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World Population Day: Indian population vs. health insurance penetration

Team AckoJul 22, 2021

India has a population of 136.64 crore people. Currently, it is the second-most populous country in the world but is expected to surpass China’s figures soon. Health is an important factor of any successful economy. India has come a long way in terms of medical technologies, but with such advancements, medical costs are also rising.

Consequences of Not Buying Health Insurance Plan

It is important to buy health insurance to cope with these rising costs. However, the sad part is health insurance penetration in the country is still minuscule. Millions of people end up spending significant earnings on healthcare services which makes their financial situation more difficult.

This World Population Day, let’s explore how deep is health insurance penetration as compared to the humongous Indian population. Before that, an insight into the demographics.

Deep insight into the Indian population

The Indian population reached the 1 billion mark in 1998 and is now growing at a rate of more than 1% each year.

State-wise population of India

Here are some interesting facts about Indians.

  • Most of the population comprise people less than 35 years of age. 50% of the people are below the age of 25 years. 

  • The average life expectancy of an Indian is 70.03 years.

Source - Demographics of India, List of states and union territories, Wikipedia

Health insurance penetration in India

Health is a major factor that affects the economy of densely populated countries like India. It is safe to say that the GDP of a country depends upon how healthy the population is. India has a large chunk of working professionals that keep the wheel of the economy turning smoothly. In 2020, India had approximately 501 million workers.

The poor state of the health care system and lack of awareness about health insurance plans in low lying areas force people to spend heavily on healthcare. Health insurance penetration in India is extremely low due to limited reach, and lack of awareness and education. This consequent burden is born by people themselves. Around 75% of Indians pay for medical services from their pocket. They are not covered by any government or private health insurance scheme.

A factor to increase penetration is Foreign Direct Investment (FDI). It can help improve insurance awareness and reach in the country. The recent hike in FDI from 49% to 74% in the insurance sector can propel the health insurance industry in this direction.

Health insurance penetration

Source - State-wise health insurance business, IRDAI

The Indian healthcare sector

India is majorly reliant on the private healthcare system to cater to the medical needs of people. 58% of hospitals in the country are privately owned, and 81% of doctors serve at these hospitals. This leaves a narrow space for people who cannot afford to avail of medical services in a private hospital.

As per the National Family Health Survey-3, 70% of urban and 63% of rural households depend upon private hospitals where the cost of healthcare services are usually much higher than government-owned medical facilities. Thus, middle and upper-class individuals are more likely to avail of services in a private hospital.

The Indian healthcare sector

The major part of the population had limited access to quality medical services and health care professionals like doctors, specialists, nurses, etc. Around 74% of India’s medical professionals are serving a mere 28% of the population.

Low funding is another factor that results in a lack of medical infrastructure in rural areas. Privatisation is so prominent in the healthcare sector that only one-fifth of healthcare is financed publicly.

Source - Health care in India, Wikipedia

The consequence of not having health insurance

According to a study conducted by National Health Accounts, the total out-of-pocket expenses on health care stood at 58.7% in 2016-17. As per the Public Health Foundation of India report, 55 million people were drawn to poverty in 2017. Here are some challenges faced by people who don't have health insurance coverage.

  • Bearing the expenses related to hospitalization

  • Cost of ancillary services like ambulance charges, diagnostic tests

  • No value-added services like free health-checkup, telemedicine, free fitness monitoring apps, etc.

  • No renewal or other loyalty discounts

These challenges increase out-of-pocket expenses. The costs increase multi-fold when the family contains children and elderly people.

Health insurance is a solution to such challenges. One can claim costs like hospitalization expenses, ancillary services, value-added services, and get discounts on health insurance policies. The financial burden is greatly reduced when a good health insurance company is providing the backup.

Also, read: Pitfalls of Not Buying Health Insurance Plan

Health insurance vs. COVID-19 pandemic

The COVID-19 pandemic has been a wake-up call for both, the authorities and the Indian population to take health and health insurance seriously. This resulted in a lot of fundamental changes in how health insurance functions in the country. The "not-mandatory-not-necessary" attitude is slowly changing and curiosity about the positives of health insurance is increasing.

Health insurance premium collections saw a growth of 40% in 2020, during the pandemic. As per the General Industry Council, health insurance was the most important sector under general insurance in the first wave of COVID-19 from April-September 2020. The number of policies issued under health insurance surpassed the celebrated motor insurance sector during this period. The significant growth can be attributed to complete lockdown where no vehicles were up for sale. And consequently, motor insurance policies were not sold.

Another major contributor to the higher health insurance business is the introduction of low-cost, regulated health plans like Arogya Sanjeevani, Corona Kavach, and Corona Rakshak. These are accessible to low-income families where medical treatment is allowed at any affiliated medical facility. 

Source - Segment-wise report, General Industry Council

Digital or traditional?

Digital health insurance has been tremendously helpful in the time of isolation and low contact. People are slowly accepting the digital transformation and are ready to buy health insurance from channels like websites, and apps instead of traditional methods that still have a strong foothold, like insurance agents. According to PWC's Health Insurance Consumer Pulse Survey, there has been a significant drop in offline channels, whereas a 20–30% growth in sales for digital insurers.

Health Insurance Channels

Even though agents are seen dominating the above chart, digital insurance is picking pace. A solid 2% sales growth was observed in the website/app space since 2019.

Inclination towards online health insurance is also fueled by certain changes in rules by the IRDAI. The inclusion of telemedicine under health insurance coverage, multiple claims to cover the cost of one medical event, etc. has been helpful in building confidence in people to buy health insurance online.

Online health insurance is also easier to understand, offers more convenience while buying/renewing, and the claim process is faster and smoother. These things attract more customers.

Source - Health insurance consumer pulse survey, PwC

Departing thoughts

The Indian population is becoming aware of why health insurance plays a vital role in financial stability and quality healthcare services. This has been the driving factor of the dangerous COVID-19. Medical emergencies, diseases, accidents, are unpredictable but a strong financial safety net in the form of health insurance is vital to sailing smoothly during such unforeseen times.

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