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Dissertation Submitted to the
Padmashree Dr. D.Y.Patil University
Department of Business Management

In partial fulfilment of the requirement for the award of

The Degree of

Submitted by:



Research Guide:



Padmashree DR. D.Y. Patil University

Department of Business Management

CBD Belapur, Navi Mumbai400614

November 2012

I herby declare that the dissertation” HEALTH INSURANCE: “IDENTIFYING


for the Degree of Master in Philosophy (Business Management) at Padmashree Dr.

D.Y. Patil University’s Department Of Business Management is my original work

and the dissertation has not formed the basis for the award of any degree,

associate ship, fellowship or any other similar titles.

Place : Mumbai Signature of the Student



This is to certify that the dissertation entitled “HEALTH INSURANCE:


MUMBAI. is the bonafide research work carried out by Ms. Swati D. Kedare,

student of Master in Philosophy (Business Management), at Padmashree Dr. D.Y.

Patil University’s Department Of Business Management during the year 2011-2012,

in partial fulfilment of the requirements for the award of the Degree of Master in

Philosophy (BUSINESS MANAGEMENT) and that the dissertation has not

formed the basis for the award previously of any degree, diploma, associate

ship, fellowship or any other similar title.

Place: Mumbai Dr.R Gopal

Date: Director
Padmashree Dr.D.Y.Patil
University, Navi Mumbai
Department Of Business Management

Written words have an unfortunate tendency to convert genuine gratitude into stilted
formality. However, I feel this is the best way to express my appreciation for
everyone concerned.

Working on this project on has been an incredible experience for me. For this very
wonderful experience I would like to thank a lot of people without whose co-operation
and support working on this project would not have been so pleasurable and

Firstly, I would like to thanks the University Padmashree Dr. D Y Patil Department of
Business Management which has accepted me for M.Phil program and I feel great
pride and pleasure in putting on record a deep sense of gratitude Dr.R.GOPAL,
Director, Department Of Business Management, During my research If it was not his
encouragement and support, this project would never have been possible. I would
have been deprived of a vast treasure of knowledge.

These acknowledgements are one way where I can say actually thanks to my family
and friends who have supported me in the making of this project. Without their help
and guidance it would be a very difficult task for me to try and plan this project and
actually prepare it.

I would sincerely like to thank customers and employees of various Health Insurance
Companies for giving me some of their valuable time from their busy schedule to
answer my queries regarding the project.

Place: Navi Mumbai Signature of Student


List of Tables viii

List of Figures ix
List of Abbreviations x
Executive Summary 1


2 Review Of Literature 17

3 Objective of The Study, Research Methodology 25


4.1 Meaning of Health Insurance 31

4.2 Background of Health insurance 33

4.3 Features Of Health Insurance 40

4.4 Main Function of Health Insurance 44

4.5 Importance 45

4.6 Types Of Health Insurance 48

4.7 Essential Guidelines Availing Health Insurance Policy 51


5.1 Main Health Insurance Plans In India 54

5.2 Current Status of private Health Insurance 63

5.3 Awareness of Health Insurance 67

5.4 Need to Spared Health Insurance 69


6.1 IRDA 75
6.2 Rules For Health Insurance Claim settlement by 77
6.3 TPA 79
6.4 Role Of TPA 80

6.5 Standard Health Insurance Model 85

6.6 Structural and Operational working Of 87

Health Insurance

6.7 Claim Management 88


7.1 Value Chain 95

7.2 Distribution Channel 97

7.3 Insurance Portability 99

7.4 Insurance Portability Gaps And Improvement Area In 109

Health Insurance


8.1 Indian Health Insurance Market 112

8.2 Growth Drivers 113

8.3 Market Drivers 118

8.4 Market Restraints Company wise Gross Direct 120


8.5 Company wise Gross Direct Premium 122

8.6 Non Life Insurance Claim settlement facts-figure 124

8.7 Budget 2012 125


9.1 Reasons For Poor Penetration Of Health Insurance 127

9.2 Major Issues In Health Insurance 130

9.3 Major Issues in Handling Of Health Insurance 132

9.4 Fraud In Health Insurance 135


10.1 Guidelines to meet the Need of Customers 140

10.2 SWOT Analysis 141

10.3 How to choose best Health Insurance Plan 143






11.5 OTHERS 156

11.6 Comparison of Health Insurance companies 157



Annexure 1 - Reference And Bibliography 191

Annexure 2 - Questionnaire 193
Annexure 3- Articles 197



4.2.1 Socio Economic Indicator 35

8.2.1 Great future of Health Insurance Industry 116

8.5.2 Company Wise Gross Direct Premium 122

Income In India : Non Life Insurers

8.6.3 Non- Life Insurance claims settlement 124

facts –figure


Figure Topic Page

No. no.

4.6.1. Main kinds of Health Insurance 48

5.1.1 Health Insurance plans in India 54

6.4.1 Conditions defined by IRDA for TPA 84

6.5.2 Standard Health Insurance Model 85

6.6.3 Structural and operational working of health 87


7.1.1 Value Chain 95

7.2.2 Distribution channel in India 97

8.1.1 Indian Health Market Analysis 112

8.3.2 Market drivers 118

8.4.3 Market Restraints 120

9.2.1 Major Issues in Health Insurance 130

9.3.2 Major Issues in Handling Health Insurance 132

9.4.4 Fraud in Health Insurance 136

11.6.1 Comparison of Health Insurance companies 157


HI- Health Insurance

PHC - Primary Health Center.

BPL - Below Poverty Line.

OOP – Out Of Pocket.

PSU – Public Sector Undertakings.

ESIS – Employee State Insurance Scheme.

CGHS – Central Government Health Scheme.

TPA – Third Party Administrator.

HMO – Health Maintenance Organization.

PPO – Preferred Provider Organization.

POS – Point Of Service.

HSA – Health Saving Account.

SEWA – Self Employed Women’s Association.

NGO – Non Governmental Organization.

NIC – National Insurance Company.

VHS – Voluntary Health Services.

GIC – General Insurance Corporation.

IRDA – Insurance Regulatory Development Authority.

RTA – Road Traffic Accident.

PPN – Preferred Partner Network.



This Research work is totally focusing on the consumer behavior towards

different types of Health Insurance Policies, and as well as consumer‘s

awareness, Preference and consumption patterns. Also opinion about the

determinants of image of a Health Insurance in Mumbai.

As today many Health Insurance Companies are coming in the city, For

selecting sample sampling technique was used. Sample consists of all those

people who are above 18 year age in Mumbai.

This project has been made on the research on HEALTH INSURANCE:


MUMBAI” . Purpose of this project is to identify the characteristics of different

variables which are mostly responsible for taking health insurance policy by the

people of city of Mumbai, also the main aim of research work is to find out

buying behavior of the people before purchase insurance policy and to find

out what are the factor behind it.

Health Insurance is Insurance that pays for medical expenses. It is sometimes

used more broadly to include Insurance covering disability or long term nursing

or custodial care needs. It may be provided through a governments Sponsored

social Insurance program, or from private Insurance companies. It may be

purchased on a group basis (e.g., by a firm to cover its employees) or

purchased by individual consumers. In each case, the covered groups or

individuals pay premiums or taxes to help protect themselves from high or

unexpected healthcare expenses. Similar benefits paying for medical expenses

may also be provided through social welfare programs funded by the

government. By estimating the overall risk of Healthcare expenses, a

routine finance structure (such as a monthly premium or annual tax) can

be developed, ensuring that money is available to pay for the healthcare

benefits specified in the insurance agreement. The benefit is administered by a

central organization such as a government agency, private business, or not for

profit entity. The most important thing which is learned from this project is how

to conduct a research on a particular problem by using different research

methodology techniques.

The health insurance market covers very smaller part of the total population

(about 10%) in India. Presently, schemes like Voluntary health insurance

schemes or Private for profit schemes; Employer-based schemes; Insurance

offered by NGOs / community based health insurance, and Mandatory health

insurance schemes or government run schemes (ESIS, CGHS) are found in


The Health Insurance market in India is unique and has developed a strong

growth potential in the recent years with the entry of many foreign players in the

market. The health Insurance market in India was worth INR 5,125 crores with

a compounded annual growth rate of 37 percent between 2002 and 2008.

While the penetration of the Health Insurance market is still quite small, it is one

of the fastest growing Industries in India.

This Research analyzes this growing industry in its research report Health

Insurance Industry in India. The report analyzes the whole industry in terms of

growth rate, market segments, and the major players in the industry.

The growth will be supported by stand alone Health Insurance companies and

new players entering healthcare market with improved healthcare infrastructure

across the country motivating a larger section of population for better

healthcare services through various healthcare insurance policies. Currently

State owned health insurance companies constitute about 70% of the market

and the rest is occupied by private companies. However private companies are

growing fast and aims to occupy a larger hare in the Health Insurance market in

near future.

This report has attempted to discuss the vital scenario in healthcare and Health

Insurance market in India. A brief about global insurance industry in 2006,

Indian Insurance industry and Health Insurance industry overview are

discussed. Growth drivers and issues of the industry are also covered. Major

public and private players are covered in terms of their performance, products

and out look. Future outlook of the industry is also discussed. The report will be

useful for insurance companies (both Indian and global), other intermediaries

associated with the industry, industry analysts, companies aspiring to be TPAs

and students in the field of Insurance.

Since the liberalization in 2000, the Insurance industry in India has been

growing considerably driven by multiple favorable economic and demographic

factors. The Indian health insurance market grew at a CAGR of 34.00% during

the review period and is expected to grow at a CAGR of 23.51% over the

forecast period to register the fastest growth among all the Insurance sectors.

Factors such as robust economic growth, changing demographic patterns such

as the rise in ‗double income no kids‘ families, increased FDI limits and the

expansion of distribution channels are expected to contribute to the market

growth in the forecast period. Of the overall healthcare expenditure in India,

only 26% comes from the local, state and central government authorities, while

nearly 71% is paid by the patient‘s family. Insurance accounts for just 3% of

overall healthcare expenditure in India, indicating a substantial opportunity for

the Health Insurance sector. The Health Insurance market is dominated by

public-sector companies, while the private sector has made gradual progress

in the sector.


This report provides a comprehensive analysis of the Health Insurance

market in India:

• It provides historical values for India‘s Health Insurance industry for the

report‘s 2007–2011 review period and forecast figures for the 2012–2016

forecast period

• It offers a detailed analysis of the key sub-segments in India‘s Health

Insurance industry, along with market forecasts until 2016.

• It covers an exhaustive list of parameters, including premium per capita,

incurred loss, loss ratio and paid claims

• It details the competitive landscape in the Indian Health Insurance industry

along with the product innovation and customer targeting strategies followed

• It analyses the various distribution channels for Health Insurance products

in India

• It profiles the top health insurance companies in India along with snapshots of

their major products and services.

Today many of the Insurance Companies not only provides Products but also

provides very good Services. There is mixture of Product and Services. The

first major competitor is ICICI Lombard Gives an attractive Products plus

Services. For example, Health Hazard ,Risk cover and many more services.

Most of the peoples aware about ICICI Lombard company. It has been

successfully able to sustain in this competitive market. The company offer

attractive products as per expectations of the customers .Although the premium

amount is high but customers still opt this companies Insurance product. It has

created as his own brand image. Only because of quality services. In case of

New India Assurance Company the most target audience are middleclass and

lower middle class, as the companies premium amount is less than other

insurance company. In India opting for Health Insurance is secondary factor,

as they are not much aware about Health Insurance, the middle class people

always consider less premium amount which suits there budget & they are able

to pay regular premium amount. Star Health Insurance company is newly enter

in the market but in very less period this company capture most of the market

just because of there excellent services, like maximum number of hospitals

associated with this company, gives very good medical services, risk cover. As

it shows that many of the customers wants something new in the market and

many of the always welcome for the new changes. So it gives very good idea

about Awareness, want, need, preference of the customers. Insurance

company came with new service, Insurance Portability This new service helps

to increase buying pattern of customer.





How many accident you need to realise that you need Health Cover? It takes

just one visit to a hospital to make us realize how vulnerable we are, every

passing second. For the rich as well as poor, male as well as female and young

as well as old, being diagnosed with an illness and having the need to be

hospitalized can be a tough ordeal. Heart problems, diabetes, stroke, renal

failure, cancer – the list of lifestyle diseases just seem to get longer and more

common these days. Thankfully there are more speciality hospitals and

specialist doctors – but all that comes at a cost. The super rich can afford such

costs, but what about an average middle class person. For an illness that

requires hospitalization/ surgery, costs can easily run into five digit bills. A

Health insurance policy can cover such expenses to a large extent. Read why

Health Insurance is more important these days compared to Old days Health is

a human right, which has also been accepted in the constitution. Its

accessibility and affordability has to be insured. While the well-to-do segment of

the population both in rural & urban areas have acceptability and affordability

towards medical care, at the same time cannot be said about the people who

belong to poor segment of the society. It is well known that more than 75% of

the population utilizes private sectors for medical care unfortunately medical

care becoming costlier day by day and it has become almost out of reach of the

poor people. Today there is need for injection of substantial resources in the

health sectors to ensure affordability of medical care to all. Health insurance is

an important option, which needs to be considered by the policy makers and

planners. As mentioned earlier, the cost of Health Insurance depends on the

sum assured , age, current health condition and your previous medical history.

Higher the sum assured, higher the premium. So what is the ideal health

insurance cover requirement? There is no standard answer or thumb rule for

this. If we agree that health insurance is important, one has to look at his/ her

own lifestyle, health condition, age/ life stage, family history of illnesses and

affordability. Keep in mind that most insurance companies limit the sum

assured to a maximum of 5 lakhs. Also note that many health insurance

policies ―provide additional benefits‖ such as daily allowance, ambulance

charges, etc. for hospitalization. Not only are such ―benefits‖ superfluous, they

tend to drive the premiums higher. So it is best to avoid such plans and stick to

something basic and simple.

Health insurance is a form of group insurance, where individuals pay premiums

or taxes in order to help protect themselves from high or unexpected healthcare

expenses. Health insurance works by estimating the overall "risk" of healthcare

expenses and developing a routine finance structure (such as a monthly

premium, or annual tax) that will ensure that money is available to pay for the

healthcare benefits specified in the insurance agreement. The healthcare

benefit is administered by a central organization, which is most often either a

government agency, or a private or not-for-profit entity operating a health plan.

