TPAs. Sending a fax for cashless authorization request to the TPA meant cycling to the nearest fax booth a few kilometers away and going down again after a few hours to collect the TPA‘s confirmatory fax.

The situation today is vastly improved with faxes, printers, scanners, computers with internet connection, even specialized software for billing - being used by these hospitals. Expansion of bed capacity, improvement in patient care (being picked up and dropped to/from home for cataract operations), introduction of OPD clinics by the same hospitals with Insurer‘s initiative have created a greater awareness and competition for customer benefits.

The relationship triangle involving the Insurance Co, TPA and Service Provider has become widely distorted for a number of reasons. Chief being treatment costs.

Costs are driven by the following factors:

Technology/Specialization

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Prescription Drugs

Medical Inflation

Moral Hazard/Adverse Selection

Usage Increase

New Treatments

Unnecessary treatments

Hospitals have started responding by way of Certification, Accreditation, Industry Rating and Standardization.

Insurer have developed their own in-house software for claims processing by the TPA so that final payment comes through within 7 days (rather than wait for the TPA to raise the funds float, receive payment and issue cheques)

TPAs face different constraints in terms of capital, capacity and connections. This implies it is not a level playing field for the functioning of the TPAs.

All Stakeholders have except the insurance holder has a business angle - to grab a major share or stay afloat. Cashless facility increases the capacity of insureds to incur higher costs at the time of illness and inflate the demand for high cost care – consumers not having insurance end up paying higher costs and hospitals would like to shape up for supplier induced demand for diagnostics and super-speciality treatment. Rural hospitals are now working to tie up for visiting consultants from South India for super-speciality treatment. Work flow to the TPAs for OPD claims is regulated by the insurer – files sent in huge lots are required to be processed for settlement within a short TAT requiring new and untrained staff to pick up/sharpen skills on the job – as a supplementary support to existing staff; TPAs are often bogged down with data flow from insurers. By turning around payments quickly TPAs only add to the tendency of higher prices of healthcare - higher the turnover of patients, greater the incentive from the hospitals to make higher per unit profits.

TPA can potentially play an important role in making insured healthcare availability smoother but it cannot be seen as a panacea for all the problems of health sector as its functioning is limited, regulated and checked by insurers, IRDA and other stake holders like government authority, insuring societies and even service providers insisting on higher cost reimbursements.

HERE ALSO THE WRITING ON THE WALL IS CLEAR. Regulate the service providers just like the insurance providers and TPAs to make insurance worth its meaning especially when the scheme is targeted towards poor weavers. Grading of hospitals and standardization of treatment and costs are the need of the hour towards better customer services.

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ANNEXURE: TABLE 1:

Year Number of Policies

Number of Members

Number of Claims

2003-2004* 22,65,451 83,61,629 3,60,088

2004-2005* 20,59,449 89,87,239 5,55,273

2005-2006* 38,28,495 1,63,45,575 10,16,785

2006-2007* 31,10,475 1,79,07,430 10,60,047

2007-2008* 37,90,838 2,41,21,625 14,36,998

2008-2009* 45,75,725 3,27,10,604 20,81,297

2009-2010** 68,84,687 5,48,93,453 32,63,597

TABLE 2:

Period Premium (` in Crs.) Claims paid ( ` in Crs.)

2003-2004* 944 785

2004-2005* 987 948

2005-2006* 1,947 1,777

2006-2007* 2,820 2,198

2007-2008* 2,758 2,904

2008-2009* 3,976 4,087

2009-2010** 7,803 7,456

TABLE 3:

Age Band Total Amount of

Sum Insured (in `) Total Claim Paid (in `)

