The Insurance Amendment Act

Published Date: 02 Nov 2017

SRIYA RAY Prof. B.R.Singh

AMITY-Logo1.jpg

AMITY UNIVERSITY

UTTAR PRADESHAcknowledgement

It gives me immense pleasure to convey my heartiest thanks Mr. B.R.Singh (Assistant Professor, ASIBAS), who extended his full &invaluable support in providing me with this excellent opportunity to learn through this project.

I would also like to thanks Mr. Rajesh Verma (Assistant Professor, ASIBAS) for helping me out in research methodology work.

My thanks and appreciations also go to my parents in developing the project and people who have willingly helped me out with their abilities.

DECLARATION

I hereby declare that the project report entitled "MARKET PENETRATION OF HEALTH INSURANCE IN NOIDA" submitted to the AMITY SCHOOL OF INSURANCE, BANKING & ACTUARIAL SCIENCE (ASIBAS), is a record of an original work done by me under the guidance of Faculty mentor, Mr. B.R.SINGH, AMITY UNIVERSITY, UTTAR PRADESH, and this project work has not performed the basis for the award of any Degree or diploma/ associate ship/ fellowship and similar project if any

Signature Signature

(MR. B.R.SINGH) SRIYA RAY

A2828411037

CONTENTS

Chapters Page No.

Introduction 05

Literature Review 16

Objective 20

Scope of the study 20

Limitation of study 20

Research Methodology 21

Data Analysis 23

Findings 37

Suggestions 39

Conclusion 41

Bibliography 43

Appendix 44

INTRODUCTION

Insurance has an ingrained history in India. It is mentioned in the writings of Manusmrithi , Dharmasastra and Arthasastra. These writings state about the pooling of resources that could be re-distributed in times of calamities such as fire, floods, epidemics and famine. This basically indicates the birth of modern day insurance. Insurance in India has evolved greatly over time.

The beginning of life insurance business in India was seen in the year 1818, with the establishment of the Oriental Life Insurance Company in Calcutta. This Insurance Company failed in 1834. After this in 1829, the Madras Equitable had begun transacting life insurance business in the Madras Presidency. The year 1870 saw the establishment 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 and the Indian offices were up for hard competition from the foreign companies.

 

The Government of India, in the year 1914, 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 the year 1938, the vision was for 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 (1950) abolished Principal Agencies. Although, there were a large number of insurance companies and the level of competition was elevated. There were few allegations of unfair trade practices. As a result, The Government of India, decided to nationalize the insurance business.

 

On 19th January, 1956, an Ordinance was issued for nationalizing the Life Insurance sector and Life Insurance Corporation came into existence in the same year. The LIC had monopoly till the late 90s when the Insurance sector was reopened to the private sector.

 

General Insurance in India has its roots in the establishment of Triton Insurance Company Ltd, in the year 1850 in Calcutta by the British. The Indian Mercantile Insurance Ltd, was set up in the year 1907. This was the first company to transact all classes of general insurance business.

The year 1957 saw the formation of the General Insurance Council that framed a code of conduct for ensuring fair conduct and sound business practices.

 

The Insurance Act was amended in 1986, to regulate investments and set minimum solvency margins and the Tariff Advisory Committee was also set up in the same year.

 

In the year 1972, the General Insurance Business (Nationalisation) Act was passed and the general insurance business was nationalized with effect from 1st January, 1973. 

107 insurers were amalgamated and grouped into four companies, namely;

The General Insurance Corporation of India was incorporated as a company in 1971 and it commenced business on January 1st 1973.

 

This millennium has seen insurance come a full circle in a journey extending to nearly 200 years. The process of re-starting the insurance sector had begun in the early 90s and the last decade 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 match 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.

 

Subsequently, 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.

 

In the year 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.

 

Currently, there are 24 general insurance companies including the ECGC and Agriculture Insurance Corporation of India and 23 life insurance companies working in the country.

 

The insurance sector is a extremely large and is growing at a speedy rate of 15-20%. The insurance services together with banking services, add about 7% to the country’s GDP.

A well-developed and evolved insurance sector is a bonus for rapid development of the economy as it provides long- term funds for infrastructure development at the same time strengthening the risk taking ability of the country.