The concept of health insurance was proposed in 1694 by Hugh the Elder

Chamberlen from the Peter Chamberlen family. In the late 19th century,

"accident insurance" began to be available, which operated much like modern

disability insurance. This payment model continued until the start of the 20th

century in some jurisdictions (like California), where all laws regulating health

insurance actually referred to disability insurance. Patients were expected to

pay all other health care costs out of their own pockets, under what is known as

the fee-for-service business model. During the middle to late 20th century,

traditional disability insurance evolved into modern health insurance programs.

Today, most comprehensive private health insurance programs cover the cost

of routine, preventive, and emergency health care procedures, and also most

prescription drugs, but this was not always the case. Insurance may be

described as a social device to reduce or eliminate risk of life and property.

Under the plan of insurance, a large number of people associate themselves by

sharing risk, attached to individual insurance plan that exclusively covers

healthcare costs and is called Health Insurance. Since the past two decades,

there has been a phenomenal surge in acceleration of healthcare costs. This

has compelled individuals to have a re-look on their actual monthly

expenditures, spending patterns and simultaneously allocate a proportion of

their income towards personal healthcare. This has resulted in individuals

availing healthcare insurance coverage not only for themselves but also for

their family members including their dependants. In short, healthcare insurance

provides a cushion against medical emergencies. The concept of insurance is

closely concerned with security. Insurance acts as a shield against risks and

unforeseen circumstances. In general, by and large, Indians are traditionally

risk-averse rather than risk lovers by nature.

Some major health insurance companies in India include National Insurance

Company, New India Assurance, United India Insurance, ICICI Lombard, Tata

AIG, Royal Sundaram, Star Allied Health Insurance, HDFC standard life,

Bajaj Allianz Apollo, AG Health Insurance Company among others.

India‘s fast growing demand for affordable health cover is attracting greater

business attention, with both life and non-life insurance companies now

entering the market with innovative new protection and savings medical

insurance products. This intense competition for health insurance customers

has only intensified in recent months, with the introduction of new savings-

linked and investment-oriented health insurance schemes by some of the

country‘s largest insurance groups.

India‘s insurance sector first opened up to private and international investors in

2001. Over the past ten years coverage rates across the populous South Asian

country have doubled and the domestic insurance industry has overtaken

several more developed financial markets in the process. The overall number

of insurance policies sold has increased several times over, and combined

premium income is now projected to reach between US$350 to US$400 billion

by 2020. Health insurance, in particular, has become as one of the country‘s

fastest growing insurance lines, accounting for almost a third of new written

premiums last year. Sales of medical insurance products have been driven by

three key factors: a low penetration rate of about 5 percent at present, surging

treatment costs, and a lack of other social safety options across most of India.

With total expenditure on healthcare, through both Indian government schemes

and private sector activity, expected to exceed US$200 billion by 2015, even

more significant opportunities for the country‘s health insurance sector will likely

emerge. Over the next three years, health insurance has the potential to

become an INR300 billion market (US$6 billion), according to industry


The introduction and increased proliferation of private sector players in India‘s

health insurance sector has worked to both develop innovative new coverage

products and increase service standards for clients in the domestic market. Of

particular note has been how the entrance of several major life insurance

brands, including Life Insurance Corporation of India, Aviva Life Insurance and

Max Life Insurance, has affected the market recently. These life insurers offer

largely savings-based health plans that provide lump sum compensation to

clients in case of a critical illness or other malady specifically defined by a

specific policy. These long-term products have tenures that can last up to 20

years. When the policy expires, customers are entitled to receive the fund value.

Normally this is not a cashless process as payment is reimbursed on

submission of medical bills. Most of these health insurance plans sold by life

insurance companies are unit-linked insurance products (Ulips), whereby

returns are determined by the performance of the stock market.

While life insurer health plans are tied to equity returns, medical insurance

policies sold through non-life companies tend to provide cashless

hospitalization cover for policyholders in the event of an illness or accident.

These plans, with premiums reviewed and renewed annually, also offer

customers a variety of additional value-added benefits such as hospital cash

allowance, home nursing allowance and recovery grants. Some insurance

companies offer these outpatient services as add-on covers with their

hospitalization plans, while others provide discounts through certain affiliated

hospital networks. These products have so far proven to be the most popular in

India. Health insurance policies sold through non-life and dedicated medical

insurers currently dominate the market, accounting for roughly INR100-120

billion (US$1.9-2.3billion) of the country‘s INR150 billion (US$3 billion) health

insurance sector. It is expected that increased intra-market competition going

forward will enable successful insurers to meet the country‘s changing

healthcare needs.

Despite the positive growth indicators, India‘s health insurance market still has

many problems to contend with in order to match its true potential going

forward. The most important challenge for insurers remains the low level of

awareness concerning the value of obtaining adequate coverage as a valuable

savings and investment tool across much of the country. This problem is slowly

being addressed as more insurers develop their product and distribution

platforms to reach previously untapped regions and client bases with more

innovative and affordable coverage products, including micro insurance and

local bank.

Indian consumers already aware and enrolled in health insurance schemes, the

industry faces the continuing challenge of keeping them happy. Customer

satisfaction levels for health insurance in India have consistently ranked below

comparable levels elsewhere, with critics frequently citing the low coverage of

plans in terms of both the diseases and number of hospitals covered. Unlike

other homogenous general insurance products, premiums for medical plans are

based on the health of an individual policyholder and this had lead to confusion

and fraud in the Indian market and increased policy cancellations from

customers who do not find any value in their health insurance policies.

The Insurance Regulatory Authority of India (IRDA) has come to the forefront in

tackling these service standard issues recently. Speaking at the first meeting of

the India Health Insurance Forum in Hyderabad last Thursday, IRDA chairman

J Harinarayan said the industry must now work to improve communication with

its customers, particularly with regard to health insurance policy documentation,

as a third of all consumer complaints this year have been directed towards

health insurers. According to IRDA data, of the 92,898 complaints levied at the

non-life sector so far in 2012, 38,891, or 37.5 percent have been focused on

health insurance issues. ―If one-third of complaints are from the health side, I

will conclude that the nature of communication on health insurance policies and

the understanding of the policy by the consumer are areas of concern.

Probably, the lack of clarity is reflected in the increasing number of complaints,‖

IRDA chairman J Harinarayan said, adding that ―good communication is the

responsibility of the insurance company and not of the policy holder. An

insurance policy, as a contingent contract, has to be specific and unambiguous.‖

With a reach of just about 2% of the country‘s 1.2 billion population, India offers

a huge potential in health insurance market. There are over 30 health

insurance products in the category offered by both life and non-life insurers.

While ICICI Lombard, Bajaj Allianz and Reliance General are some of the

prominent general insurers in the health insurance space, Apollo DKV, Star

Health & Allied Insurance are the standalone players. Health insurance‘s

annual premium collections are over Rs 6,000 crores. Despite the high growth,

the business is a huge challenge for insurers because of the high losses over

soaring medical expenses

A survey showed massive dissatisfaction with the healthcare system in India.

The interesting find about health insurance in India was how people perceived

health insurance in India. It is seen as an instrument to protect savings. It is not

aimed at protecting the asset that is health. This is probably common to

developing markets, where people tend to place wealth ahead of health. On a

macro level, very few households in India have contingency plans to meet their

health expenses. Health risks in India are perceived differently than the western

population. Prior planning in health issues is yet to be a major priority

The industry is also becoming tech-savvy with facilities to buy certain types of

insurance products online and payment of premium through Internet. The

insurance penetration level in India is very low when compared with the global

average. This has brought about a plethora of distribution channels such as

agents, brokers, bancassurance (bank insurance model) avenues, soliciting

insurance through Internet or direct mailing. Many banks, financial institutions

and insurance intermediaries saw a huge opportunity in marketing insurance

products. Insurance brokers play a vital role in bringing together insurance

companies and the insured, and their role assumes importance when a claim

arises. Research includes awareness of health insurance , preference of health

insurance consumption pattern ,new services offered by insurance sectors,

claim settlement procedure, and major issues of health insurance.

Health insurance policy does not always cover every possible health problem

someone might encounter in the future. There are certain terms and conditions

agreed to by the insured (person who is taking the plan), and the insurer (entity

that is providing the plan) and the entire procedure happens according to what

has been agreed to in the contract .

The best time to avail a health insurance plan is when the insured is still in a

good physical condition. The normal logic among young people is that since

they are rarely afflicted by physical ailments they do not need such a plan.

In reality people can fall prey to a disease or other physical problem at any time

- nobody can be absolutely sure of a life fully free of such issues. Normally as

someone gets older the problems increase and the possibilities of some major

disease are always there. A problem with trying to get a medical insurance

during old age is that since there are more chances of a medical condition the

premium is often high or the insurer is not ready to cover the individual in





When a person experiences a bad shock to health, their medical expenses

typically rise and their contribution to household income and home production

(e.g. cooking or childcare) declines (e.g. Wagstaff and Doorslaer, 2003; Gertler,

Levine & Moretti, 2003; Gertler and Gruber, 2002). According to the WHO,

―Each year, approximately 150 million people experience financial catastrophe,

meaning they are obliged to spend on health care more than 40% of the

income available to them after meeting their basic needs.‖ (WHO Factsheet

N°320, 2007)Low income and high medical expenses can also lead to debt,

sale of assets, and removal of children from school, especially in poor nations.

A short-term health shock can thus contribute to long-term poverty (e.g. Van

Damme et al, 2004; Annear et al, 2006). At the same time, because

households often cannot borrow easily, they may instead forego high-value

care. When they do access care it will often be of low quality (Das, Hammer

and Leonard, 2008), which can lead to poor health outcomes.

Theory suggests that health insurance can address some of these problems.

By covering the cost of care after a health shock, insurance can help to smooth

consumption, reduce asset sales and new debt, increase the quantity and

quality of care sought, and can improve health outcomes.

Unfortunately, rigorous evidence on the impact of insurance is scarce, and

there are even fewer studies on the effects of insurance in developing

countries. One reason for the lack of evidence is that it is difficult to find a valid

control group for the insured. We cannot simply compare the outcomes of

insured and uninsured households, since health insurance status is typically

strongly correlated with other household characteristics. For example, rich and

well educated households typically have both better health (Asfaw, 2003) and

better health insurance coverage (Jütting, 2004; Cameron and Trivedi, 1991),

but the positive correlation between health and insurance status tells us nothing

about the impact of insurance. On the other hand, those in poor health may be

more likely to pay for health insurance (Cutler and Reber, 1998; Ellis, 1989),

but finding that the insured tend to be sicker would not imply that insurance

causes illness.

Below we review past evidence on the impacts of health insurance, focusing on

studies where health insurance status is plausibly exogenous, or where studies

have attempted to eliminate bias due to self-selection. A majority of the

rigorous studies are based on United States data. We follow Levy and Meltzer

(2004, 2008) in both our choice of U.S. studies and in our main conclusions.


Understanding who chooses to purchase voluntary health insurance is

important for understanding both how well targeted the insurance product is

and the financial viability of the insurance program. As explained below, the

latter will be particularly sensitive to the existence of adverse versus positive

selection. The extent of adverse selection or positive selection into insurance

has important repercussions for an insurance provider‘s ability to cover its

costs. Standard insurance theory predicts that insurance markets will suffer

from adverse selection, which occurs when less healthy people or people who

are more risky with their health are more willing to purchase health insurance

because they know that the amount they spend on healthcare will be larger

than the premium they will pay. (e.g., Rothschild and Stiglitz 1976; Akerlof,

1970) Voluntary health insurance cannot be financially sustainable if adverse

selection is severe, since only the most costly patients would find it worthwhile

to purchase insurance, and premium levels will not be able to cover the high

costs of care.

Some studies in wealthier nations find evidence that people with higher

expected medical expenditures (measured in a variety of ways across studies)

are more likely to buy insurance or pay for health insurance at higher premiums

than those with lower expected medical expenditures (e.g. Cutler and

Zeckhaus, 1998). However, the extent of adverse selection in health and other

insurance is often found to be minimal (e.g. Wolfe and Goddeeris, 1991;

Finkelstein and Poterba, 2004) or non-existent (e.g. Finkelstein and McGarry,

2006; Cardon and Hendel, 2001; Cawley and Philipson (1999). There is also

some recent evidence of positive selection into health insurance (e.g. Fang et

al., 2008).

The literature review suggests that income is one of the important

determinants of purchase of health insurance (Scotton 1969, Cameron,

Trivedi et al. 1988, Savage and Wright 1999). Income has been found to

be having a positive association with health insurance purchase decision

consistently in different studies conducted in different countries Propper

(1989) in UK; Cameron, Trivedi et al. (1988)in Australia and Hurd and McGarry

(1997) in USA, Healthcare expenditure is another important variable

affecting health insurance purchase (Kronick and Gilmer 1999). Relation

of health insurance purchase decision and health expenditure is based on

the premise that families which have higher chances of requiring

hospitalization will have higher probability of buying health insurance.

Some other socio economic factors like age, education etc. have also

been found to be important factors affecting health insurance purchase In

India knowledge and awareness about health insurance could be

important factor for health insurance purchase decision. Very few studies

have tried to analyse reasons for low penetration of health insurance in

India (Wadhawan 1987, Ellis 2000, Bhat and Mavalankar 2001). Some

studies have tried to analyse community based health insurance in India.

(Devadasan, Ranson et al. 2004, Ahuja 2005. Rao (2004) discusses the

issues and challenges for health insurance sector in India. These and

other studies have tried to analyse health insurance sector in India, but

not much systematic empirical work has been done and this area is largely


The theory of risk has been applied extensively to the literature related to

health insurance decision (Arrow 1963; Feldstein 1973). Under conditions

of consumer rationality and risk averseness, the decision to purchase

insurance is made on the basis of expected utility gain.

Health Insurance choice essential decision - whether or not to purchase

private health insurance (Barrett and Conlon 2003). Binary discrete choice

models using either legit or probit has been used to analyze determinants of

this type of purchase decision. Cameron and Trivedi (1991) specified a

conditional expected utility function that is associated with alternative

health care regimes. The consumer chooses the regime that maximises

expected utility The utility gains, expected from the purchase of private

insurance are related to the expected medical need of the people in the first

instance. Some individuals face greater risk vulnerability than others due

to their age, pre-existing health status, job profile and marital status.

For example, Hopkins and Kidd (1996) suggest that the probable

probable distribution of future health states is based on present and past

Health status, Health care expenditure of the household may be anther proxy of

health status of the household this view of the role of education in Health.