<1 10717317771 3387904423

1 – 5 60661435074 302160548

6 – 15 138314590745 629367097

16 – 25 172141370029 1195070231

26 – 40 449355340159 3250266686

41 – 60 467148623931 6778822199

61 – 65 48179978056 1713088349

66 – 70 28576305138 1424773699

71+ 24166413552 1706700597

Age not specified 139131558 995014481 Total 1,39,94,005,06,013 21,38,31,68,309

Source of All Tables: IRDA

47

REGRESSION BETWEEN NUMBER OF MEMBERS AND NUMBER OF POLICIES

Year Number of Policies Number of Members

2003-2004* 22,65,451 83,61,629

2004-2005* 20,59,449 89,87,239

2005-2006* 38,28,495 1,63,45,575

2006-2007* 31,10,475 1,79,07,430

2007-2008* 37,90,838 2,41,21,625

2008-2009* 45,75,725 3,27,10,604

2009-2010** 68,84,687 5,48,93,453

SUMMARY OUTPUT

Regression Statistics

Multiple R 0.978576

R Square 0.957611

Adjusted R Square 0.949133

Standard Error 368032

Observations 7

ANOVA

Df SS MS F Significance F

Regression 1 1.53E+13 1.53E+13 112.955 0.000128

Residual 5 6.77E+11 1.35E+11

Total 6 1.6E+13

Coefficients Standard Error t Stat P-value Lower 95%

Upper 95%

Lower 95.0%

Upper 95.0%

Intercept 1501142 256210.3 5.859022 0.002053 842532.3 2159751 842532.3 2159751

X Variable 1 0.098006 0.009221 10.62803 0.000128 0.074302 0.121711 0.074302 0.121711

48

REGRESSION BETWEEN NUMBER OF POLICIES AND NUMBER OF CLAIMS

Year Number of Policies

Number of Claims

2003-2004* 22,65,451 3,60,088

2004-2005* 20,59,449 5,55,273

2005-2006* 38,28,495 10,16,785

2006-2007* 31,10,475 10,60,047

2007-2008* 37,90,838 14,36,998

2008-2009* 45,75,725 20,81,297

2009-2010** 68,84,687 32,63,597

SUMMARY OUTPUT

Regression Statistics Multiple R 0.97738 R Square 0.955271 Adjusted R

Square 0.946325 Standard

Error 231597.9 Observations 7

ANOVA

df SS MS F Significance F

Regression 1 5.73E+12 5.73E+12 106.7842 0.000146 Residual 5 2.68E+11 5.36E+10

Total 6 6E+12

Coefficients Standard Error t Stat P-value Lower 95%

Upper 95%

Lower 95.0%

Upper 95.0%

Intercept -871686 236288.2 -3.68908 0.014159 -1479084 -264288 -1479084 -264288

X Variable 1 0.598748 0.057942 10.33364 0.000146 0.449805 0.747692 0.449805 0.747692

49

REGRESSION BETWEEN NUMBER OF CLAIMS AND NUMBER OF MEMBERS

Year Number of Members

Number of Claims

2003-2004* 83,61,629 3,60,088

2004-2005* 89,87,239 5,55,273

2005-2006* 1,63,45,575 10,16,785

2006-2007* 1,79,07,430 10,60,047

2007-2008* 2,41,21,625 14,36,998

2008-2009* 3,27,10,604 20,81,297

2009-2010** 5,48,93,453 32,63,597

SUMMARY OUTPUT

Regression Statistics Multiple R 0.99711 R Square 0.994228 Adjusted R

Square 0.993074 Standard Error 1355991 Observations 7

ANOVA

df SS MS F Significance F

Regression 1 1.58E+15 1.58E+15 861.2731 8.61E-07 Residual 5 9.19E+12 1.84E+12

Total 6 1.59E+15

Coefficients Standard Error t Stat P-value Lower 95%

Upper 95%

Lower 95.0%

Upper 95.0%

Intercept 640098.1 927664.8 0.69001 0.5209 -1744540 3024736 -1744540 3024736

X Variable 1 16.25184 0.553773 29.34745 8.61E-07 14.82832 17.67536 14.82832 17.67536

50

REGRESSION BETWEEN CLAIM AND PREMIUM

Period Premium (` in Crs.) Claims paid ( ` in Crs.)