 

 

HEALTH INSURANCE

Insurance has an ingrained history in India. The insurance sector is an extremely large and is growing at a speedy rate of 15-20%. The insurance services together with banking services, add about 7% to the country’s GDP.

A well-developed and evolved insurance sector is a bonus for speedy development of the economy as it provides long- term funds for infrastructure development at the same time strengthening the risk taking ability of the country.

The greatest resource India has is its human resource and along with it comes the health issues. Thus India certainly has a huge market for health care and health insurance is a vital part of it.

The concept of health insurance started catching up in India during the mid 1980’s. In the beginning, only the basic version of hospitalization cover was offered. With the opening up of this industry and the resultant competition, more innovative products have been introduced in the market. But still the health insurance sector has not made much progress in India. The modern general insurance in India took root in late nineteenth century; Health Insurance is a comparatively recent development, with 1986 as the main year, in its inception. Even though there was a Medical Expenses & Hospitalisation (MEH) policy before 1986, hardly any policies were sold, because of several reasons like product complexity, lack of awareness, and a lack of knowledge about the product's operation among the insurers. However with the introduction of the Mediclaim policy in 1986, the situation started to change, although very slowly.

On the whole, only a small percentage of the population is covered by some form of health insurance. Though in the post-liberalization era, health insurance in the Indian market has made considerable progress. However, considering the vast potential that is available in the country, it still has a long way to go. Health insurance constitutes only an insignificant 10% of the total industry revenue and has not kept pace with the expansion of the healthcare industry on the whole. Even though it is on the rise, health insurance in India is still in nascent stage and will probably take some more time to settle down.

In this ever-changing world, with several challenges that threaten the health and well-being of the population, it is necessary for the government and community collectively rise to the occasion and face these challenges and find ways to improve the overall health of the people.

As said by Mr. Benjamin Disraeli, Former British Prime Minister -

"The health of people is the foundation upon which all their happiness and all their powers as a state depend."

We are fortunate to be living in a country which produces the largest number of doctors, nurses and medical technicians in the world. We also have the largest number of USFDA approved drug manufacturing units outside USA. We have every ingredient required for a phenomenal healthcare delivery model. However, the only missing link is the lack of ready cash in the hands of the common people. 80% of the national expenditure on healthcare is paid out of pocket whereas 47% of the rural and 37% of the urban population borrow money or sell assets to pay their medical bills. Here in India, government does not spend much on healthcare facilities. If not the government, then who is going to pay the bills? - It is the people! When the working class and poor people do not have the funds to buy a car, they can always use buses provided by the government and share their expenses. But unfortunately we do not have a similar concept in healthcare and the health insurance which is suppose to bridge the gap, covers less than 4% of the country.

However, Indian health insurance market represents one of the fastest growing and second largest non-life insurance segments in the country. The market owes its stupendous, slow but steady growth rate to the increasing health consciousness and concerns over scaling healthcare costs, among both the urban-ities and rural-ites. Thus, this segment overcame the adverse economic environment to sustain its double-digit growth rate during 2010-11.

Furthermore, with the government of India playing a major role in promoting the health insurance penetration in India, the health insurance premium is expected to grow at a rate of 28% during (2011-12) to (2013-14).

Even though the government is trying to increase the penetration level, the overall population covered by health insurance is rather low. According to the Insurance Institute of India website, the penetration is awfully low - about 4%. If the social and employer covers are taken into consideration as well, the total population covered would come to a mere 10%. However, if acted upon prudently, under-penetration by itself is a huge opportunity for the health insurance industry to tap the potential uninsured population that should be reasonably exploited to the fullest.

Nevertheless the health insurance sector continues to record fine growth and as per the statistics released by the Insurance Regulatory and Development Authority (IRDA), the industry recorded 17.5 per cent growth in gross premiums written during the period between April to December FY2011-12.

FEW INITIATIVES TAKEN BY GOVERNMENT OF INDIA TO PROMOTE HEALTH INSURANCE:

Rashtriya Shashtra Bima Yojana-

RSBY has been introduced by Ministry of Labour and Employment, Government of India to provide health insurance cover for Below Poverty Line (BPL) families. RSBY was mainly launched to provide protection to BPL households from financial liabilities arising out of health shocks that involve hospitalization. This was started by Mr. Anil Swarup (IAS) in the year 2008.