Health status of the household This view of the role of education in health

decision-making has been well documented by Grossman (1972) and

Muurinen (1982). The implication is that not only is a better educated person

likely to be healthier which would lower the probability of insurance, but also

he/she is likely to be better informed about both the services available in the

public hospital system and the benefits of joining a private health insurance

fund. The indirect effect of education is and the benefits of joining a private

health insurance fund its impact on income.

Education and income are generally positively correlated (Van De Ven and Van

Praag 1981). Higher income generally decreases the opportunity cost

associated with the purchase of private health insurance. Overall, increases

in both income and education would be expected to lead to an increase in the

probability of buying the insurance.

Another set of factors which are found important in the literature of

health insurance are demographic and economic variables. These variables

are employment, age, marital status and gender. The available evidence

suggests that socioeconomic variables act on choice in the expected

ways. Those who are employed and those in executive positions are

likely to purchase insurance (Butler 1999; Savage and Wright 1999).

Married respondents are more likely to take out coverage (Cameron &

McCallum 1995), though family size apparently has been of little influence

on the purchase decision (Cameron and Trivedi 1991).


The perception of individuals towards the risk is also an important factor.

A consumer‘s knowledge of being at risk by being a member of a particular

group of people with high-risk characteristics (e.g., those who know they

have high cholesterol) likely to influence their insurance decision. Hopkins

and Kidd (1996) and Butler (1999) found that smokers are less likely to

purchase insurance. Smoking behavior is viewed in these studies as a

proxy for risk-aversion. Of the other possible determinants of the decision to

purchase insurance, an obvious factor is price. However few studies have

attempted to estimate price elasticity of demand. This is because of lack of

price information and also because of limited variation in price in highly

regulated health insurance market. To overcome this problem Butler

(1999) constructed ‗effective prices‘ from information on insurance fund

premium revenue (averaged over policies sold) and the expected benefits

paid out by age category.

The studies in Indian context on health insurance are scanty. Several recent

papers and reports have critically reviewed the Indian health delivery and

financing system (Bhat and Mavalankar 2000, Berman and Khan 1993,

World Bank 1995, Planning Commission 1996, etc). These studies have

documented issues and challenges the system faces in terms of

accessibility, efficiency and quality of the health care delivery.


 The research was based on primary collection of data, there may be

chances of human error and bias.

 The research was dependant on the information provided by the

respondents who were very reluctant in providing right information and
were careless.

 As associated with every project, time and money were the major
limitations with project.

 Due to unwillingness of providing any information, the respondents filled

the questionnaire casually..

 The projection is purely based on verbal meetings with the respondents.

 Non-co-operative behaviour of respondent was a big problem in this


 While studying the report the above facts should be taken into







The purpose of this study is to find out the Awareness, Preferences and

Buying patter of Health Insurance, in four main Health Insurance companies .

Health Insurance is viable solution to ensure access to basic Health care

services to the masses, the number of people with Health Insurance coverage

is low in India. There are some structural issues with system. The present study

is an attempt to find the cause for low Health Insurance coverage. The study

address the awareness and buying pattern of Health Insurance and scope of

the private Health Insurance companies schemes. Given the growing interest

on the importance of Health Insurance , the outcome of the present study is

considered useful in guiding policy making and to help to knowing the complete

process of Health Insurance.


To assess the individual awareness about Health Insurance.

To know the preference of individual regarding health insurance.

To evaluate consumption patterns of health insurance.

To assess the effectiveness of company services

Research methodology

D.Slesinger and M.Stephenson in the Encyclopedia of Social Sciences define

the research as “the manipulation of things, concepts or symbols for the

purpose of generalizing to extend, correct or verify knowledge, whether that

knowledge aids in construction of theory or in the practice of an art.”

In short, the research for knowledge through objective and systematic method of

finding solution to a problem is research. The systematic approach concerning

generalization and the formulation of a theory is also research.

Research design provides the glue that the research project together. A

designed is used to structure the research to show how all of the major parts of

the research project, the sample or group measurement ,treatments and

methods of assignment work to gather try to central research question.

Hence, it is clear that research design is the blueprint for researcher it lays down

the methodology involved in the collection of information and answering at

meaningful conclusion from the same.

This classification are made according to the objective of the research ,in some

causes the research will fall in to one of this category but in other cases

research will fall in to two categories.

There are two types of methods of collecting data



PRIMARY DATA: The main purpose of collection of primary data was to

prepared questionnaire. The researcher tried to find out the awareness and

Buying pattern of Health Insurance Through :

Personal Approach

 Surveys

 Mails

 questionnaires

 articles ,magazines

 telephone ,discussion meeting with Managers, Agents of all the four Health

Insurance companies &customers etc. for this project personal interviews was

conducted for collection

SECONDARY DATA consists of published data collected through

 Books

 websites

 news papers

 journals

 magazines

 research papers









A comparative study health Insurance has been done in ICICI Lombard ,Star

Allied Health Insurance, Bajaj Allianz,New India Assurance, and other

companies , the respondents were Senior manager , middle level manager,

agent, broker, customers . the sampling technique was Quota sampling , The

research tool are questionnaire .


The statistical analysis has been done using Microsoft excel.


4.1 Introduction of Health Insurance
4.2 Background of Health Insurance
4.3 Features of Health Insurance
4.4 Main Function of Health Insurance
4.5 Importance
4.6 kinds Of Health Insurance
4.7 Essential Guidelines Availing Health
Insurance Policy




Health insurance in a narrow sense would be an individual or group

purchasing health care coverage in advance by paying a fee called premium In

its broader sense, it would be any arrangement that helps to defer, delay,

reduce or altogether avoid payment for health care incurred by individuals and

households. Given the appropriateness of this definition in the Indian context,

this is the definition, we would adopt. The health insurance market in India is

very limited covering about 10% of the total population Health insurance

guarantees payments to a person in the event of sickness or injury. and works

as protection scheme. Health insurance is protection, scheme to take care of

health of a person and works it works by buying a policy from a company or an

insurance agent. Depending on the premium paid the health insurance policy

will pay specified amounts for the medical expenses incurred to overcome the

health problem. Currently the trend of some of the reputable companies seems

to be to build in a health insurance policy as a benefit to an employee. Some

countries offers free health insurance to their citizen. In India certain sectors

like railways, army and the employees working with the central government are

covered in a health scheme provided cover to almost 20million

people in different part of country.

Health like education should be essential and should be freely available to all

the citizens of a country. Some developed countries realizing the importance of

the health of the nation spend as much as 6% to 8% of their GDP on it and

have advanced facilities in their government run hospitals. Some examples

include the United Kingdom where the National Health Services hospitals

provide all the health requirements to majority of their citizens. Sweden and

Norway follow similar government run health schemes. As per the census of

USA in the year 2004, it was noted that 245.3 million people had health

insurance coverage; however 45.8 million lived without an insurance cover. In

response to some of these stats Senator John Kerry said.

"Great physicians and nurses, skilled, caring and unparalleled in their training,

intervened in my life and probably saved it. I was lucky but other Americans are

not. It is time to speak again and stand again for the ideal that in the richest

nation ever on this planet, it is wrong for 41 million Americans, most of them in

working families, to worry at night and wake up in the morning without the basic

protection of health insurance." Developing countries like India have priority of

spending in other sectors like the army and the infrastructure development and

barely 2% of the GDP is spent on the health and results in the government

hospitals lack in facilities especially for any advanced procedure such as heart

surgery or hip placement .Health insurance schemes are particularly important

for individuals from the lower income group to provide them and their family

members with adequate cover in event of any mishap or illness. The escalating

medical costs are due to the advanced diagnostic and therapeutic procedures

that have become the hallmark of modern medical care. An insurance scheme

will guarantee that no compromises are made in your treatment for wants of

funds. Remember when negotiating a policy you ask for adequate cover as the

provided by the health insurance will depend on the type of policy purchased.

Before you ask for the best health insurance quote or plan to buy a health

insurance plan become an informed consumer. Find definitions of commonly

used health insurance terms in this health insurance glossary. It serves as a

dictionary to help consumers understand common terms used in health


“Health insurance aims that one can access to the best health care

without fearing the financial strain, it help people to have peace in mind

rather than to have fear”.


The health care system in India is characterized by multiple systems of

medicine, mixed ownership patterns and different kinds of delivery structures.

Public sector ownership is divided between central and state

governments, municipal and Panchayat local governments. Public health

facilities include teaching hospitals, secondary level hospitals, first- level referral

hospitals (CHCs or rural hospitals), dispensaries; primary health centers

(PHCs), sub-centers, and health posts. Also included are public facilities

for selected occupational groups like organized work force (ESI), defense,

government employees (CGHS), railways, post and telegraph and mines among


The private sector (for profit and not for profit) is the dominant sector with 50%

of people seeking indoor care and around 60 to 70% of those seeking

ambulatory care (or outpatient care) from private health facilities. While

India has made significant gains in terms of health indicators

demographic, infrastructural and epidemiological (See Tables 1 and 2); it

continues to grapple with newer challenges. Not only have communicable

diseases persisted over time but some of them like malaria have also

developed insecticide-resistant vectors while others like tuberculosis are

becoming increasingly drug resistant. HIV / AIDS has of late assumed

extremely virulent proportions.

The 1990s have also seen an increase in mortality on account of non-

communicable diseases arising as a result of lifestyle changes. The country is

now in the midst of a dual disease burden of communicable and non-

communicable diseases. This is coupled with spiraling health costs, high

financial burden on the poor and erosion in their incomes. Around 24% of all

people hospitalized in India in a single year fall below the poverty line due to

hospitalization. An analysis of financing of hospitalization shows that large

proportion of people; especially those in the bottom four in come quintiles

borrow money or sell assets to pay for hospitalization This situation exists in

a scenario where health care is financed through general tax revenue,

community financing, out of pocket payment and social and private health

insurance schemes. India spends about 4.9% of GDP on health.. The per

capita total expenditure on health in India is US$ 23, of which the per capita

Government expenditure on health is US$ 4. Hence, it is seen that the total

health expenditure is around 5% of GDP, with breakdown of public

expenditure (0.9%); private expenditure (4.0%). The private expenditure

can be further classified as out-of-pocket (OOP) expenditure (3.6%) and

employees/community financing (0.4%). It is thus evident that public health

investment has been comparatively low. In fact as a percentage of GDP it has

declined from 1.3% in 1990 to 0.9% as at present. Furthermore, the central

budgetary allocation for health (as a percentage of the total Central budget)

has been stagnant at 1.3% while in the states it has declined from 7.0% to



Land area 2% of world area

Burden of disease (%) 21% of global disease burden

Population 16% of world population

Urban : Rural 28:72

Literacy rate (%) 65.38

Sanitation (%) Rural – 9.0; Urban – 49.3

Safe drinking water supply (%) Rural – 98; Urban – 90.2

Poverty (%) Below poverty line – 26

Rural – 27.09; Urban – 23.62

Poverty line (Rs.) Rural – 327.56; Urban – 454.11

Table no.4.2.1 socioeconomic indicators

Achievements: 1951-2000

Demographic 1951 1981 2000


Life expectancy 36.7 54 64.6(RGI)

Crude birth rate 40.8 33.9(SRS) 26.1(99 SRS)

Crude death rate 25 12.5(SRS) 8.7(99 SRS)

Infant mortality 146 110 70(99 SRS)


Table no.4.2.2 Achievements: 1951-200

In light of the fiscal crisis facing the government at both central and state levels,

in the form of shrinking public health budgets, escalating health care costs

coupled with demand for health-care services, and lack of easy access of

people from the low-income group to quality health care, health insurance is

emerging as an alternative mechanism for financing of health care.

During the last 50 years India Has developed a large government health

Infrastructure with more than 150 medical collages, 450 district hospitals,3000

community Health centers 20,000 Primary Health care centers and 1,30,000

sub- Health centers . On the top of this there are large number of this there are

large number of private and NGO health facilities and practitioners scatters

throughout the country.

Over the past 50 Years Indian has made considerable progress in improving its

health status. Death rate has reduced from 40 to 9 per thousand, infant

mortality rate reduced from 161 to 71 per thousand live birth and life

expectancy increased from 31 to 63 years. However, many challenge remain

and these are: life expectancy 4 years below world average, high incidence of

communicable diseases, increasing incidence of non- communicable diseases,

neglect of women‘s health, considerable regional variation and threat from

environment degradation. It is estimated that at any given point of time 40 to 50

million people are on medication for major sickness in India. About 200 million

workdays are lost annually due to sickness. Survey data indicate that about

60% people use private health providers for outpatient while 60% use

government providers for in-door treatment. The average expenditure for care

is 2-5 times more in private sector than In public sector.

India spreads about 6 percent of GDP on Heath expenditure. Health Care

expenditure is 75 percent or 4.25 percent of GDP and most of the rest

(1.75percent) in government funding. At present, the insurance coverage is

negligible .Most of the public funding is for preventive, promotive and primary

care programs care expenditure has grown at the rate of 12.84 percentage per

annum and for each one present increase in per capita income the private

health care expenditure has increased by 1.47 percent number of private

doctors and private clinical facilities are also expanding exponentially. Indian

Health financing scene raises number of challenges, which are increasing

health care cost , high financial burden on poor eroding their incomes,

Increasing burden of new diseases and health risks and neglect of preventive

and primary care and public health function due to underfunding of the

government Health care.

Given the above scenario exploring health- financing options become critical.

Health insurance is considered one of the financing mechanisms to overcome

some of the problems of our systems.


India is about 1.2 million of population and granting that not all may not be

insurable for various season , it makes a strong case for potentiality of at least

50 crore plus people to be under some health insurance scheme apart from

government schemes for the weaker sections. Unfortunately , even after

opening of market the penetration has been poor and roughly only about 3.5

crore people are covered under various insurance scheme as mentioned above

making the market quit big ,only being scratched at the surface without being

properly tapped. However, since last 2/3 years health insurance has picked up

with aggressive selling coupled with awareness making it the second largest

portfolio after motor Insurance.



The experiences in liberalizing the private health insurance suggest that it has

undesirable effects on the costs of health care. The costs care generally goes

up. Given the present system of fee for service and current scenario of health

infrastructure in private sector, the development of insurance will need

improvements in the quality and change in structure. The new investment to

improve quality will result in to high cost and therefore increase in prices of

Insurance products. There would be development in the direction of exploring

options of managed care, which would help in reducing the costs. The

developments would be needed in the direction of exploring options of

managed care, which would help in reducing the costs. The developments

would be needed in the directions of strong information base accreditation

system for providers. The structure of the health sector will have to change

from multi-single doctor hospitals and clinics to large hospitals and polyclinics

which provide services of multiple specialties and can operate at larger scale.

