Indians now know the importance of health insurance but continue to be underinsured: Niva Bupa Health CEO

Health insurance premium rates have risen 10-15 percent annually due to the rise in the cost of healthcare post COVID-19.

Policyholders are increasingly realising the importance of having adequate cover in place and the average cover size has increased from Rs 5 lakh to Rs 10 lakh now, says Krishnan Ramachandran, MD and CEO, Niva Bupa Health Insurance, in an interview with Moneycontrol.

The health insurance sector has witnessed a tumultuous three years due to COVID-19-induced strain on the healthcare and healthcare financing space. The industry has paid out COVID-19 claims worth Rs 25,000 crore to date, he says.

While it has not ceased to be a factor in medical underwriting (the process of evaluating the prospective policyholder’s health to determine premiums), the past infection does not have a bearing on premiums anymore, he says. Indians have realised the importance of having adequate health insurance covers in place, but continue to remain underinsured.

Also read: How much health insurance cover do you need?

The central government’s proposal to amend the Insurance Act to provide a composite licence to insurers will allow standalone health insurers to offer well-rounded protection products, he says. Edited excerpts:

The recently announced Budget 2023 proposals do not contain any tax benefits for encouraging health insurance purchase, contrary to the insurance industry’s expectations…

The penetration of health insurance in our country is still low and we have seen that in a price-sensitive market like ours, tax benefit acts as a nudge for people to purchase health insurance cover.

Many customers today consider buying health insurance as apart from offering financial protection in case of a medical emergency, it also offers additional tax benefit under section 80D. Hence, it becomes easier for customers to think about buying insurance from a savings standpoint.

As an industry, we would have liked to see an increase in the limit to claim tax deductions under section 80D as it would have encouraged more people to opt for health insurance.

Also read: Budget 2023: Insurers seek separate tax deduction basket for life policies, higher limit for health insurance premium

How will a composite licence (where insurance companies can sell life, health and general insurance products under a single licence), proposed by the government, help health insurance companies?

The General Insurance Council has indicated that we are in favour of a composite licence because it will give us a level playing field should life insurers be allowed to provide health insurance covers.

We feel that a composite licence will allow us to offer more holistic protection solutions and perhaps also offer health savings-related products.

This is a fairly well-established concept in other parts of the world. Health savings accounts are vehicles with tax advantages. The money in the health savings account can be used to fund outpatient spends and pay for premiums.

The health insurer-hospital equation was frosty, especially in the initial phase of COVID-19. How have things changed since then?

During COVID, the fact is that both health insurers and healthcare companies did work together in the interest of patients. The health insurance industry has settled more than Rs 25,000 crore worth of COVID claims.

A lot of times, claims that don't get paid get reported, which could be for a variety of reasons but the fact of the matter is the industry did a brilliant job. Over 90 percent of claims do get settled. The rest don't, may be for some valid reasons or there are some poor experiences. But the industry on balance does a very good job.

I operate in a company which is a joint venture, and in most other countries where Bupa, our joint venture partner operates, the governments picked up the cost of COVID hospitalisation. In India, health insurance companies paid for COVID-19 treatment.

But there were disputes between hospitals and insurers. Do you think having a healthcare regulator in place would have helped during COVID times?

In general, having a healthcare regulator is helpful. One is pricing transparency. As a consumer, it is important that when you purchase something, you know what the price and quality are going to be. Today, there is not much transparency around either cost or quality in the healthcare system.

So I think the healthcare regulators could bring about much higher levels of transparency in healthcare. It can also help bring about higher levels of standardisation around the practice of medicine.

Lastly, a regulator can bring about the use of much higher levels of technology use. This will serve the healthcare industry, the health insurance sector and the consumer very well.

Are people preferring to buy higher covers post COVID-19?

In our company's case, the most sold sum insured has become the Rs 10 lakh sum insured. Pre-COVID, or 36 months ago, it would have been Rs 5 lakh. I would argue that in any of the metros, the minimum sum insured for a family is Rs 20 lakh.

Does COVID continue to be a factor in the questions that you ask in the proposal forms today? Will past infection have any bearing on premiums?

COVID is one of the factors. So, it's not that COVID is specifically targeted but it is part of the broader questionnaire. If somebody is found to be diabetic or has hypertension, her premium automatically goes up. We don't want a young healthy person to be paying more premium or paying the same premium as somebody who has diabetes, where we know that there's a greater higher likelihood of claims. But infections which are sorted out in the past have no bearing on premiums.

What kind of premium rise has the industry seen in the last couple of years? And are we likely to see any further rounds of rate hikes?

We have seen healthcare inflation go up very sharply in the last 30 months. This is something the entire insurance industry is concerned about – whether it’s a one-off development or structural is something that remains to be seen. The industry has seen annualised premium revisions of around 10-15 percent over the last 24 months. In our case, low single-digit premium increases over a 12-18 month period is our preferred strategy around premium revisions. For companies in general, it depends on a number of factors, including claim experience. There is no one rule behind how much premiums rise every year.

What are the focus areas of Niva Bupa Health Insurance Co over the next three years?

We want to increase health insurance penetration in the mass affluent category. Secondly, we have a solid offering for senior citizens. We want to grow this pie. We've also launched a product targeted at people who have chronic conditions. So it's not just a health insurance product but a product that helps people manage their diabetes or hypertension. We want to add more chronic conditions and make this suite of products more meaningful.

Which product categories do you expect to do well going forward? Will we see more OPD products?

OPD covers present a big opportunity. But we need to solve this whole taxation aspect (18 percent GST on premiums) before we can do anything meaningful. Savings may be a good vehicle, but we'll have to wait and see when that plays out. Seniors is a big underserved segment in our country today.

As a proportion of the population, lack of insurance is a bigger challenge than in the age group between, say, 35 and 50 years. Millennials aren’t buying enough insurance. The average policyholder age for the industry would be maybe 34-36 years. So not enough people in the 25-35 age group are getting into the fold of insurance and this is a big opportunity for the industry.

Next financial year, what kind of premium growth do you foresee for Niva Bupa, as well as for the industry?

Next three years, I foresee Niva Bupa growing at a compound annual growth rate (CAGR) of 30-35 percent. For the industry, for health, again, I foresee a premium growth of 20-25 percent over the next three years.