A total sum of Rs. 30,000 insures a Below Poverty Line family. All diseases, including the pre-existing, are a part of this cover. A smartcard facilitates cashless transactions and service delivery through an elaborate automated RSBY process. Here, 75% of the cost and the about Rs. 60 smartcard cost is borne by the central government while 25% of the cost and administrative costs are borne by the participating state.

Rajiv Gandhi Aarogyasri Community Health Insurance Scheme -

Rajiv Gandhi Aarogyasri Community Health Insurance Scheme commenced in early 2007. Andhra Pradesh set up a State Assistance Fund targeting the poorest segments of the population and aiming at meeting their hospitalization expenses & surgical expenses.

The Government of Andhra Pradesh was the first to team up with the Ministry of Health, Government of India, in the framework of the National Rural Health Mission (NRHM) insurance development plans. The scheme is open for the entire family without any age bar.

Kalaignar Insurance Scheme -

The Government of Tamilnadu has launched the Chief Minister Kalaignar Insurance scheme for life-saving treatments in the year 2009. The scheme is targeted to cover the families of the 26 welfare boards (unorganized sector) as well as families earning less than Rs. 72,000/- per annum of Tamil nadu.

Jan Arogya Bima Yojana –

This policy is planned to provide cheap & economical medical insurance to poorer sections of society. The policy is accessible to individuals and family members. The age limit of this policy is 5 to 70 years. Children between the age of 3 months and 5 years can be covered provided one or both parents are covered concurrently.

Economically Weaker Sections -  

According to economically weaker section policy (EWS), all the private hospitals which have been given government land at concessional rates, are suppose to reserve 25% of their OPD capacity and 10% of beds for free treatment of poor patients. This will enable the poor people to get good treatment free of cost.

Community Based Health Insurance Schemes-

There are two types of Community based health insurance schemes that are observed in India , one is where an NGO acts as an intermediary between a formal insurance provider and the insured community (for example, SEWA in Ahmedabad, ACCORD in Nilgiris) and another where the NGO itself provides insurance to the target community. In the latter case, where an NGO itself insures the target population, the NGO may itself be the health service provider (for example, Sewagram Hospital) or may have an agreement with the health service provider (for example Tribhuvandas Foundation).

MARKET PENETRATION –

Market penetration is basically defined as an activity of increasing the market share of an existing product, through strategies like advertising, lower prices, or volume discounts.

Market penetration is one of the four growth strategies of the Product-Market Growth Matrix as defined by Ansoff. This occurs when a company penetrates a market in which current or similar products already exist.

For instance, if there are 300 people in a city and 65 of those people have mobile phones then the market penetration of mobile phones would be approximately 22%. Thus, this would mean in theory that there are still 235 more potential customers for mobile phones, which may be a good sign of growth for mobile phone makers.

The Ansoff Growth matrix is marketing planning tools that assist a business determine its product and market growth strategy.

Existing Products New Products

Existing MARKET PRODUCT

Market PENETRATION DEVELOPMENT

New MARKET

Market DEVELOPMENT DIVERSIFICATION

Thus, Market penetration is a growth strategy where the business focuses on selling existing products into existing markets. It seeks to achieve few objectives:

Maintain or increase the market share of current products – this can be achieved by a combination of competitive pricing strategies, advertising, sales promotion and perhaps more resources dedicated to personal selling.

Restructure a mature market by driving out competitors; this would require a much more aggressive promotional campaign, supported by a pricing strategy designed to make the market unattractive for competitors

Increase usage by existing customers – for example by introducing loyalty schemes

In this strategy, the business is focusing on markets and products it knows well. It is likely to have good information on competitors and on customer needs. It is unlikely, therefore, that this strategy will require much investment in new market research.