This will aloe them to provide high quality professional care at competitive

prices. As one of the responses to these Third Party Administrator (TPA) are

rapidly emerging in India. Here we can learn from the models, which we have

emerged elsewhere. but their applicability to Indian situation needs to be

examined carefully. These aspects of the health sector will need detail study.

Lack of adequate information base to operate insurance schemes at large

scale. The insurance mechanism prevalent in many developed countries has

their history. Health reforms experiences in many countries are replete with the

suggestion that the systems cannot replicated easily


Now a days there are different insurance policies coming in the market like life

insurance, vehicle insurance, but the importance of health insurance seems to

be growing at a very fast rate. Health insurance is mainly taken to protect a

person from any unexpected medical expenses incurred due to any illness.

With the present condition, it is observed that with the latest technologies or the

advancements taking place, the health care has immensely improved but so

has the expenses. The treatments are becoming more and more expensive

with each passing day. It is required that every individual gets a financial

security related to any unexpected medical expenses coming his way. The

main merits observed in health insurance are;

1. Medical cash benefits- this benefit entitles you to get cash benefits, if you

are hospitalized. All the financial expenses incurred would be covered in this

plan. The amount provided to you will be on per day basis and the amount

depends upon the plan you have opted.

2. Cashless facility- in this benefit, you can get hospitalized on the basis of

this plan without paying a penny. But this benefit can be availed only in some

special cases. Sometimes the amount paid by you, is reimbursed within 24


3. Before and after expenses- as per this policy all the expenses related to

illness incurred 60 days prior to 90 days after hospitalization would come under

the cash benefits that you can avail.

4. Floater benefits- this is an add-on benefit for the health insurance policy

holders. In this policy, an individual can take a single policy for the whole family

which would cover the entire member in a single sum assured.

5. Other benefits- the policy holder is entitled to a 5% of bonus amount of the

sum assured every year as a bonus. This policy includes, all the expenses

including the ambulance charges, health checkups to the maximum limit of Rs

1000 per family. It even provides tax benefits as per income tax act.

Considering all the aspects, health insurance has advantages which could be

availed very easily. The health insurance is needed now more than ever due to

skyrocketing medical expenses, the increasing possibilities of diseases. So, if

you still don‘t have a good health care plan, just go for it at the earliest.


Though the features may vary from insurer to insurer, some basic
features are:

1. Reimbursement for Hospitalization due to illness/disease/ surgery.

2. Reimbursement for Domiciliary Hospitalization expenses in lieu of


3. Pre-hospitalization Expenses

4. Post-hospitalization Expenses

5. Ambulance Charges

6. Cashless Access

7.Income Tax Benefit etc

Insurance may be described as a social device to reduce or eliminate risk of life

and property. Under the plan of insurance, a large number of people associate

themselves by sharing risk, attached to individual insurance plan that

exclusively covers healthcare costs and is called Health Insurance.

Since the past two decades, there has been a phenomenal surge in

acceleration of healthcare costs. This has compelled individuals to have a re-

look on their actual monthly expenditures, spending patterns and

simultaneously allocate a proportion of their income towards personal

healthcare. This has resulted in individuals availing healthcare insurance

coverage not only for themselves but also for their family members including

their dependants. In short, healthcare insurance provides a cushion against

medical emergencies. The concept of Insurance is closely concerned with

security. Insurance acts as a shield against risks and unforeseen

circumstances. I

Some major health insurance companies in India include National Insurance

Company, New India Assurance, United India Insurance, ICICI Lombard, Tata

AIG, Royal sundaram ,Star allied health insurance, cholamandalam ,DBM,

Bajaj Allianz ,Apollo, AG Health Insurance company among others .


Indian Health Insurance is primarily classified into 2 categories:

•Cashless Hospitalization

• Medical Reimbursement

a) Cashless Hospitalization

Cashless hospitalization is a specialized service provided by an insurer wherein

an individual is not required to pay the hospitalization expenses at the time of

discharge from the concerned hospital. The settlement is done directly by the

insurance company (or insurer). However, prior approval is a must from the

TPA (Third Party Administrator) before availing the benefits under this option.


• Planned hospitalization: This is a planned hospitalization wherein the

insured is aware of the hospitalization in advance. This duration period may

vary from case to case. Examples include: FTND (Full Term Normal Delivery),

Chemotherapy treatment for carcinoma (cancer), for cataract

surgery, tonsillectomy (removal of tonsils).

• Emergency hospitalization: It is a sudden hospitalization that may be either

an emergency or due to unforeseen circumstances. In short, hospitalization is

not anticipated in advance. Examples include RTA (Road Traffic Accident),

Myocardial infarction (heart attack), Acute Appendicitis.

b) Medical Reimbursement

Re-imbursement means to repay or to compensate. Thus, Medical Re-

imbursement means to repay the products/services availed during

hospitalization more importantly after the completion of the treatment. Under

this procedure, the insured has to bear the entire expenses incurred during

hospitalization. After getting discharged from hospital, the insured/policy holder

can claim medical reimbursement. For availing benefits under this option, the

insured has to approach the concerned TPA under which he/she is covered, fill

the requisite form and satisfy all the requirements as mentioned. This includes

submission of TPA card, policy paper, discharge summary, prescriptions,

diagnostic laboratory reports, OPD treatment details etc. A sum

is granted as reimbursement for treatment expenses.

A recent survey conducted in 2008 showed that only 3% of the entire Indian

population has availed some sort of insurance policy and enjoys benefits

included under its coverage. This miniscule percentage constitutes both –

PSUs (Public Sector Undertakings) and Private Insurance Companies. Since,

the general public are by and large ignorant about the benefits of availing

healthcare insurance policies, there lies an urgent need to educate the masses

regarding the importance of Health care insurance and the benefits derived on

account of it. There are numerous reasons for not availing health insurance.

There is a lack of knowledge regarding the existing insurance products/services

in the markets. On top of it, there are numerous misconceptions about

Insurance prevalent in the Indian Markets. In India; public funded healthcare is

available only to a miniscule section of BPL (Below Poverty Line) groups, low-

income groups and to government employees. The Indian Government has

formulated Employee State Insurance Scheme (ESIS) that focuses on the

public healthcare policy for low-income groups. The government employees

can avail Central Government Health Scheme (CGHS) that offers

medical treatment at a subsidized cost.

With the opening up of insurance sector for private participation, numerous

players have entered the healthcare segment, but inspite of the entry of private

sector, penetration of insurance coverage in India is abysmally low. Recently a

legislature has been passed in the Indian Parliament allowing 49%of FDI in

Insurance Industry.


The primary function of Health Insurance is to pay those covered expenses, as

outlined in the policy, incurred as a result of an accident or illness. It often has

two elements, one being hospitalization expenses and the other being for the

medical care rendered by a physician or other health care professional. The

vast majority of health insurance is employer-based, meaning that people have

access to it through their employment. Not all employers offer it, and for those

whose employers do not, they are free to obtain individual/family policies on

their own.

Health insurance comes in a variety of types. These include traditional

indemnity plans, which are becoming less common, and an array of managed

care plans, including Health Maintenance Organizations and Preferred Provider

Organizations. Both of the latter provide medical care on a prepaid basis, but

differ in their delivery models, including by the degree of choice of provider that

the member retains.

Most health insurance plans have deductibles and co-payments, although

different terminology may be used. A deductible is an amount that the

insured/member must pay before the insurer's liability for payment is triggered.

A co-payment is a form of cost-sharing such that the insurer pays a percentage

of a covered expense, and the insured pays the remainder. The size of the

deductible and co-payment has an impact on premium. Insurance may be

described as a social device to reduce or eliminate risk of life and property.

Under the plan of insurance, a large number of people associate themselves by

sharing risk, attached to individual insurance plan that exclusively covers

healthcare costs and is called Health Insurance Since the past two decades,

there has been a phenomenal surge in acceleration of healthcare costs. This

has compelled individuals to have a re-look on their actual monthly

expenditures, spending patterns and simultaneously allocate a proportion of

their income towards personal healthcare. This has resulted in individuals

availing healthcare insurance coverage not only for themselves but also for

their family members including their dependants. In short, healthcare insurance

provides a cushion against medical emergencies. The concept of Insurance is

closely concerned with security. Insurance acts as a shield against risks and

unforeseen circumstances. In general, by and large, Indians are traditionally

risk averse rather than risk lovers by Nature.


The importance of Health Insurance can never be undervalued for the following


• Provides security to human life which is of prime importance to any individual.

• Closely bonds Insurance Companies, Hospitals, Policyholders and TPAs

together for the benefit of Indian masses.

• An answer to the solution of uncertainties and risks that are prevalent and

ever-pervading in human life.

• Access to quality healthcare.

• Means of savings and a safe investment option.

• Provides financial stability in life.

• A tax-saving instrument that significantly contributes in reduction of tax


•Reduces tensions and stress caused on account of hospitalization.

• Greatly contributes in leading a stress-free life.

The health insurance schemes marketed by insurance companies

face some other challenges worth noting, for example :-Absence of

accreditation of providers and a rationalized cost structure.-Adverse claims

experience / high loss ratio.-High moral hazard at various levels of service.-Non

regulated market and no control through state machinery.-The limited

government funding of healthcare programmers.-Lack of propagation of health

insurance as a health insurance among masses.-Rising medical costs and

imbalance in cost structure among service providers.-Servicing through third

party administrators (TPA) introduced with cashless entry to hospitals meeting

with limited success.


A) HMO (Health Maintenance Organization).

You go to your family doctor for any health services. If there is urgency in going

to a specialist, your family care doctor will help you in referring one. Mediclaim

companies will not insure you without the referral from your family doctor and

therefore, you will have to pay yourself for such specialist services.

B) PPO (Preferred Provider Organization Plan).

Through this plan you can analysis to any primary, specialist, or medical facility

without referral and get totally covered. It is the Mediclaim companies that

cover you when your child breaks a bone accidentally and you approach

directly to the orthopaedic doctor, without consulting your primary doctor.

C) POS (Point of Service).

This plan essentially includes both an HMO and a PPO plan. Mediclaim

companies give you the option from the two plans for every medical case. The

plan offers extra covered preventative programs, however, you may have to

pay more from your pocket, if you choose a doctor outside your plan.

D) HSA (Health Savings Account).

This plan is much more superior than the above mentioned mediclaim plans.

The plan covers eyeglasses, dental, cosmetic procedures, over-the-counter

medications, etc. It is a tax-deferred savings account as long as withdrawals

are concern for medical expenses. Funds outstanding at the end of the year

are carried forward into an IRA account



Tax Saver

Kinds of

Student Overseas
medical Mediclaim
policy policy


Source – Researcher Analysis

Figure no.4.6.1 Health Insurance Types in India


1. Individual Mediclaim Policy

This is the plain vanilla mediclaim or health insurance policy for an

individual protecting this person from the expenses incurred due to disease or


2. Floater Policy

A floater health insurance policy covers your entire family under one policy with

one sum insured and one premium. It covers all the expenses as covered

under mediclaim only the cover is now extended to the family instead of one

person. This cover can be used by any member of the family any number of

times. The advantage of this policy is that saves money by spreading the cover

across family members

3. Critical Illness Policy

Insurance companies define certain specified illness or diseases as ―critical‖. If

you have a critical illness policy, then the insurance company will pay you a

lump sum payment if you are diagnosed with a critical illness as defined by the

insurance company. Some of the diseases/conditions which are usually

deemed critical are Cancer ,Heart Attack, Kidney Failure, Major Organ

Transplant, Stroke, Paralysis and Heart Valve Replacement Surgery. (For a

more comprehensive list check with your insurer)

Unlike other general insurance policies, these policies come with multiple

options in terms of sum assured and term of the policy. For example ICICI

Lombard provides critical cover for 5 years for a Rs. 12, 00,000 coverage.

These policies are also available with disability coverage to ensure that you are

also covered for loss of income during that critical period.

3. Overseas Mediclaim Policy

An Overseas Mediclaim Insurance policy provides cover for medical expenses

incurred abroad for treatment of illness and diseases contracted or injury

sustained during the insured period of overseas travel. Anyone who is

travelling abroad for business or pleasure or for educational purposes should

have this policy.

4. Student Medical Insurance

Student Medical insurance covers the cost of health care while studying abroad.

It is an essential requirement of many foreign universities for its overseas

students. Students are generally advised to buy it in India as it is substantially

cheaper than buying it abroad.

6. Tax Saver

This is a new class of insurance launched to take full advantage of the income

tax benefit under section 80 D of the Income Tax Act 1961. The premium is

fixed at Rs 15,000 for all plans. For Senior Citizens aged 65 and above, the

premium is Rs. 20,000 This plans includes reimbursement of OPD expenses

upto Rs. 10,000. This includes diagnostics tests, dental treatment and related

expenses. This insurance is suitable for people who are looking to cover all

their medical expenses in a tax free manner



The following points should be borne in mind while purchasing an

individual health policy:

• Understanding the policy coverage: The policyholder should be able to

clearly comprehend the extent of medical coverage being offered under the

particular health insurance policy before opting for it. The individual should

check whether pre-existing diseases and its resultant complications are

covered or not, as well as the extent of the coverage under that particular


• Keeping an eye for medical expenses that are not covered/re-imposable

under the policy: Before availing a particular health insurance policy, the

prospective policyholder should note the medical expenses not covered under

that Insurance policy. It is important to note that deductibles are a part and

parcel of any insurance coverage and the expenses incurred as part of the

medical treatment need to be borne by the individual. Generally this list

includes aprons, sterilization charges, gloves, Dettol, gloves etc.

• To understand whether it is a co-insurance policy: Before availing a

health policy, the prospective customer should understand whether it is a co-

insurance policy or not. It is advisable to get an individual health insurance

policy with a co-insurance payment option. The maximum amount does not

exceed 15% of the entire medical coverage for a particular disease.