2003-2004* 944 785

2004-2005* 987 948

2005-2006* 1,947 1,777

2006-2007* 2,820 2,198

2007-2008* 2,758 2,904

2008-2009* 3,976 4,087

2009-2010** 7,803 7,456

SUMMARY OUTPUT

Regression Statistics Multiple R 0.993647 R Square 0.987333 Adjusted R

Square 0.9848 Standard Error 285.6115 Observations 7

ANOVA

df SS MS F Significance F

Regression 1 31792710 31792710 389.7411 6.16E-06 Residual 5 407869.6 81573.92

Total 6 32200579

Coefficients Standard Error t Stat P-value Lower 95%

Upper 95%

Lower 95.0%

Upper 95.0%

Intercept -76.3012 184.5725 -0.41339 0.69645 -550.76 398.1574 -550.76 398.1574

X Variable 1 0.974293 0.049352 19.74186 6.16E-06 0.84743 1.101155 0.84743 1.101155

51

REGRESSION BETWEEN TOTAL SUM INSURED AND TOTAL CLAIM PAID

Age Band Total Amount of

Sum Insured (in `) Total Claim Paid (in `)

<1 10717317771 3387904423

1 – 5 60661435074 302160548

6 – 15 138314590745 629367097

16 – 25 172141370029 1195070231

26 – 40 449355340159 3250266686

41 – 60 467148623931 6778822199

61 – 65 48179978056 1713088349

66 – 70 28576305138 1424773699

71+ 24166413552 1706700597

Age not specified 139131558 995014481

Total 1,39,94,005,06,013 21,38,31,68,309

SUMMARY OUTPUT

Regression Statistics Multiple R 0.704963 R Square 0.496972 Adjusted R

Square 0.434094 Standard Error 1.44E+09 Observations 10

ANOVA

df SS MS F Significance F

Regression 1 1.64E+19 1.64E+19 7.9037 0.022796 Residual 8 1.66E+19 2.08E+18

Total 9 3.31E+19

Coefficients Standard Error t Stat P-value Lower 95%

Upper 95%

Lower 95.0%

Upper 95.0%

Intercept 1.07E+09 5.94E+08 1.79716 0.110029 -3E+08 2.44E+09 -3E+08 2.44E+09

X Variable 1 0.007651 0.002722 2.811352 0.022796 0.001375 0.013927 0.001375 0.013927

52

BIBLIOGRAPHY:

BOOKS / JOURNALS:

IRDA Journal (2003). Data for Health Insurance.

Quarterly Journal of Economics

Bhat, Ramesh. (1999). "Characteristics of private medical practice in India: a

provider perspective," Health Policy and Planning,

Kalyani K.N. (2004b). On the Shopfloor; IRDA Journal, Vol II, No. 6; May

Bhat Ramesh, Jain Nishant (2004b). Time-series analysis of private

healthcare expenditures and GDP: co integration results with structural break;

Working Paper No. 2004-05-10 Indian Institute of Management, Ahmadabad.

Gupta I., Roy A., Trivedi M. (2004). Third Party Administrators œ Theory and

Practice; Economic and Political Weekly, Vol XXXIX, No 28, July 10, 2004.

WEBSITES:

http://www.medindia.net/patients/insurance/health-insurance-basics.htm

http://www.investorwords.com/2289/health_insurance.html#ixzz1GybMJAij

http://www.hdfclife.com/Products/healthplans/TPA.aspx

http://en.wikipedia.org/wiki/Third-party_administrator

http://www.ttkhealthcareservices.com/pages/faqs.htm

http://www.medsave.in/tpa.html

http://www.acadjournal.com/2008/V22/part7/p2/Important - check it for dates

n stats

http://www.bimabazaar.com/index.php?option=com_content&view=article&id=

117:evolution-of-health-insurance-in-india-towards-healthy-health-

insurance&catid=83:health-insurance&Itemid=70

http://www.wikipedia.com