Thus, the market penetration of health insurance products is low but offers a huge market opportunity. The need for health insurance in India has exploded due to different factors like increase in disposable incomes and consequent increase in household expenditure on health care, increased Government Spending on Healthcare leading to improvement in early diagnosis and access to health care, increase of Private Healthcare facilities in Urban areas, several changes in disease patterns due to change in life styles, increased medical costs resulting in increased demand for Insurance and lastly, gradually but there is an increase in Insurance awareness. Since there are so many reasons that are offering us various opportunities to exploit the uninsured population, we must act prudently and work upon it to increase the penetration level and cover everyone.

REVIEW OF LITERATURE

[1] Dr. S. Kutty, in his concept paper, covers some of the key issues in health insurance, placing them in perspective. A critical challenge facing societies today is to get resources for financing their health care needs. The problems are even more frightening for developing countries. Of about 3.5 trillion US Dollars [2006] of global health spend, the middle and low income countries accounted for just about 280 billion or 12% of the total. These countries had about 84% of the global population and 90% of the global disease burden [World Bank].

(Source: https://www.insuranceinstituteofindia.com/downloads/Forms/III/Journal-2009-10- 11/Journal%20Book.pdf)

[2] Dr. Ruparel has presented a concise profile of Indian health insurance today, its evolution and growth drivers and its challenges like achieving universal coverage, cost control and regulation of the industry, with specific points on the way ahead. Health Insurance is one of the most focused areas of India's insurance industry. Dr. Ruparel states that this sector has witnessed phenomenal growth during the last five years. It is not only the most rapidly growing segment in non life insurance industry over the last decade but it is also emerging as an increasingly significant line of business for life insurance industry. All the renowned life insurance companies now have products in the health insurance space.

(Source: http://www.docstoc.com/docs/21598489/Health-care-and-Health-Insurance-in-India)

[3] Mr. M V Pauly shared his views about two alternative approaches to expand insurance coverage through insurance based mechanisms. The first is where health insurance is introduced for a small part of the population which can afford to pay and premiums can be deducted from payroll at source -like civil servants and formal sector workers. The poor and informal sector workers are covered through access to subsidized hospitals and ambulatory clinics. The second approach is where health insurance is introduced for a broader segment of the population by applying a demand driven approach. This involves paying for or subsidizing the premiums of poor and low income informal sector workers. Here the focus is on placing funds directly in the hands of ultimate purchasers of health care rather than in the hands of service providers like the public hospitals.

(Source: https://www.insuranceinstituteofindia.com/downloads/Forms/III/Journal-2009-10-11/Final%20Print%20Full%20Chapter.pdf)

[4] In the year 2000, Gumber & Kulkarni, concluded that there is a strong need for health insurance especially for low income people because of heavy burden of out of pocket expenditure on them while seeking health care and SEWA health insurance scheme have strong preference by those who cannot afford the services of various other schemes.

(Source: http://icrier.org/pdf/WP-90.pdf )

[5] In 2009, Mr. Santosha conducted a study which stated that though India has made rapid strikes in the health sector since independence, the cost of healthcare is burdensome for most families in rural India. Around 70 per cent of India’s population lives in villages. Of these, less than 2 per cent are insured. Though the health insurance market is huge, it has so far remained untapped. Recently, IRDA has constituted a committee to chalk out a plan for spreading health insurance in rural areas. Today, the health insurance providers face lot of hurdles and challenges in reaching the rural population due to various factors such as lack of healthcare facility, belief in non-medical means, problem of accessibility to institutional healthcare, improper agent service and the problem of affordability.

(Source : http://www.scribd.com/doc/56732376/JNNCE-MBA-Mr-Santhosha )

[6] In the year 2011, Mr. Robin A. Cohen studied about the health insurance coverage and affirmed that the Centers for Disease Control and Prevention’s (CDC) National Center for Health Statistics (NCHS) is releasing selected estimates of health insurance coverage for the civilian non institutionalized U.S. population based on data from the 2011 National Health Interview Survey (NHIS), along with comparable estimates from the 1997–2010 NHIS. Data analyses for the 2011 NHIS were based on 101,577 persons in the Family Core.

Three measures of lack of health insurance coverage are provided: (a) uninsured at the time of interview, (b) uninsured at least part of the year prior to interview (which also includes persons uninsured for more than a year), and (c) uninsured for more than a year at the time of interview. Estimates of public and private coverage are also presented.