• Understanding and updating oneself about expiry period regarding the

policy cover: An individual health insurance cover entails regular premium

payments on a monthly, half yearly or annual basis before the expiry of a

particular policy. Non-payment of premium within the stipulated time results in

the lapsing of the policy with subsequent break in the policy coverage of the

concerned individual. Even though the concerned individual holds policy with

an Insurance company for many years together, a break in the policy coverage

(Which generally does no exceed more than 15 days is treated as fresh policy




5.1 Current status of private Health Insurance

5.2 Awareness of Health Insurance
5.3 Need to spread Health Insurance



The escalating cost of medical treatment today is beyond the reach of a

common man. In case of a medical emergency, cost of hospital room rent, the

doctor's fees, medicines and related health services can work out to be a huge

sum. In such times, health insurance provides the much needed financial relief.

An investment in health insurance scheme would be a judicious decision. The

health insurance scheme could either be a personal scheme or a group

scheme sponsored by an employer. Some of the existing health insurance

schemes currently available are individual, family, group insurance schemes,

senior citizens insurance schemes, long-term health care and insurance cover

for specific diseases.

Figure no.5.1 Types of Health Insurance plan



a) ESIS( Employees state Insurance Scheme)

b) Central Government Health Scheme (CGHS)

C) Self-Employed Women‘s Association (SEWA)



a) Individual policy

b) Group Mediclaim policy (also known as GMC).



Community-based funds refer to schemes where members prepay a set

amount each year for specified services. The premium are usually flat rate (not

income-related) and therefore not progressive. Making profit is not the purpose

of these funds, but rather improving access to services. Often there is a

problem with adverse selection because of a large number of high-risk

members, since premiums are not based on assessment of individual risk

status. Exemptions may be adopted as a means of assisting the poor, but this

will also have adverse effect on the ability of the insurance fund to meet the cost

of benefits. Community –based schemes are typically targeted at poorer

populations living in communities, in which they are involved in defining

contribution level and collecting mechanisms, defining the content of the benefit

package, and / or allocating the schemes, financial resources (International

Labour Office Universities Program 2002 as quoted in Ranson K & Acharya


Such schemes are generally run by trust hospitals or nongovernmental

organizations (NGOs). The benefits offered are mainly in terms of preventive

care, though ambulatory and in-patient care is also covered. Such schemes

tend to be financed through patient collection, government grants and

donations. Increasingly in India, CBHI schemes are negotiating with the for profit

insurers for the purchase of Custom designed group insurance policies.

However, the coverage of such schemes is low, covering about 30-50 million.

A review by Bennett, Cresses et al. indicates that many community-based

insurance schemes suffer from poor design and management, fail to

include the poorest-of-the poor, have low membership and require extensive

financial support. Other issues relate to sustainability and replication of such



This scheme established in 1992, provides health, life and assets insurance to

women working in the informal sector and their families. The enrolment in the

year 2002 was 93 000. This scheme operates in collaboration with the National

Insurance Company (NIC). Under SEWA‗s most popular policy, a premium of

Rs 85 per individual is paid by the woman for life, health and assets

insurance. At an additional payment of Rs 55, her husband too can be covered.

Rs 20 per member is then paid to the National Insurance Company (NIC) which

provides coverage to a maximum of Rs 2 000 per person per year for

hospitalization. After being hospitalized at a hospital of one‗s choice (public

or private), the insurance claim is the responsibility for enrolment of members,

for processing and approving of claims rests with SEWA. NIC in turn receives

premiums from SEWA annually and pays them a lump sum on a monthly basis

for all claims reimbursed.


Chennai, Tamil Nadu was established in 1963. It offers sliding premium

with free care to the poorest. The benefits include discounted rates on both

outpatient and inpatient care, with the VHS functioning as both insurer and

health care provider. In 1995, its membership was 124 715. However, this

scheme suffers from low levels of cost recovery due to problems of adverse




Social insurance is an earmarked fund set up by government with explicit

benefits in return for payment. It is usually compulsory for certain groups in the

population and the premiums are determined by income (and hence ability to

pay) rather than related to health risk. The benefit packages are

standardized and contributions are earmarked for spending on health services

The government-run schemes include the Central Government Health Scheme

(CGHS) and the Employees State Insurance Scheme (ESIS).


Since 1954, all employees of the Central Government (present and retired)

some autonomous and semi-government organizations, MPs, judges, freedom

fighters and journalists are covered under the Central Government Health

Scheme (CGHS). This scheme was designed to replace the cumbersome and

expensive system of reimbursements. It aims at providing comprehensive

medical care to the Central Government employees and the benefits

offered include all outpatient facilities, and preventive and promotive care in

dispensaries. Inpatient facilities in government hospitals and approved private

hospitals are also covered. This scheme is mainly funded through Central

Government funds, with premiums ranging from Rs 15 to Rs 150 per month

based on salary scales. The coverage of this scheme has grown

substantially with provision for the non-allopathic systems of medicine as well as

for Allopathy. Beneficiaries at this moment are around 432 000, spread across

22 cities.

The CGHS has been criticized from the point of view of quality and

accessibility. Subscribers have complained of high out-of-pocket expenses due

to slow reimbursement and incomplete coverage for private health care

(as only 80% of cost is reimbursed if referral is made to private facility when

such facilities are not available with the CGHS).


The ESIS programmed has attracted considerable criticism. A report based on

patient surveys conducted in Gujarat found that over half of those covered

did not seek care from ESIS facilities. Unsatisfactory nature of ESIS

services, low quality drugs, long waiting periods, impudent behavior of

personnel, lack of interest or low interest on part of employees and low

awareness of ESI procedures, were some of the reasons cited.


Apart from the government-run schemes, social security benefits for the

disadvantaged groups can be availed of, under the provisions of the Maternity

Benefit (Amendment) Act 1995, Workmen‗s Compensation (Amendment)

Act 1984, Plantation Labour Act 1951, Mine Mines Labour Welfare Fund Act

1946, Beedi Workers Welfare Fund Act 1976 and Building and other

Construction Workers (Regulation of Employment and Conditions of Service)

Act, 1996.

The Government of India has also undertaken initiatives to address

issues relating to access to public health systems especially for the

vulnerable sections of the society. The National Health Policy 2002

acknowledges this and aims to evolve a policy structure, which reduces

such inequities and allows the disadvantaged sections of the population a

fairer access to public health services. Ensuring more equitable access to health

services across the social and geographical expanse of the country is the main

objective of the policy.

6) Voluntary health insurance schemes or private-for-profit schemes

In private insurance, buyers are willing to pay premium to an insurance

company that pools people with similar risks and insures them for health

expenses. The key distinction is that the premiums are set at a level, which

provides a profit to third party and provider institutions. Premiums are based on

an assessment of the risk status of the consumer (or of the group of

employees) and the level of benefits provided, rather than as a proportion of the

consumer‗s income.

In the public sector, the General Insurance Corporation (GIC) and its four

subsidiary companies (National Insurance Corporation, New India Assurance

Company, Oriental Insurance Company and United Insurance Company) and

the Life Insurance Corporation (LIC) of India provide voluntary insurance


The Life Insurance Corporation offers Ashadeep Plan IIand Jeevan Asha Plan

II. The General Insurance Corporation offers Personal Accident policy, Jan

Arogya policy, Raj Rajeshwari policy, Mediclaim policy, Overseas Mediclaim

Policy, Cancer Insurance policy, Bhavishya Arogya policy and Dreaded

Disease policy. Of the various schemes offered, Mediclaim is the main product

of the GIC.

The Medical Insurance Scheme or Mediclaim was introduced in

November 1986 and it covers individuals and groups with persons aged 5

–80 yrs. Children (3 Months – 5 yrs) are covered with their parents. This

scheme provides for reimbursement of medical expenses (now offers cashless

scheme) by an individual towards hospitalization and domiciliary hospitalization

as per the sum insured. There are exclusions and pre-existing disease clauses.

Premiums are calculated based on age and the sum insured, which in turn

varies from Rs 15 000 to Rs 5 00 000. In 1995/96 about half a million Mediclaim

policies were issued with about 1.8 million beneficiaries. The coverage for the

year 2000-01 was around 7.2 million.

Another scheme, namely the Jan Arogya Bima policy specifically targets the

poor population groups. It also covers reimbursement of hospitalization costs up

to Rs 5 000 annually for an individual premium of Rs 100 a year. The same

exclusion mechanisms apply for this scheme as those under the

Mediclaim policy. A family discount of 30% is granted, but there is no group

discount or agent commission. However, like the Mediclaim, this policy too has

had only limited success. The Jan Arogya Bima Scheme had only covered 4 00

000 individuals by 1997.

The year 1999 marked the beginning of a new era for health insurance in the

Indian context. With the passing of the Insurance Regulatory Development

Authority Bill (IRDA) the insurance sector was opened to private and foreign

participation, thereby paving the way for the entry of private health insurance

companies. The Bill also facilitated the establishment of an authority to

protect the interests of the insurance holders by regulating, promoting and

ensuring orderly growth of the insurance industry. The bill allows foreign

promoters to hold paid up capital of up to 26 percent in an Indian company and

requires them to have a capital of Rs 100 crore along with a business plan to

begin its operations. Currently, a few companies such as Bajaj Alliance, ICICI,

Royal Sundaram, and Cholamandalam among others are offering health

insurance schemes. The nature of schemes offered by these companies is

described briefly.


a) Individual policy-

One may obtain a health insurance policy through two different ways:

individually or through group insurance. In individual insurance, a person gets

to talk with the health insurance providers one-on-one, in order to get

themselves a deal that would have most of their requirements fulfilled.

Individual health insurance is such that one is able to choose what s/he wants,

and is not saddled with any and everything. Many people prefer to go for

individualized health insurance because they get to choose what they want to

be covered for. In complete honesty they have surrender any knowledge of

their family history in terms of illness so that their cases can be assessed

thoroughly. In the case of an individual policy, the risks of being rejected before

commencement of the policy are higher. This is because of the possibility of the

smallest of things affecting any clause in the policy. Sometimes insurance

companies do this to save on expenses and payments that may not really be


b) Group Health Insurance Policy

In contrast to this is a group insurance policy because there are fewer chances;

insurance companies do not usually reject paying up dues to people in a group

insurance policy. Group insurance policies tend to be more successful and less

prone to obstacles; often in-depth checkups are not conducted as they are with

individual health policies. The reason behind this is that insurance companies

are suspicious of individuals who approach them; they feel that there must be a

particular reason for them approaching them. This is sometimes true, and so,

individuals tend to be scrutinized much more than group members.



India has lessons to learn from the experience of Chile. India too has a dual

system of care—a private fee-for-service based sector where the money

is paid out-of-pocket by individual households and a tax-based public

sector where the providers are salaried. Utilization of insurance under both

these systems is partly restricted and rationed by the affordability of the

individual household and availability of the budget. On the other hand,

insurance as a means of financing is a far more sophisticated mechanism,

requiring a comprehensive understanding of the failures that characterize

health insurance markets.

For example, a problem such as asymmetry in information puts the patient and

the insurer at a disadvantage due to their inability to resist or challenge medical

opinion regarding an existing condition or future treatment. Besides, in the

absence of knowledge of prices, the provider can short change the two by

overcharging. Second, cashless insurance creates disincentives to control

costs as it appears to be a free‗ good for the patient and the provider, often

resulting in excessive treatment by the provider (induced demand) and

frivolous use by the patient taking treatment even for a condition which he

would normally have ignored or cured with a home remedy (moral hazard).

Third, it is only the patients who know their health status. Since it is normally

those in need of health care who tend to subscribe to health insurance, this

puts the risk on insurance agencies to resort to extensive processes of

risk selection, such as medical examination, before being given admittance as

an enrollee and focusing on low risk groups, such as the young or healthy. Risk

selection in individual- based policies however results in increasing the loading

fee and consequently the cost of premium. This is one reason for the attractive

group discounts being as high as 67%. For these reasons, private commercial

health insurance is known to select its customers—the young, healthy,

rich, males—leaving the bad risks to the government—old, poor, young

women in the reproductive age group, and the ill.

Health insurance in India is usually associated with the Mediclaim policy of the

GIC, which was introduced in 1986 as a voluntary health insurance

scheme offered by the public sector. The premium based on the age, risk and

the benefit package opted for, ranged from a minimum premium of Rs 201 for

those more than 25 years of age, to a maximum benefit of Rs 15,000 with

discounts for group memberships. In 2001, there were 78 lakh persons covered

under Mediclaim. The subscribers are usually from the middle and upper class,

especially since there is a tax benefit in subscribing to Mediclaim.

The standard Mediclaim policy covers only hospital care and domiciliary

hospitalization benefits. Most medical conditions are reimbursed though there

are important exclusions, such as pre-existing diseases, pregnancy and child

birth, HIV/AIDS, etc. Hospitals with more than 15 beds and registered with a

local authority can be identified as providers.

The Insurance company (or the TPA, where applicable) administers the

scheme. Being an indemnity scheme, the patient pays the hospital bills and

submits the necessary documents to the company. The company in turn

reimburses the patient.

There is also uncertainty about the amount reimbursed, there are times when

the patient is reimbursed only partially, the usual reason being the

insufficiency of documentation. The policy is not renewed automatically and is

dependent on the timely payment of premium. Ellis et al. observed that the GIC

was more interested in whether the claim pertained to an existing disease or

whether the facility was qualified or not, but spent little time on detecting fraud.

With claims exceeding 30% a year, more than the household spending, it

reflects the problem of moral hazard which requires close monitoring.

Second, it was also observed that the GIC sets premium on the filing of claims

and not actual amounts settled, giving it a cushion year on year as

settled claims amounts are always lower than those filed, an amount that

remains unadjusted. During 1994, 4.4% of the insured persons made a claim, of

which only 75% of claims were settled. The claims ratio was 45%. However, of

late, the claims ratio is growing at a fast rate, allegedly because of

collusion between the patients, insurance agents and hospitals.

From the above discussion, five features that characterize the Health

Insurance system in India emerge:

1. By and large, the system offers traditional indemnity, under which the insured

first pay the amount and then seek reimbursement. Under indemnity, all known

diseases or health conditions are excluded and therefore such policies typically

have a large number of exclusions. This also means that those most in need of

insurance, i.e. The sick, get excluded for any financial risk protection against

the diseases they are suffering from.

2. It is a fee-for-service-based payment system. Such a system of payment

is advantageous for the provider since he bears no risk for the prices he

can charge for services rendered by him. Combined with the asymmetry in

information, such a system usually entails increased costs.

3.Policies provide a ceiling of the assured sum. Such a system, and that

too within a fee-for-service payment system, results in short changing the

insured as he gets less value for money, as the provider and the insurer

have no obligations to provide quality care and/or over provide/over charge

services so long as the amounts are within the assured amount of the insurance


4.The system is based on risk-rated premiums. This again puts the risk on the

insured as the premium is fixed in accordance with the health status and age.

