The health insurance sector in India has undergone many changes over the last decade due to increasing healthcare costs, growing awareness, and many government initiatives for insurance coverage. However, even though many advancements have taken place, the sector still has many challenges in terms of coverage and penetration. The article attempts to throw some light on the current size of the health insurance market in India, the percentage of the population covered, the present scenario, and the future growth of this crucial industry.
Market Size and Growth
By 2023, the Indian health insurance market is projected to reach a substantial value of approximately USD 11.2 billion, marking it as one of the fastest-growing segments in the overall insurance industry. The health insurance sector in India has been on a remarkable growth trajectory, with a compound annual growth rate (CAGR) of around 24% over the last decade. This significant growth underscores the increasing demand for health coverage in a country where healthcare costs are escalating rapidly (Fig. 1).
Several factors have fuelled this:
- Surging Medical Costs: Medical inflation in India is the highest in the world, increasing health care costs by around 14% every year. This has made health insurance an essential need for most families that cannot bear the financial burden of hospitalization or serious illness.
- Government Initiatives: Government Initiatives have played a pivotal role in expanding health insurance coverage. The Ayushman Bharat scheme, launched in 2018, has been a key driver in this regard. This scheme, aimed at economically weaker sections of society, is set to cover more than 500 million people, making it one of the world’s largest publicly financed health insurance schemes. The proactive role of the government in this sector provides a reassuring outlook for the future of health insurance in India.
- Covid-19 Pandemic: The COVID-19 pandemic has significantly increased awareness about health insurance. This global health crisis has led to a surge in policy purchases across all segments of society, highlighting the growing recognition of the importance of health coverage.
Percentage of the Population Covered
Given the increase in market size, however, the percentage of the population covered with health insurance is still low compared to world averages. In 2023, around 36% of the Indian population will be covered under any health insurance cover, including private insurance and government schemes like Ayushman Bharat (Fig. 2).
This means that nearly two-thirds of the population, or about 900 million people, remains uninsured and faces financial ruin in the event of a significant health issue. The reasons for the low penetration rate could be many, including:
- Unawareness: Many people, especially those in rural settings, are still unaware of the essence of health insurance, while others are simply reluctant to invest in policies out of ignorance.
- Affordability Issues: Health insurance premiums are an unnecessary financial burden in addition to the already large plate that most of the population—especially those in the informal sector or low-income groups—has.
- Urban-Rural Divide: There is a vast difference in insurance coverage between urban and rural residents, with most urban residents having a much higher likelihood of being covered by health insurance than rural residents (Fig. 3).
The Status Quo: Challenges and Opportunities
The Indian health insurance sector is growing, but it is grappling with various challenges that need solutions for the sector to ensure broad coverage and better access to healthcare services.
- Low penetration: Despite the growing coverage, the penetration of health insurance remains low, especially among rural areas and low-income groups, where most of the population is dependent on out-of-pocket expenditures (Fig. 4).
- Claims Settlement Issues: The claims process in India has often been tedious, with several policyholders facing a lot of trouble getting their claims approved. This may be because of the non-transparency in clauses, terms, and conditions or issues related to nondisclosure of pre-existing conditions. Such issues raise doubts in prospects’ minds about the fair mechanism of insurance players and create barriers to adopting health insurance.
- High Out-of-Pocket Expenditure: Most people end up spending huge amounts of money even with insurance coverage. This is because some insurance policies provide limited coverage that may not include all types of treatments or could have high deductibles and co-payments.
- Regulatory Hurdles: Health insurance is perhaps one of the most regulated industries in India. This seems necessary to protect consumers’ interests, but it can also lead to inefficiencies. The sector needs continual updating and reforming to factor in the healthcare scenario and the changing needs of the population.
Projected Growth and Future Prospects
Further, the Indian health insurance industry seems to be moving towards another level of growth. The market is expected to see sustained growth, and by 2026, it is estimated that it might grow into a USD 21 billion industry (Fig. 5). There are various reasons as to why this growth is going to happen:
- Greater Penetration: Efforts to create awareness and educate the public on the importance of health insurance are bound to pay off, leading to higher penetration rates, especially in underinsured segments like rural areas and among low-income families.