(Source: http://www.cdc.gov/nchs/data/nhis/earlyrelease/insur201206.pdf )

[7] Mr. Narendra Rapeti stated that the term ‘Health Insurance’ refers to a category of insurance that provides two major types of benefits: Payment of medical costs (hospital bills, doctors’ fees, etc.) and Disability income (monthly income to disabled workers during their disability). This paper, ‘Health Insurance Market Penetration in India’, exhibits the performance of health insurance in the industry for the Financial Years 2003-04 to 2007-08. The paper throws light on the projected performance, given the actual data provided by the Tariff Advisory Committee (TAC) and also provides a glimpse of health insurance data in the recent past. This paper raises questions at important places in the topic and there by brings out valuable insights to the insurance sector.

(Source: http://www.researchgate.net/publication/228275652_Health_Insurance_Market_Penetration_in_India_-_An_Analysis)

[8] In the year 2004, Mr. Stefan Dercon stated that households living in developing countries face significant shocks that can lead to a reduction in consumption and deterioration of capital and physical assets. Income shocks can be due to a multitude of reasons: adverse weather, price fluctuations, business failure and household illness. Health shocks can produce particularly severe effects on household wellbeing. In the absence of insurance these shocks may lead to reduced household consumption and costly risk-mitigation strategies This paper explores issues related to our health insurance intervention and its consequences.

(Source: http://www.ilo.org/public/english/employment/mifacility/download/repaper24.pdf )

OBJECTIVES OF THE STUDY

The proposed research study is to be centered on fulfilling the following objectives:

To study the market penetration of health insurance

To find out the reasons of low market penetration of health insurance

To develop strategies to increase market penetration on health insurance

SCOPE OF THE STUDY

This project is undertaken in Noida from 15.12.2012 to 15.01.2013.

My study will be concentrated on penetration of health insurance in Noida, other aspects are beyond the scope of study.

LIMITATIONS OF THE STUDY

There are limitations that need to be acknowledged and addressed regarding the present study:

The time period for this study was only 2 months, thus there was limited time to collect Primary Data for the purpose of research.

There was less number of respondents.

The customers were reluctant in giving the information that they were asked to provide.

RESEARCH METHODOLOGY

Hypothesis :

A hypothesis is a specific, testable prediction about what you expect to happen in your study. In research, a hypothesis is a suggested explanation of a phenomenon.

Ho : Market penetration of health insurance is independent of age

H1 : Market penetration of health insurance is dependent of age

Ho : Market penetration of health insurance is independent of cost

H1 : Market penetration of health insurance is dependent of cost

Ho : Market penetration of health insurance is independent of number of dependents

H1 : Market penetration of health insurance is dependent of number of dependents

Research Design:

This project is based on descriptive research design.

Sample design:

Target population –Residents in Noida sector 44 & 37

Sample Frame – Directory of sector 44 & 37

Sample Unit – Individuals

Sample Size - It is proposed to have a sample size of 200 respondents

Sampling Method - Convenient sampling technique will be used

Method of data collection:

The mode of data collection will be based on Survey Method.

Tool for data collection :

Questionnaire

Tools for Data analysis :

Ms excel

DATA ANALYSIS AND FINDINGS

In this study, it has been observed that out of 200 respondents, 15% of respondents are below the age of 18, 23% are between the age of 18 to 30, 33% are between the age of 30 to 50 years and about 29% of respondents are above 50 years of age.

Testing of Hypothesis using Chi-Square Test

The number of respondents surveyed for this project is 200. So, the expected frequency is 50, i.e. 200/4.

The general formula for Chi-square test is:image001.gif

Where O= the frequencies observed

E= the frequencies expected

Degrees of Freedom= n-1

Age

O

E

O-E

(O-E)²

(O-E)²/E

Below 18

31

50

-19

361

7.22

18 to 30

46

50

-4

16

0.32

30 to 50

65

50

15

225

4.5

Above 50

58

50

8

64

1.28

Total

200

200

∑ = 13.32

χ²χ²

= 13.32

The table value of Chi-square at 95% confidence level, 5% significance level and 3 degrees of freedom. The calculated value of χ² is 13.32 which is much higher than the table value i.e. 7.815 and hence null hypothesis (H0) cannot be accepted.