Under such a system, women in the reproductive age group, the old, the poor

and the ill get to pay higher amounts and are discriminated against.

5.The system is voluntary, making it difficult to form viable risk pools for

keeping premiums low.


Insurance may be described as a social device to reduce or eliminate risk of life

and property. Under the plan of insurance, a large number of people associate

themselves by sharing risk, attached to individual insurance plan that

exclusively covers healthcare costs and is called Health Insurance.

Since the past two decades, there has been a phenomenal surge in

acceleration of healthcare costs. This has compelled individuals to have a re-

look on their actual monthly expenditures, spending patterns and

simultaneously allocate a proportion of their income towards personal

healthcare. This has resulted in individuals availing healthcare insurance

coverage not only for themselves but also for their family members including

their dependants. In short, healthcare insurance provides a cushion against

medical emergencies.

The concept of Insurance is closely concerned with security. Insurance acts

as a shield against risks and unforeseen circumstances. In general, by and

large, Indians are traditionally risk-averse rather than risk lovers by nature.


Indian Health Insurance is primarily classified into 2 categories:

•Cashless Hospitalize

• Medical Reimbursement


Cashless hospitalization is a specialized service provided by an insurer wherein

an individual is not required to pay the hospitalization expenses at the time of

discharge from the concerned hospital. The settlement is done directly by the

insurance company (or insurer). However, prior approval is a must from the

TPA (Third Party Administration ) before availing the benefits under this option

cashless hospitalization can be of two types

• Planned hospitalization: This is a planned hospitalization wherein the

insured is aware of the hospitalization in advance. This duration period may

vary from case to case. Examples include: FTND (Full Term Normal Delivery),

Chemotherapy treatment for carcinoma (cancer), for cataract

surgery, tonsillectomy (removal of tonsils).

• Emergency hospitalization: It is a sudden hospitalization that may be either

an emergency or due to unforeseen circumstances. In short, hospitalization is

not anticipated in advance. Examples include RTA (Road Traffic Accident),

Myocardial infraction (heart attack) acute appendicitis.


Re-imbursement means to repay or to compensate. Thus, Medical Re-

imbursement means to repay the products/services availed during

hospitalization and more importantly after the completion of the treatment

Under this procedure, the insured has to bear the entire expenses incurred

during hospitalization. After getting discharged from hospital, the insured/policy

holder can claim medical reimbursement. For availing benefits under this option,

the insured has to approach the concerned TPA under which he/she is covered,

fill the requisite form and satisfy all the requirements as mentioned. This

includes submission of TPA card, policy paper, discharge summary,

prescriptions, diagnostic laboratory reports, OPD treatment details etc. A sum

is granted as reimbursement for treatment expenses.

A recent survey conducted in 2008 showed that only 3% of the entire Indian

population has availed some sort of insurance policy and enjoys benefits

included under its coverage. This miniscule percentage constitutes both –

PSUs (Public Sector Undertakings) and Private insurance companies. Since, the

general public are by and large ignorant about the benefits of availing healthcare

insurance policies, there lies an urgent need to educate the masses regarding the

importance of Healthcare insurance and the benefits derived on account of itThere

are numerous reasons for not availing health insurance. There is a lack of knowledge

regarding the existing insurance products/services in the markets. On top of it, there

are numerous misconceptions about Insurance prevalent in the Indian Markets. Also

there are numerous fly-by-night agents out to fleece the gullible Indian public.

In India, public funded healthcare is available only to a miniscule section of BPL

(Below Poverty Line) groups, low-income groups and to government employees. The

Indian Government has formulated Employee State Insurance Scheme (ESIS) that

focuses on the public healthcare policy for low-income groups. The government

employees can avail Central Government Health Scheme (CGHS) that offers medical

treatment at a subsidized cost.

With the opening up of insurance sector for private participation, numerous players

have entered the healthcare segment, but inspite of the entry of private sector,

penetration of insurance coverage in India is abysmally low. Recently a legislature has

been passed in the Indian Parliament allowing 49% of FDI in insurance industry.


The condition of health insurance in India is not up to mark. 85% of Indian

population does not use health insurance to finance their medical expenditure.

These people pay for their medical expenditure from their pocket. As a result,

many of these uninsured individuals either end up with poor quality healthcare

or have to bear financial hardships. The financial stress that is engendered due

to rising medical expenses is believed to affect the lifestyle of all family

members for years. If the same continues, how will the people of India pay their

medical expenses in the future? How will the efforts of medical care providers

be fruitful, when there will be no one to avail medical treatment?

Thus, there is a need to increase the number of insured individuals in India.

Working in this direction, every individual, every medical care provider and

every health insurance company should play an active role. It is only then

possible that people would be able to avail quality healthcare in times of

medical emergency. Insurers have designed plans, but people should be

encouraged to buy them so that the overall condition of medical care

insurance in the country can be improved. The products and offerings brought

by different medical insurance providers vary from each other. The only point

that should be brought to light is that people should buy these products to

remove inconveniences from quality medical treatment. These products offer

much relief to them and their family members at the time of medical

emergency. There is no need for an insured individual to scramble for the

arrangement of funds at the last hour. Hence, the Government and all the

associated bodies should all offer their support in spreading health insurance

awareness so that Indian citizens are aware of the right to seek quality

healthcare without any financial thought.

Health of its citizen is one of the top priorities of a nation. A nation with Healthy

people would be able to pursue its agenda with dexterity and execute those

with fine see. Total Health care boost economic growth , reduces poverty and

lowers mortality rate. The success of many countries lies in their special effort

to cover the entire population with a scheme of health insurance that keep

them protected against unforeseen health hazards through insurance coupled

with wellness program . The Health insurance converge is well established

straightway . In India as also in many other countries with low per capita, the

burden of having to pay for unplanned and expenditure for medical treatment is

very acutely affecting large population. The total health expenditure in India is

around 5% of gross domestic products(GDP) in which bulk funding comes from

private household as mentioned above.

The Government should educate people about the rise of medical costs and

the importance of these products. Regulators should bring change in the

guidelines, allowing only the right players to enter the health insurance market.

Health insurance providers should design products, according to health needs

of target customers and encourage people to buy them. The combined efforts

of all these bodies will surely bring some improvement.


In the Indian non-life insurance industry, health insurance is the second largest

segment. It has picked up pace in previous fiscals, and is set to reach new

heights in the coming few years as public and private insurers are coming up

with various schemes to cover the untapped insurance market. As per our

latest findings, the Indian health insurance industry is one of the most prolific

ones in the world. As the healthcare costs and awareness are rising in the

country, we expect the segment to grow with gross premiums scaling up at a

CAGR of around 32.5% during 2010-11 to 2013-14. India‘s health insurance

landscape has undergone tremendous changes in the last few years with the

launch of several health insurance schemes, largely initiated by central and

state governments. We observed that a significant share of coverage has been

achieved through central and state government-sponsored health insurance

schemes. Besides, private and public health insurers have introduced a large

number of plans and schemes to cover an individual and his family against

critical ailments like heart failure, stroke and kidney failure.

As a chunk of population in India is living with HIV/AIDS, the private health

insurance companies are cashing in on the big opportunity by designing special

policies for such people. India could soon see a national medical insurance

policy for people living with HIV (PLHIV). The National Aids Control

Organization is planning to make insurance 'inclusive and universal for PLHIV',

we observed while studying and analyzing trends in the Indian health insurance


During the health insurance market analysis, researcher found that there are

around 28 active third party administrators (TPAs) in India, and the TPA

infrastructure in the country has witnessed a strong growth with the rising

penetration of health insurance. The TPAs are recognized as valuable service

providers in the health insurance services delivery chain. Our comprehensive

report also identified that emergence and growth of health insurance have

given rise to a need for maintaining and optimizing claims processing and

management. It aims at enhancing services, offered by health insurance

companies, for the maximum benefit of the insured.

According to the study, health insurance portability is also gaining popularity in

India as it allows health insurance policyholders to switch companies while

retaining their no-claims benefit. The report also provides an overview of the

rural health insurance segment, and expects that the number of uninsured rural

households will decrease with time. Various Insurance Regulatory and

Development Authority (IRDA) acts and amendments have also been studied

to understand the regulatory framework for the industry. The research also

looks into profiles of various players in public and private sectors to present the

competitive landscape and a balanced outlook of the Indian health insurance

industry to clients.



6.1 IRDA
6.2 Rules for Health Insurance Claim Settlement by IRDA
6.3 Third Party Administrator
6.4 Role Of TPA
6.5 Standard Health Insurance Model
6.6 Structural and Operational Working Of Health Insurance
6.7 Claim management



6.1 IRDA


Insurance regulator - Insurance Development and Regulatory Authority (IRDA)

is soon coming up with a separate health insurance claims settlement

regulation, which would address issues arising out of claims not honored by the

insurers in a time bound manner. Presently there is no separate provision for

the health insurance claim settlement. The IRDA is working on a draft

regulation and it is expected to be put up on the regulator‘s website

for comments and suggestions by April 30, 2012.

A public interest litigation was filed by a Mumbai-based insurance activist in

February 2011 against IRDA which said ―there are a great deal of

inconsistencies and violations in the health insurance industry, which are

directly detrimental to the interests, health and financial well being of crores of

Indian consumers.‖ The fight between the hospitals and insurers and their third

party administrators (TPAs) should not impact consumers, it said.

After hearing the petition last month, a division bench of Chief Justice Mohit

Shah and Justice Roshan Dalvi said in its order, ―We expect that the IRDA will

display the draft regulation for health care on its website as possible.

There are currently more than 7 crore health insurance customers with a total

premium of Rs. 11,000 crore. Out of the 4 public sector general insurers, New

India Insurance incurred a loss of Rs 422 crore in FY ‗11 and the rest were

making profits. Out of the 15 private non-life insurance companies only 2 made

profits. The net loss of the general insurance industry was Rs 1,019 crore

for the last financial year.

There have been number of cases where insurers were accused by the

customers for denying, delaying or reducing claim amounts deliberately.

In2010, the 4 public health insurance companies, having a 60% share of the

total market, struck off a large number of hospitals from their Preferred Partner

Network (PPN) in almost all metros. PPN hospitals provide cashless medical

facility under the health insurance policy. Insurers alleged that there were some

hospitals who along with the patients were inflating the medical bills and

some TPAs were also involved in this.

There is documentary evidence of some insurance companies providing

incentives to their TPAs to lower the amount claimed by a customer. Experts,

however, feel that when there are mechanisms the IRDA has developed to deal

with claims, there is no need for a new set of regulations.

IRDA is planning to change Health Insurance in India:-

On 30th May 2012, IRDA published an exposure draft of IRDA (Health

Insurance) Regulations 2012. The exhaustive 44 page new draft regulations for

Health Insurance released, reflect IRDA's continued efforts and intentions to

"clean up" the grey areas in Health Insurance in India.


All Health Insurance products henceforth would be renewable for

lifetime, without any renewal ceasing age.

Grace period for renewal of Health Insurance would be 30 days, before

which delay of renewal could be condoned by the Insurance Company.

Health Insurance policies from Life Companies would have a minimum

term of 4 years, whereas Non-Life companies could have a maximum

term of 3 years.

Clear procedures specified for smooth migration of children from

Floater plans proposed by their Parents, into their own independent


Insurers would be required to have policy wordings of all their products

mandatorily put up on their website. (Yes, there are some good

companies which don‘t have Policy Wordings on their portal)

Communication of Denial of Coverage, and Loading on fresh Health

Insurance proposals should be in writing.

Separate Claims and Grievance Cell for Senior Citizens.

Loading on Claims only when individual claims for 3 consecutive years

exceed 500% of the renewal premium.

Health Insurance Customers with multiple insurance policies, would

have a choice to choose which product he wants to use. Contribution

would be effected between Insurance companies, without involving the


Standard Definitions, Exclusions, and Forms (like Claim Forms) are

expected to be released by IRDA.

Renewal Procedure (regarding maximum age, changes in coverage at

later ages, upgrading cover, loading charges) would have to be

clearly detailed in the policy wordings

Any change in Terms of the policy at the time of renewal need to be

communicated with the policy holder 3 months before the renewal date.

Insurers are required to mandatorily settle claims within 30 days of

submission of complete documents.

Insurance Companies cannot reject claims on technical grounds of

delayed submission, if the customer can provide valid reasons for the

delay caused.

Cashless Cards should be issued within 15 days of issue of the

Health Insurance Policy. No Fresh cards would be issued every year on

renewal. The same cashless card would be continued every year.

Hospital Network would be the responsibility of the Insurance

Company, and not the TPA (which is the case currently) Insurance

Companies would be required to make direct agreements with Hospitals.

These agreements could be tripartite with the TPA. In short, Insurance

Companies would administer the network and would be held responsible

for issues that arise in the network. (Since TPAs were originally brought

in to primarily administer the network of hospitals, their role after these

regulations take effect, would be diluted significantly.)

Any Change of TPA in a policy should be informed to customer with

30days of such change. All data should be seamlessly transferred to the

new TPA, ensuring there is no hassle caused to the customers.


A Third Party Administrator (TPA) is an organization which processes claims

or provides cashless facilities as a separate entity. Seen as an outsourcing of

claim processing, TPA processes claims for both retail and corporate policies.

The risk of loss incurred remains with the insurance company. The insurance

company usually contracts a reinsurance company to share its risk. An

insurance company hires TPA to manage its claims processing, provider

network and utilization review. While some TPA operates as units of insurance

companies, most are often independent.

TPA is also involved in handling employee benefit plans such as processing

retirement plans. Handling healthcare or employee benefit claims requires

using a specialized set of manpower and technology, therefore hiring a TPA for

the same is a more cost effective method. The Insurance Regulatory and

Development Authority of India (IRDA) defines TPA as a Third Party

Administrator who, for the time being, is licensed by the Authority, and is

engaged, for a fee or remuneration, in the agreement with an insurance

company, for the provision of health services. TPA was introduced

by the IRDA in 2001.

Being one of the prominent players in the managed care industry, it has the

expertise and capability to administer all or a portion of the claims process. The

services include claims processing, premium collection, enrollment and

cashless processing. Insurance companies setting up its own health plan often

outsource certain responsibilities to a TPA.

The TPA acts like a claims adjuster for the insurance company. In some cases

the insurance company sets up an entire department within their own company

to act as TPA as opposed to hiring a commercial TPA company.


