High Growth Health Insurance Market Still Remains Underpenetrated

India’s healthcare industry is one of the fastest growing sectors and in the coming 10 years it is expected to reach $275 billion. Indian healthcare sector is much diversified and is full of opportunities in every segment which includes providers, payers and medical technology. With the increase in the competition, businesses are looking to explore for the latest dynamics and trends which will have positive impact on their business.

- Narayan Kulkarni

Healthcare has become one of India’s largest sectors - both in terms of revenue and employment. Healthcare comprises hospitals, medical devices, clinical trials, outsourcing, telemedicine, medical tourism, health insurance and medical equipment. The Indian healthcare sector is growing at a brisk pace due to its strengthening coverage, services and increasing expenditure by public as well private players.

Indian healthcare delivery system is categorised into two major components - public and private. The Government, i.e. public healthcare system comprises limited secondary and tertiary care institutions in key cities and focuses on providing basic healthcare facilities in the form of primary healthcare centres (PHCs) in rural areas. The private sector provides majority of secondary, tertiary and quaternary care institutions with a major concentration in metros, tier I and tier II cities.

The healthcare sector in India is largely underpenetrated with government expenditure constituting approximately 1.4 per cent of India’s GDP. Private sector expenditure constitutes 70 per cent of the total healthcare expenditure out of which 62 per cent is out of pocket while only 8 per cent is covered through pre-financed instruments, as per World Bank Data (2014). Moreover, less than 30 per cent of India’s population has healthcare cover indicating considerable potential for the health insurance industry.

The health insurance industry, as of today, caters largely to institutional treatment, leading to considerable opportunities in targeting outpatient treatment in areas such as consultation fees, diagnostics and medicine expenses. The outpatient treatment, with medical inflation at ~15 per cent has created a strong need of developing a health savings account product combined with a robust health insurance plan in order to bring in spend efficiencies and protection for the Indian population.