Thus, we will accept the alternative hypothesis (H1). Thus, we can conclude that the market penetration of health insurance is dependent of age.

It has been observed that the majority of the respondents are male; 63% are males whereas 37% are females.

From the above diagram, it has been observed that out of 200 respondents 58% are married whereas 40% are not married and 2% of respondents are either divorced or widowed.

The above diagram reveals that out of 200 respondents, majority of them are self employed. 14% of respondents are salaried, 60% are self employed, 15% are professional, 6% among them are home makers and 5% are students.

It has been observed that 15% of respondents earn an income of less than Rs.2 lakhs annually while 21% of respondent’s income is between Rs. 2 lakhs to Rs. 5 lakhs. Furthermore, around 30% of respondents earn between Rs. 5 lakhs to Rs. 8 lakhs and the rest earn more than Rs.8 lakhs per annum.

How many members are there in your family?

❑ Less than 3 ❑ 3 to 5 ❑ Greater than 5

The analysis reveal that out of 200 respondents, about 24% of respondents have less than 3 members in their family , 33% have around 3 to 5 members in their family and 43% have more than 5 members in their family.

How many dependents?

❑ Less than 2 ❑ 2 to 4 ❑ Greater than 4

Out of 200 respondents, 29% said that they have less than 2 dependents to take care of whereas about 57% of respondents have 2 to 4 dependents and 14% have more than 4 dependents that rely on them.

Testing of Hypothesis using Chi-Square Test

The number of respondents surveyed for this project is 200. So, the expected frequency is 67, i.e. 200/3.

The general formula for Chi-square test is: image001.gif

Where O= the frequencies observed

E= the frequencies expected

Degrees of Freedom= n-1

Number of Dependents

O

E

O-E

(O-E)²

(O-E)²/E

Less than 2

59

67

-8

64

0.96

2 to 4

114

67

47

2209

32.97

More than 4

27

67

-40

1600

23.88

Total

200

200

∑ = 57.81

χ²= 57.81

The table value of Chi-square at 95% confidence level, 5% significance level and 2 degrees of freedom. The calculated value of χ² is 57.81 which is much higher than the table value i.e. 5.991 and hence null hypothesis (H0) cannot be accepted.

Thus, we will accept the alternative hypothesis (H1). Thus, we can conclude that the market penetration of health insurance is dependent of number of dependents.

What is your annual expenditure on medical?

❑ Less than Rs 10000 ❑ Rs. 10000 to 30000 ❑ Greater than Rs. 30000

It has been observed that 17% of respondents spend less than Rs. 10000 on their medical annually, 79% spend between Rs. 10000 to Rs. 30000 on their medical and annual expenditure on medical of 4% is more than Rs. 30000.

Average expense on hospitalization in the last 3 yrs in family?

❑ Less than Rs 25000 ❑ Rs. 25000 to 50000 ❑ Greater than Rs. 50000

This analysis illustrates that 20% of respondent’s average expense on hospitalization in the last 3 years has been less than Rs. 25000 whereas 76% of respondent’s average expense has been around Rs. 25000 to Rs. 50000 and 4% said that their average expense has been more than Rs. 50000.

Have you taken health insurance?

❑ Yes ❑ No

It has been observed that 56% of respondents have taken health insurance whereas 44% have not taken health insurance.

If No, what are the factors that are preventing you from taking health insurance? Please rank them in the order of your preference:

Several Medical tests

High cost

Complicated coverage

Less no. of network hospitals

Several exclusions

Not eligible

Out of the respondents who haven’t taken health insurance policy, it has been observed that 27% of respondents ranked several medical tests as the main reason for not taking a health insurance policy, 21% ranked high cost as the core reason whereas 24% ranked complicated coverage as the reason. 11% said the most important factor that is preventing them from taking a health insurance policy is less number of network hospitals, 10% of respondents ranked several exclusions as the foremost reason and 7% are not eligible for a health insurance policy.

Testing of Hypothesis using Chi-Square Test

The number of respondents surveyed for this project is 88. So, the expected frequency is 15, i.e. 88/6.