Large number of the health insurance companies in India suffer losses and

have been doing so for years together. The group health insurance profile is

what may cause optimum leakage to the health insurance companies in India.

TPA was introduced through the notification on TAP Health Insurance

regulation 2001 by the IRDA-their basic role is to function as intermediary

between the insurer and the insured and facilitate the cashless services of

insurance .For this service they are paid a fixed percent of insurance premium

as commission . The commission is currently fixed at 5.6 percent of premium.

The introduction of TPAs is of great help and relief to the insurance

companies, which have been searching for ways and means to get their

management expenses in line with the specifications laid down by the IRDA.

TPA is maintaining a database of policy holders and issue identity cards with

unique identification numbers to them. They also handle all the policy- related

issues, including claim settlements for the policy holders Insurance companies

(insurers) can now outsource their administrative activities, including settlement

of claims, to third party administrators, who offer such services for a cost. The

insurers remunerate the TPAs; hence, policyholders receive enhanced facilities

at no extra cost. Once the policy has been issued, all the records will be

passed on to the TPAs and all further correspondence of the insured will be

with the TPAs and not with the insurance companies

The TPA's are expected to provide value-added services to the consumers, like

arranging ambulance services, medicines and supplies, guiding policy holders

for specialized consultation, and providing information about 24- hour help

lines, health facilities, bed availability, organization of lifestyle management and

well- being programs.

In the middle of 2010, the public sector health insurance companies, namely

United India, New India, Oriental Insurance and moreover National Insurance

took a tough stand and penalized major hospitals where such procedure were

taking place. They eliminated these hospitals from the list from which cashless

medical services can be availed by the customers. This caused a lot of pain to

the insured, however the industry woke up to the fact that insurance companies

were being taken for a ride. The 4 public sector health insurance companies

then decided to float a TPA of their own and even do away with the middlemen

who were not falling in line. This action is likely to cut down the frequency of

false claims creeping their business. The move has acquired big support even

from the private health insurance companies. The issuer was not of the public

sector health insurance companies alone as well as certain private sector

companies have done away with the practice of TPAs as well as used to

process claims through in-house representatives. The TPA undoubtedly aims

to give the health insurance industry the required boost in India.


ID card: TPA provides ID cards to all their policyholders in order to validate

their identity at the time of admission.

The TPA's undertakes "Pre-authorization" before a surgical procedure to

ease claim processing

24 hours customer support services: The TPA provide assistance through

their 24 hrs call center that provides information regarding policyholder's data,

provider network, claim status, benefits available with existing cardholder, etc

All these details are furnished on request.

Cashless Hospitalization: Each policyholder is provided with a list of

empanelled hospitals where in he/she can avail cashless hospitalization.

Claim Management: On behalf of the insurance companies TPA administers

and settles claims for hospitals and policyholders .Policyholders have the privilege

of expressing their grievances to the concerned insurance company or at the

consumer's court if they are not satisfied with the services of a TPA.


The TPA keeps and maintains all the records of medical insurance policies of

an insurer.

The TPA issues identity cards to all the policyholders. The policyholders will

have to show the identity cards to the hospital authorities before availing any

services from the hospital.

In case of a claim, policyholders will have to inform the TPA on a 24 hr toll-

free line provided by them

After informing the TPA, the policyholder will be directed to a hospital where the

TPA has a tied up arrangement. However, policyholders have the option to be

admitted at another hospital of their choice in which case, payment will be on

reimbursement basis.

TPA pays for the treatment; they issue an authorization letter to the hospital for

the admission of the policyholder in the hospital.

At the point of discharge, all the bills will be sent to the TPA while they are

tracking the case of the insured at the hospital.

TPA makes the payment to the hospital.

TPA sends all the documents necessary for consideration of claims, along with

the bills to the insurance company.

The insurance company then reimburses the TPA


Before IRDA allowed the TPA‘s to formally enter in to the insurance market

there were intermediaries who were acting on behalf of the corporate and

playing very similar role of present days TPA‘s. Corporate were utilizing these

agencies to help them make process of claim reimbursement easier and

smoother for their employees, Also these agencies were helping to market the

insurance product available –mainly the mediclaim –to corporate. As regulation

,2001er IRDA , the following are the conditions , specified for the TPA‘s. Figure

5 shows the detail condition specified by IRDA by TPA‘s.

Only a company with share capital 1crore of registered under the companies Act.
1956 can function as TPA

An organization is desires to function as TPA shall license from the authority by

make in a application in writing in form TPA and accompanied with fees of RS

The Authority, on examination of the application and detailed furnished by the

applicant, may issue a license , if it satisfied that the applicant TPA is eligible to
function as TPA

Every TPA approved by the Authority shall pay a further Rs.30000(Rupees thirty
thousand only )to the authority as license fees before the license granted to it.

A copy of agreement entered in to between the TPA and insurance company or an

modification thereof , shall be filed , within 15 days of its execution and

Every TPA shall appoint , with due intimation to the authority ,from among its
directors or senior employees, a chief Administrator officer (CAO) Chief executive
officer(CEO) who shall be responsible for the proper day to day administration
activities of the TPA

Where the authority decides to issue a license to the applicant to act as TPA, it shall
issue the same in the form TPA-2

Every License granted by the Authority to a TPA, shall remain in force for three years
, unless the authority decides , either to revoke or Cancel it earlier , as provided in
these regulations. A license granted to a TPA may be renewed for a further period of
three years


Figure no.6.4.1 Conditions Defined by IRDA for TPA






Making regular payments ( for PROFIT OR
to a fund NON PROFIT)


Source: International research of multidisciplinary research

Figure no. 6.5.2 Standard Health insurance Module

In graphical representation of working environment of insurance industry and

role of TPA in the system .The core product or service of a TPA is ensuring

cashless hospitalization to policyholder. Intermediation by a TPA is ensuring

that policy holder hassle- free services. Insurance companies pay for efficient

And cost efficient services and health care providers get their reimbursement

on time. By doing this it is expected that TPA‘s would develop appropriate

system and management structures aiming of controlling costs ,developing

protocols to minimize unnecessary treatments, Investigations, Improvement

quality of services and ultimately lead to lower insurance premium.

However the system is currently going through teething troubles. Cashless

policies where the insurer directly pays the hospital bill to the health care

providers have not yet fully materialized.

Other than the above diagram we can see that there are main three

stakeholders in the health insurance system. These are insurance companies,

Health care providers and customers. Other than these, two more parties which

are important and involved in the process are of Third party Administrator and

regulator. Important difference between health insurance and any other kind of

insurance there are more stakeholders than in the other type of insurance and

this makes the whole process more complex and difficult to control.



Operational Health Insurance procedure

Operational and Surgical related

Critical Illness Related

Step1- Claims needs to be

confirmed by a registered
Network Non practitioner including a
Hospital network Relevant specialist
Hospital acceptable to the company (
The cost of which shall be
borne by the policy Holder)

Step1- Complete Pre Step 1- Filling all the

authorization form required claim
documents within 60 Step 2- Life Insured
and send to TPA
days of the date of should have survived
happening of the for at least 28 days after
event with relevant happening of the Event

Step 2-Cashless
Hospitalization Step 2-Receive benefits Step 3- Filling all the
as applicable (Payout required claim
may be reduced by 20 documents within 60
to 30% in case of days of the date of
hospitalization or happening of the event
undergoing surgery in a
network Hospital

Figure no 6.6.3 Operational Health Insurance Procedure


Health insurance claims management has evolved significantly in India over the

past 10 years. Since the introduction of Mediclaim in the mid 1980s till the

advent of TPAs in 2002, claims management focused primarily on

reimbursement claims. With the advent of cashless hospitalization, the entire

claim process changed. New processes, such as prior authorization became

vital for providers and payers. Time, which was not a crucial element in

processing reimbursement claims earlier, all of a sudden became a vital

parameter. Frequently the patient was already admitted when an authorization

request reached a TPA, this meant that a response had to be given within 4-6

hours so the full treatment could commence. Authorization limit enhancements

were also sought as the treatment progressed or as the patient was ready for

discharge, they also required an urgent response.

The early claim systems were ad-hoc applications, frequently improvised upon

to incorporate the ever changing multitude of payers / providers requirements,

customer expectations and health insurance products. They were mostly

reactive systems, supporting existing products and practices and not designed

to support future requirements. Thus a peculiar chicken and egg scenario

existed- how could an insurer introduce a new product when systems to service

it did not exist? A good claims management system must service existing

products well while having the in-built flexibility to support products with new

and unique features, such as outpatient coverage or products with a savings

component. Increased flexibility to incorporate on-the-fly modifications in

benefits and processes, in-built intelligence to standardize routine processes

and rules based prompts and alerts are now available in newer claims system.

Not only do they reduce manual intervention and improve process efficiencies,

they can auto adjudicate and process claims which meet all compliance

parameters thus enabling claims staff to provide more time for claims that

require detailed analysis.


Over the next decade, the insurance industry will witness continuous evolution

in health insurance products and processes. The trend to move the claims

function in-house may also be adopted by more insurers. This will create a

unique opportunity for claims system vendors who can offer systems and

applications with a high level of flexibility and automation. The starting point is a

well defined and intelligent work flow management module to ensure optimum

work routing and distribution, in-built escalation and strong external

communication features (like auto letter generation for various scenario‘s or

SMS gateway). The ability to easily configure new products at a granular level

is a vital requirement this enables the automation of various validation checks

on policy, claimant, benefits and provider. A product configure at or interacts

with a rules engine to define product benefits and exclusions to facilitate

automated adjudication of claims. Appropriate pre-processing edits before the

adjudication can substantially increase efficiency and process claims faster. . In

fact in the U.S. auto adjudication rates of 65% to 85% are not uncommon,

albeit a very high percentage of these are simple primary care claims. Since

new products will attempt to differentiate themselves with new service models,

the claims systems will require business process builder to build operational

workflow compatible with the product. In summary, the product configuration

module, business process builder and rule engine is already becoming the core

of the new generation claims systems. Such integrated solutions enable the

claims teams to achieve significant automation of validation checks at the

policy and the product level including verification of benefit and coverage limits

to streamline prior authorization for cashless claims.

Access to data in the policy administration system and provider module is vital

at this stage. Once the claim data is in the system, pre-defined rules and

product specific processes can be applied. After ensuring that all mandatory

information is provided and is valid, the first step would be to match the claim

against the prior authorization. The second step would be to conduct checks for

medical appropriateness, compliance with provider contracts and variation from

usual and customary practices. Much of this can be automated through the use

of standard treatment guidelines embedded in the system to identify excessive

or unwarranted billing item, therefore generating cost savings for the insurer.

An ideal claims management system should also include a fraud management

module that identifies possible fraudulent patterns based on policy holder

profile, underwriting information and provider profile. Since fraud or abuse

patterns frequently reoccur, such a tool can be very useful.

Once a claim has been processed the claim payment process starts.

Integration with payment gateways is a common feature now and significantly

simplifies this process when paying network hospitals. In case of non-network

hospitals or reimbursement claims, it helps to have a good cheque printing

module. Finally, an effective claims management system can provide excellent

insight to management. Not only can past trends be identified and leveraged,

the vast amount of claims data can be combined with enrollment data to be

efficiently used in actuarial pricing and underwriting.

In summary, underwriting and claims handling are two core functions of an

insurer and technology offers a lot to streamline both these functions. The

recent advances in claims system ensures that in a few years a significant

portion of claims in India will be processed without any significant manual


Know How: Health Cashless Insurance Claims Settlement

Cashless Hospitalization

Cashless hospitalization is service provided by an insurer wherein you are not

required to settle the hospitalization expenses at the time of discharge from

hospital. The settlement is done directly by the insurance company. However,

prior approval is required from the TPA before the patient is admitted into the


Types of Cashless Hospitalization

Cashless claims can be of two types:-

Planned: Where the insured is aware of the hospitalization 2-3 days in


Emergency: Where the insured or any covered family member meets with

sudden accident or suffers from bout of illness that requires immediate


The procedure of planned / emergency hospitalization.

In case of planned hospitalization

Contact the toll free help-line number.

Fax / submit the required documents. E.g. Doctor‘s certificate, etc.

Obtain approval from the TPA .

Obtain authorization for network / non-network hospitals.

Avail health treatment.

In case of emergency Hospitalization

Rush the patient to the hospital

Patient avails treatment

Family contacts toll free number provided by the insurer

Family submits required documents. E.g. Doctor‘s certificate, etc

Family obtains approval from the TPA

Family obtains authorization for network / non-network hospitals

Hospital bills are directly settled by the TPA

Non-cashless claim or claim reimbursement : filing claim

A non-cashless claim is when you avail treatment in hospitals that do not form

part of insurer‘s network. In such cases, you have to pay the hospital bills and

subsequently claim reimbursement from the insurer.

The procedure to be followed in case of claim reimbursement :-

Call toll free number and provide hospitalization details.

Settle the hospital bills directly.

Submit the relevant bills / documents to the TPA.

Documents required for filing a non-cashless claim

The following documents are required:-

Duly completed claim form

Xerox copy of the policy

Bills, receipts and discharge certificate/card from the hospital in originals

Bills from chemists supported by proper prescription

Receipt and pathological test reports from a pathologist

Medical practitioner / surgeon prescribing the test.

Nature of operation performed and surgeon‘s bill and receipt.

The claims are serviced at both network as well as non-network hospitals.

Not covered under cashless and non-cashless hospitalization: How to

prevent rejection claim.

There are following rules to prevent rejection of claim:-

Read the list of coverage and exclusions in policy wordings (which comes to

you with the policy).

Ensure that you declare all the pre-existing diseases at the time of enrolment.

Do not claim for any hospitalization and diagnostic studies / investigation

charges, which do not confirm existence of an illness or injury that requires


After filing the claim, make sure that maintain minutes of interaction with the

insurer in black and white.

Understand the policy in detail. Be informed about the ‗Fine print‘ , exclusions

and details pertaining to depreciation and deductions.

Do not hesitate to ask details of deductions or rejection.