- Technological Advances: The adoption of digital tools and technologies, including telemedicine, mobile health apps, and AI-driven underwriting processes, allows for easy access to arrangements and claiming health insurance and would likely drive growth through the expected contribution to its user-friendliness and accessibility.
- Product Innovation: Insurance companies have started launching products by identifying the diversified requirements of the Indian population, such as critical illness policies, top-up plans, and disease-specific covers. These innovations are expected to attract more customers and increase overall coverage.
- Government Initiatives: This is going to be the key driver, with continued government efforts to expand the scope and coverage of public health insurance schemes and incentivise the private sector for greater participation. Success stories like Ayushman Bharat will be models for further expansion.
- Growing Middle Class: As India’s middle class continues to grow, so will the demand for comprehensive health insurance products. This demographic shift will be a key driver of market growth in the coming years.
The Essence
Indian Health Insurance is at a crossroads. It has been showing impressive growth recently but is still miles away from attaining universality. With burgeoning healthcare costs and growing awareness of health insurance, the demand for health insurance is bound to grow. However, low penetration, affordability, and problems in claims processing remain as challenges for the realisation of the full potential of this sector. Overcoming these challenges with the use of technology and innovation sets the health insurance industry in India at the threshold of a bright tomorrow—an assurance to protect more lives and secure the financial well-being of millions.
Dr. Prahlada N.B
MBBS (JJMMC), MS (PGIMER, Chandigarh).
MBA (BITS, Pilani), MHA,
Executive Programme in Strategic Management (IIM, Lucknow)
Senior Management Programme in Healthcare Management (IIM, Kozhikode)
Postgraduate Certificate in Technology Leadership and Innovation (MIT, USA)
Advanced Certificate in AI for Digital Health and Imaging Program (IISc, Bengaluru).
Senior Professor and former Head,
Department of ENT-Head & Neck Surgery, Skull Base Surgery, Cochlear Implant Surgery.
Basaveshwara Medical College & Hospital, Chitradurga, Karnataka, India.
My Vision: I don’t want to be a genius. I want to be a person with a bundle of experience.
My mission: Help others achieve their life’s objectives in my presence or absence!
My Values: Creating value for others.
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Summarized very well.grea5 article
ReplyPrahlada Sir, on this auspicious Teachers' Day, I offer my reverent salutations to you, the paragon of pedagogy in our midst. Your daily blogs, like the first blush of dawn, illuminate my mind and set it aglow with wisdom. In an era where cognitive twilight beckons, your words are a beacon, warding off the specter of forgetfulness that haunts me, a legacy of my father's struggles with Alzheimer's.
Like a thirsty traveller, I lap up each message in our group, mindful of the transience of memory and the fleeting nature of insight. And so, I turn to today's topic, the labyrinthine landscape of Health Insurance in India, with a sense of trepidation and awe. Here is my humble offering, a droplet in the ocean of discourse…
"India's health insurance landscape stretches out like a canvas, waiting to be painted with vibrant colors of coverage. Yet, the brushstrokes of protection still fall short, leaving vast swaths of the population exposed to the whims of fate.
Like a mighty river, healthcare costs swell and surge, threatening to engulf the financial well-being of millions. But amidst the turbulence, a beacon of hope flickers – the growing awareness of health insurance.
As demand for coverage rises like a morning sun, the question echoes: how to illuminate a brighter tomorrow, where more lives are shielded and financial security is the cornerstone of every Indian's foundation?
Perhaps the answer lies in innovative solutions, like a master weaver's loom, intertwining threads of technology, accessibility, and affordability. Or maybe it's in the collective efforts of policymakers, insurers, and individuals, joining hands like a chorus of voices, singing in harmony for a healthier future.
Let us envision a tapestry of protection, where every thread represents a life secured, every fiber a family safeguarded, and every hue a hope renewed. Together, we can paint a masterpiece of comprehensive coverage, where India's tomorrow is brighter, healthier, and more secure for all."
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