The general formula for Chi-square test is:image001.gif

Where O= the frequencies observed

E= the frequencies expected

Degrees of Freedom= n-1

Factors

O

E

O-E

(O-E)²

(O-E)²/E

Several medical tests

24

15

9

81

5.4

High cost

18

15

3

9

0.6

Complicated coverage

21

15

6

36

2.4

Less no. of network hospitals

10

15

-5

25

1.6

Several exclusions

9

15

-6

36

2.4

Not eligible

6

15

-9

81

5.4

Total

∑ = 17.8

χ²= 17.8

The table value of Chi-square at 95% confidence level, 5% significance level and 5 degrees of freedom. The calculated value of χ² is 17.7 which is higher than the table value i.e. 11.07 and hence null hypothesis (H0) cannot be accepted.

Thus, we will accept the alternative hypothesis (H1). Thus, we can conclude that the market penetration of health insurance is dependent of cost.

If Yes, Type of Coverage?

❑ Group ❑ Individual

Among the respondents who have taken a health insurance policy, it has been observed that 71% of them have opted for individual health insurance policy while 29% are covered under group plans.

Your policy is?

❑ Reimbursement policy ❑ Cashless policy

It has been observed that, 56% have opted for cashless policy of health insurance whereas 44% have taken reimbursement policy.

You have taken health insurance for ?

❑ For yourself ❑ For Family

From the above diagram, it has been observed that 23% of respondents have taken health insurance cover for themselves while 77% have opted for the family floater policy.

From where did you get the information regarding your current health insurance policy?

❑ Print Media ❑ Electronic Media ❑ Relatives ❑ Friends

33% of respondents said that they got information about their health insurance policy via print media, 23% obtained information from electronic media, 28% from their relatives and 16% from their friends.

Factors that are considered important while taking health insurance. Please rank them in the order of your preference:

Cost

Coverage

Exclusions

Network hospitals

Reputation of the Company

It has been observed that 30% of respondents ranked cost as the most important factor considered while taking a health insurance policy, 28% believed that coverage is the main factor, 18% ranked reputation of the company as the most important factor, 16% said that exclusions in the policy are regarded as the chief factor and 8% considers list of network hospitals covered as the most important factor.

FINDINGS

It was observed that around 43% of respondents have more than 5 members in their family.

Around 57% of respondents have 2 to 4 dependents to take care of.

79% of respondents spend Rs. 10000 to Rs. 30000 on their medical annually.

About 76% of respondent’s average expense on hospitalization in the last 3 years has been Rs. 25000 to Rs. 50000.

According to the study, it has been observed that 56% of respondents have taken health insurance policy.

It was observed that 27% of respondents ranked several medical tests as the main reason for not taking a health insurance policy. The rest ranked the other factors as the foremost reason. They are as follows –

Several Medical tests 27%

High cost 21%

Complicated coverage 24%

Less no. of network hospitals 11%

Several exclusions 10%

Not eligible 7%

It has been observed that 71% of respondents have opted for individual health insurance policy.

As per the respondents, around 56% have opted for cashless policy of health insurance as compared to reimbursement policy.

It has been observed that 77% of respondents have taken family floater health insurance cover instead of taking cover only for themselves.

According to the respondents, 33% said that they obtained information about their health insurance policy via print media.

It has been observed that 30% of respondents ranked cost as the most important factor considered while taking a health insurance policy. The rest ranked the other factors important -

Cost 30%

Coverage 28%

Exclusions 16%

Network hospitals 8%

Reputation of the Company 18%

SUGGESTIONS

On the basis of the research conducted by me, below are certain suggestions that can be considered for increasing the market penetration of health insurance.

A suggestion is basically an idea or plan put forward for consideration. The insurance companies must focus on increasing their reach (distribution) and make more customized products. These may help the insurers strengthen their customer base in health insurance sector; improve their services, thereby establishing a cordial relationship with the customers which will lead to an increase in market penetration level.

