For any industry to remain relevant, understanding the consumer demand and their evolving needs is the key. Health insurance industry is no exception, in fact, consumers are more sensitive as it is related to their own individual health and wellness. Health is wealth, as we all know, took a new meaning in the post pandemic era – for most of us, today, health insurance is wealth.
COVID has helped us realise how a health emergency can put a strain on our finances and wipe out our life savings within a few days. Thousands of uninsured people lost their savings, gold ornaments, and property due to Covid-19 related medical expenses. For many, this was a wake-up call.
This led to an increase in the demand for health insurance plans immediately after COVID. People who were not insured, wanted to buy health insurance plans whereas those who had insurance, looked for higher coverage or sum insured.
This sudden spike in health insurance during the first half of the financial year 2020-21 made the health segment the largest portfolio in the non-life insurance pie for the first time in India, surpassing the motor segment.
The health insurance sector continues to be robust in FY23 with specialised or standalone health insurance companies’ premium collection growing by over 25% YoY to around ₹26200 crore, which is now more than 10% of the overall general insurance industry in India.
Changing consumer behaviour
Prior to the pandemic, people looked at health insurance policies as an instrument to fund sickness or medical emergencies. For many, especially the younger population, it didn’t resonate as most of them felt health insurance policy was not required because they won’t fall seriously ill or need hospitalisation in the next few years. Similarly, people who suffered from lifestyle related disease conditions like diabetes, asthma, hypertension etc did not end up getting adequate coverage.
People were willing to spend lavishly on flashy cars and pay hefty instalments, but when it came to health insurance, they thought it was an unnecessary expense. However, there is a noticeable shift in the scenario.
Consumers are now realising that health insurance is more to just sickness funding and it can help to lead a healthy lifestyle. Even so they are prioritising health insurance covers over luxury spends.
According to the findings of Aditya Birla Health Insurance’s New Health Normal Report 2022, as much as 85% of their respondents preferred cutting down on some luxury items and spending more on health insurance.
Today, buying health insurance is increasingly seen as an investment that shields consumers from rising healthcare costs while guaranteeing them access to high-quality care. The survey also revealed that 84% of respondents thought their awareness of health and wellness issues had increased post-covid, and 52% said they had set aside money for medical emergencies.
Consumers have become more aware and concerned about mental and physical wellness. They are more forthcoming about discussing their mental health issues and do not hesitate consulting experts. Hence mental and physical health are both essential components of overall health and are inextricably linked. Depression, for example, can aggravate the risk of diabetes, heart disease, and stroke. Similarly, the presence of chronic conditions can increase the likelihood of developing mental illness.
Recognising this changing consumer preference, there is a gradual shift towards a wellness-oriented approach and insurers are focusing on promoting healthy lifestyles and preventive care. Among the many new concepts, industry is also looking to increase the coverage domain by including new things like including mental health consultation in health insurance policies.
Growing opportunities
The last few years have seen an increased awareness among people about the need for buying a health policy that provides holistic and adequate cover. As a result, the standalone health insurance players have seen substantial growth which led to quadrupling their market share in the last five years. However, the penetration of health insurance in India is still far from satisfactory, with only 3% of the total Indian population buying retail policy.
The India Insurtech Landscape and Trends Report, released recently by the India Insurtech Association (IIA) in collaboration with Boston Consulting Group (BCG) has revealed that penetration of life and health insurance in India is 3% and 35% respectively. According to the recently released National Family Health Survey-5 (2019-21), a little over two-fifths, or 41%, of households in India have at least one individual covered by a health insurance plan or a health scheme of the government.
These numbers demonstrate that India's health insurance coverage is inadequate in comparison to global leaders, highlighting the need to reimagine products and distribution.
Low penetration and coverage present enormous opportunities for insurers, and the current robust insurance ecosystem is conducive to their growth. Health insurance is receiving strong thrust from the government and the regulator. With the trilogy - Bima Sugam, Bima Vahak and Bima Vistaar, combined with the adoption of innovative “Customer-First strategies” will significantly change how the industry conducts business and shapes the customer experience landscape.
More private players are entering the market, existing players are expanding their operations and more distribution channels are being created. Among the key driving factors are the burgeoning middle class and the growing demand for health insurance from smaller towns and semi-urban areas. India is now the world's fifth largest economy, and disposable household income is rising rapidly. Over the next few years, approximately 150 million people will be added to the workforce, further fueling the demand for health insurance.
Above all these, the most notable trend has been the shift away from traditional indemnity-based health insurance policies, towards more incentivized and comprehensive plans that cover pre-existing medical conditions and a wide range of treatments and procedures rather than just hospitalisation costs. Micro-insurance products designed for low-income households, customised policies for women, and disease-specific policies are also gaining traction.
Conclusion
Health insurance companies are realigning their product features and are coming out with various health and wellness solutions that incentivizes policyholders to remain fit. The idea is to promote physical and mental well-being of the customers while providing access to quality care and protection against chronic ailments.
India’s health insurance market is expected to reach $198 billion by 2027, growing at a CAGR of 10.2%. While claim management is one of the biggest challenges for insurers, higher investment returns will benefit them in the long run, offsetting higher claim costs.
To ensure that this growth potential translates into real insurance penetration, all the stakeholders need to realign themselves to the new realities. In sync with the evolving consumer demand, the health insurance companies therefore need to play the role of a health partner in the lives of their customers. Helping them to stay healthy will make them more relevant.
Mayank Bathwal, CEO, Aditya Birla Health Insurance Company Ltd