Proper market segmentation is required with a view to expand catchment area;

Appropriate communication mode for different segments,

Urban population – Emails, SMS, Newspaper inserts, Door to door campaigns, Insurance promotion camps held in buildings & community centers

Semi-urban / Rural population – Newspaper inserts, Insurance promotion camps, communication in Hindi/ English/ local language, simple & easily understandable brochures

Advertisements to draw attention of target customers;

Further, the companies can appoint more agents and brokers and tie up with various NGOs, banks, educational institutions etc. to expand their reach;

Dispel all ambiguity in people’s mind about policy and about the coverage and exclusions by making all terms & conditions clear;

Internet is one of the most effective way to reach and connect with your target audience, thus a website or blog targeting people looking for information on health insurance coverage must be built. The site must be filled with informative content to attract visitors and educate them about the types of health insurance available. This site must also contain a toll-free contact number so that the visitors can contact for any additional information. Since these visitors are already so keen in finding a solution for their health insurance needs, they may be eager about purchasing a policy too;

To increase customer’s knowledge, all insurance companies should provide specialized services like proper guidance to the customers regarding the processing, incentives offered, claim settlement etc., especially for the customers who are illiterate or who belong to the backward urban areas. This will not only bring more customers but also attract more business from existing customers;

There should be relaxation on documentation procedures. The stringent formalities and paperwork should be reduced while providing the policy to the customers for their convenience;

All insurance companies should be concerned about the fast settlement of claims and fast resolution of customer problems as and when they arise and must take necessary steps immediately as it helps in building trust and confidence among customers;

Due to stiff competition among all the insurance companies, the companies need to continuously monitor the customer satisfaction level of the products and continuously innovate and improve the same, to provide better benefits to the customers, so as to ensure that existing customers can be retained and this will also lead to word-of-mouth publicity. This can be done by taking continuous feedback from the customers regarding the product.

CONCLUSION

The growth in the healthcare insurance industry implies that Indians will now have access to treatments and drugs they never thought existed. No person will have to live with a bad hip or a weak knee. An appendix removal has become much easier and heart operations have a faster recovery period. There are lesser crooked smiles in school, there are more kids running around after a fall. Healthcare, in India, has started giving people more faith in cure today.

But the fact is that none of this growth matters if people cannot afford these healthcare facilities. The cost for the healthcare has gone through the roof in the past decade. Today an angioplasty costs between Rs.2-2.5 lakhs and a knee replacement will cost around Rs.4 lakhs. To add on, according to a recent report of World Bank, 99% of Indians will have to face a financial crunch in case of critical illness. Thus it is essential that every person has a good health insurance to take care of all the health and medical needs.

Ever since the insurance industry in India has been started up for private participation, the one division that has gained the limelight is Health insurance. The rationale behind this can rightly be called a mixed bag of both positives and negatives – and why not? If we look at it optimistically, it has caught the attention of many forces that have not even bothered to give it the scantiest regard previously. No wonder the business figures of insurers have consistently grown over the years. If the story were to end here on this very bright side of the picture, several stakeholders would be very contented. But then, there is another side that persuades one to look deeper.

Time and again, it has been voiced that the ignorance of the common man about the uniqueness of an insurance contract is solely responsible for quite a lot of the ills associated with this segment of insurance. Even some of the literate and well-placed persons of the society fail to recognize the fact that the premiums they pay are to take care of the fall-out of a contingent event. It is nearly impossible to convince one that when one buys insurance, one really pays for an event that one doesn’t desire to happen thus it is necessary in their life.

All these facts do indicate that while there has been substantial progress, there also exist some serious challenges in front of the health Insurance Industry.

Despite the strong growth in health insurance premiums, the number of persons covered under health insurance is still well below 5% of the population. The population remains largely under-penetrated because of several shortcomings that need to be dealt with. Some serious issues include low awareness, no product development/innovations in health insurance products, non-coverage of outpatient care and existing diseases, inefficient cost management, product reach in rural areas, and weak retail distribution model.

It is well accepted that ‘health is wealth’. Health insurance is perhaps the only financial instrument which ensures health of an individual but not at the cost of his wealth by taking care of the affordability of the treatment. In spite of the various challenges faced by this budding industry, there is a lot of scope for development & expansion for this service sector.

The study was conducted in Noida from 15.12.2012 to 15.01.2013 but there is still scope of doing a similar study in the rest of this country to get more insights of the problems faced by insurance companies in market penetration of health insurance business.