7.1 Value Chain
7.2 Distribution Channel
7.3 Insurance Portability
7.4 Portability in Health Insurance Help to increases
buying pattern of customer
7.5 Portability Form
7.6 Gaps and Improvement area in Health Insurance


Value Chain


Private companies
Public companies

Payer Intermediaries Providers

Employer, TPAs
Government, Distribution
diagnostic centers
Mediclaim Channel Partners
, Nursing Homes ,
policy Holder HMO

Customers (Individual Patents )


Figure no. 7.1.1 Value Chain


Value Chain Insurers Private Companies IRDA - regulator Public Companies

Payers Intermediaries Providers TPAs Employers Hospitals Distribution

Channel Government Diagnostic Centers Partners Mediclaim Policy Holders

Doctors HMO NGO/SHG/MFI Nursing Homes PPO Customers (Individuals,

Patients) Private: Private Companies, TPAs, Distribution Channel, TPA‘s, PPO,

HMO, Healthcare Providers, Private Employers Public : Public Companies,

Healthcare Providers, Government Employer.









Figure no 7.2.2 Distribution Channel in India


In India distribution channel has increase day by day there has been many

channel partners like Agency, Direct marketing , bank assurance, Brokers,

Telemarketing, Micro insurance, virtual marketing but some channel partners

are emerging slowly in the market. The Agency , Direct marketing ,Banc

assurance, brokers plays an very important role to fulfill the need of the

customers as per their requirement.

Agency and direct marketing channels stable in the market, now many of the

banks has started there own insurance product or they are tie up with the

insurance company so the banc assurance channel now growing in the market

, many of the customers maintain their loyalty towards the company hence they

bye only that companies product.

Brokers and the telemarketing is the easiest way to get the product, by setting

at home customer get there product in hand so this is also one of the growing

channel in the market.

Leveraging the Distribution Network:

 Enhancing customer awareness product innovation to suit different segment of

society rather than one size fits all.

 Agency model to be restricted to tap the rural market

 Finding New business opportunities

 Banc assurance channel not capitalizing on the available data base.

 Brokers distribution to about 18% of health insurance market focus only on

ubran and group polices & brokers can tap the worksite.

 Marketing opportunities available in virtual marketing activities such as

Electronic kiosk stands, mobile advertising, Internet tap.


Portability allows customers to carry forward continuity benefits accrued on

their previous policy. These benefits are gained by being under continuous

coverage for a certain period. This is essential for getting coverage for pre-

existing diseases. Earlier, policyholders had to stick to a policy only to retain

the waiting period benefit .

Those covered under employer group health insurance policies or family floater

policies can also port to an individual health cover .However, they will first have

to switch to a plan offered by their existing insurer and will be allowed to switch

to the insurer of their choice only after a year.

 IRDA Has issued two circulars on the subject of portability of Health


1. Circular dated 10th February , 2011:

Insurance companies have been advised by IRDA to permit the

policyholder to carry forward the credit gained for pre-existing

conditions in terms of waiting period when he or she switches from

one insurer to another , or one plan to another , provided the

previous policy has maintain without break.

The entire data base of the companies , including the claim details ,

in respect of polices where the policyholder have opted for

portability will have to be shared with there counterparts, if

requested by the counterpart within seven working days of such

request. A time period of three days has been granted by the

regulator to acknowledge portability applications.

This reform is expected to bring about a positive change in the

insurance industry as a whole. The industry players have

welcomed this development. Health insurance portability will bring

about a higher level of competition within seven working insurers in

order to retain existing customers. This will insure that there is

constant innovation and improvement in the efficiency , standard

and services.

2. Circular dated 9th September, 2011:

It was felt necessary to put in place a system to enable

collection of data on the history of Health Insurance and

monitoring the transfer of record of the porting policyholder. In

that context, it was decided that the implementation of

portability of health insurance polices would be mandate to

commence no later than 1st October 2011

Detailed procedures of Health insurance portability have been

set out.

Definition of portability and break in policy.



The IRDA, vide circular dated February 10, 2011, had issued guidelines

on portability of health insurance policies which was to be introduced from

1st July 2011. Subsequently, on 24th June 2011, it was felt necessary to

put in place a system to enable collection of data on the history of health

insurance and monitoring the transfer of records of the porting policy

holder. In that context, it was decided that the implementation of

portability of health insurance policies would be mandated to commence

no later than 1st October 2011. In continuation of the above guidelines, the

detailed procedure on health insurance portability shall be as set out in

these guidelines.

1. In these guidelines, the following terms shall carry the meanings as assigned

to them.

1.1 Portability: Portability means the right accorded to an individual health

insurance policyholder (including family cover) to transfer the credit gained by

the insured for pre-existing conditions and time bound exclusions if the

policyholder chooses to switch from one insurer to another insurer or from one

plan to another plan of the same insurer, provided the previous policy has been

maintained without any break.

1.2 Break in policy: A break in policy occurs when the premium due on a given

policy is not paid on or before the premium renewal date or within 30 days


2. All policyholders are hereby vested with the right of portability, i.e.,

policyholders have the right to purchase a Health Insurance Policy from

another insurer from amongst the products such insurer is marketing and the

right will be limited to transfer of the period gained in the existing policy (ies)

which would account towards PEDs and the time-bound exclusions of the new


3. A policyholder desirous of porting his policy to another insurance company

shall apply to such insurance company at least 45 days before the premium

renewal date of his/her existing policy.

3.1.The Insurer may not be liable to offer portability if policyholder fails to

approach the new insurer at least 45 days before the premium renewal date.

3.2.The insurer may consider a proposal for portability even if the policyholder

fails to approach the insurer at least 45 days before the renewal date, it may be

free to do so.

3.3. Where the outcome of acceptance of portability is still waiting from the new

insurer on the date of renewal:

3.3.1 the existing policy shall be allowed to extend, if requested by the

policyholder, for the short period by accepting a pro- rate premium for such

short period, which shall be of at least one month and

3.3.2 shall not cancel existing policy until such time a confirmed policy from

new insurer is received or at the specific written request of the insured

3.3.3 the new insurer, in all such cases, shall reckon the date of the

commencement of risk to match with date of expiry of the short period,

wherever relevant.

3.3.4 if for any reason the insured intends to continue the policy further with

the existing insurer, it shall be allowed to continue by charging a regular

premium and without imposing any new condition.

4. On receipt of an application for porting, the insurance company shall furnish

the applicant, the Portability Form as set out in Annexure ‗A‘ to these guidelines

together with a proposal form and relevant product literature on the various

health insurance products which could be offered.

5. The policyholder shall fill in the portability form along with proposal form and

submit the same to the insurance company.

6. On receipt of the Portability Form, the insurance company shall address the

existing insurance company seeking necessary details of medical history and

claim history of the concerned policyholder. This shall be done through the web

portal of the IRDA within 7 working days of the receipt of the Portability form.

7. The insurance company receiving from another insurance company a

request for relevant data shall furnish the requisite data in the data format for

porting insurance policies prescribed in the web portal of IRDA within 7 working

days of the receipt of the request.

8. On receipt of the data from the existing insurance company, the new

insurance company may underwrite the proposal in accordance with its

underwriting policy as filed by the company with the Authority in accordance

with clause 6 of IRDA Form R2 of IRDA (Registration of Indian Insurance

Companies) Regulations, 2000 and clause 14-15 of F&U Guidelines (circular

no. 021/IRDA/F&U/Sep. 06 dated 28th September 2006), and convey its

decision to the policyholder in accordance with the Regulation 4 (6) of the IRDA

(Protection of Policyholders‘ interest) Regulations, 2002.

9. If on receipt of complete information and data within the above time frame,

the insurance company does not communicate its decision to the requesting

policyholder within 15 days then the insurance company shall not retain the

right to reject such proposal and shall have to accept the proposal.

10. Portability shall be allowed in the following cases:

10.1 All individual health insurance policies issued by non-life insurance

companies including family floater policies

10.2 Individual members, including the family members covered under any

group health insurance policy of a non-life insurance company shall have the

right to migrate from such a group policy to an individual health insurance

policy or a family floater policy with the same insurer. One year thereafter,

he/she shall be accorded the right mentioned in 10.1 above.


 The application to port your health insurance policy should reach the new

insurer 45 days prior to the last date of renewal of your existing policy.

 On receiving your request, the new insurance company will provide you a

proposal form and a portability form along with details of various products

offered by it.

 Choose the product which suits your requirement, fill up the proposal and

portability forms and submit them to the new insurer.

 Once the insurance company receives both these forms, it will approach

your existing insurer seeking details such as medical records and claim

history .

 The data will be received through a common data sharing portal

developed by Irda for all insurers. The existing insurer will have to furnish

all the details within seven working days.

 After the new insurer has the requisite information, it has to take a

decision on underwriting your policy within 15 days. If it fails to take a view

within this time frame, it will be bound to accept your application.



To make the process smooth and efficient Insurance Regulatory and

Development Authority (IRDA) has made a clause; according to which if insurer

does not respond into specified time then proposal would be considered to be


Portability also allows policyholder to switch from group health insurance policy

to individual or family floater health insurance policy without loosing out on

waiting period credit. This will help those employees who solely depend on

group health insurance policies provided by their employer as now they can

shift to individual health insurance policy without waiting for four years to pre-

existing diseases to be covered.


Policyholder would think to shift to another insurer only if he is not happy with

the claim settlement of the existing insurer that means he had made a claim;

Portability depends on health insurer as he has right to reject or accept the

proposal hence no insurer would like to have a policyholder who had earlier

made a claim.

Another drawback of portability is that there is high probability that insurer will

reject the proposal of senior citizen who are considered high risk category.

If you have accumulated no-claim-bonus and willing to port your health

insurance policy then you will have to pay higher premium for same cover

under new policy because as per IRDA regulations no-claim-bonus can be

transferred to new insurer but premium will be charged on enhanced amount.

Another point is that if policyholder is shifting from group policy to individual

policy then he will get credit for period he has been insured with current insurer

only this is a compromise for the insured especially if he has not made claim

with previous insurer.

Another thing that you need to remember is that you can shift to individual

health insurance policy of the same company which has provided you group

health insurance policy; however, you can shift to another insurer after one


There is confusion on the definition of pre-existing diseases take for instance if

a policyholder has gone for treatment for a disease and his earlier insurer had

settled a claim then in such condition will the new company can deny a cover

for that disease. If new insurer does not provide cover without waiting period for

the ailments suffered during the tenure of the old policy then health insurance

portability does not serve its purpose for senior citizen and persons having

chronic diseases. Hence new insurer should cover such diseases. If disease is

listed as pre-existing disease in the current policy then new insurer should also

treat it as pre-existing disease.


Portability Form

Name of the Policyholder / insured (s)

2) Date of Birth/Age

3) Address of the policyholder/insured

4) Details of existing insurer

i. Name of the product

ii. Sum Insured

iii. Cumulative Bonus

iv. Add-ons/riders taken

v. Policy number

5) Details of the proposed insurance

i. Name of the product proposed/intend to


ii. Sum Insured Proposed

iii. Whether Cumulative Bonus to be converted

to an enhanced sum insured

6) Reason(s) for Portability

7) No. of family members to be included in the policy

to be ported:

Enclosure: Photocopy of the existing policy documents

Date: Signature of the



Health insurance is an expense, to be sure, but the importance of health

insurance really helps defray that expense. To save money, it is better to work

with a health insurance agent who can help you compare plans and costs to find

the best one for you and your family's needs.

Remember, medical expenses are higher than ever, so if you have to be

hospitalized for any reason, your costs are going to be a lot higher than you

might have anticipated. They could be so high that you simply can't pay them,

and bankruptcy is your only recourse. It doesn't make sense to go bankrupt, and

ruin your financial future, just because you didn't buy affordable health


Think about another importance of health insurance. Your family. Your children

need health care throughout their young lives, and it seems like kids are always

getting into scrapes that require a trip to the emergency room. If you take care

of a family, you owe it to them to get health insurance. Without it, your entire

family is vulnerable, and if anything happened, would you want to live with the

guilt that having no health insurance could create?

The importance of health insurance cannot be overrated. Certainly, it can be

difficult to come u with the money for individual health insurance. But can you

afford to be without it, really?

This private sector bridges most of the gaps between what government

offers and what people need. However, with proliferation of various

health care technologies and general price rise, the cost of care has

also become very expensive and unaffordable to large segment of

population. The government and people have started exploring various

health financing options to manage problems arising out of growing

set of complexities of private sector growth, increasing cost of care

and changing epidemiological pattern of diseases.

The proportion of insurance in health care financing in India is extremely low.

Public spending in health care is very low at 17% and the National Health Policy

has recognized this More than 86% of healthcare financing is through

unplanned or, non-contributory spending 86% from out-of-pocket expenses 83%

from private sector spending Health care financing in India.



8.1 Indian Health insurance Market
8.2 Growth Drivers
8.3 Market drivers
8.4 Market Restraints
8.5 Company wise Gross direct premium
8.6 Non life insurance claim settlement facts-Figure
8.8 Budget 2012



Indian Health Insurance Market (2004-2011)

 Health Insurance is one of the India Largest sector, in terms of revenue &

employment & sector is expanding rapidly.

 Health Insurance spend in India is currently poised to touch 8% of GDP

in 2012 (5.5 in 2009)

 Private Sector accounts of total healthcare spending in India.

 Fastest Growing segment in the Insurance Industry – Presently Growing

at 32%

 Health Insurance sector poised for immense growth

 The Growth Chart







2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-2011

Figure 8.1.1 Indian Health insurance Market


Research has shown that Indians across all segments and age groups are

presently more prone to lifestyle-related ailments and diseases than previous

generations. This fact, undoubtedly negative, stands out as the root cause for

the potential growth of the health insurance sector. Jacob informs, ―The

growing percentage of middle class citizens in the country and the

increasing .healthcare cost is also adding to the growth of the health insurance

segment. Changing demographics, affluence and work-life balance has brought

about a paradigm shift in the attitude of people, who demand for a better

quality of healthcare. Health insurance as a mechanism to finance this need, is

therefore, finding greater acceptability. Thus, the market has great prospects,

but the need of the hour is to identify products that will suit customers‘

insurance needs and win their confidence.‖ Biggest target for the insurance

companies in the next five years would be to cover 20 per cent of the Indian

population. This is expected to be driven by factors like entry of new

competitors, increasing consumer awareness, relaxation in income ceiling, low

growth in public sector employment and increased efforts of Non-government

Organisation (NGO)/self-help groups. He further adds, ―Over the past few years,

many companies have entered into the market, and the industry is seeing a lot

more innovation with product offerings for different segments including senior

citizens, corporate, low poverty line and affluent class. Information Technology

(IT) has also been one of the significant enablers of growth in the sector. Given

the current health insurance penetration levels in the country, at about three to

four per cent, there is a significant potential and a long way to go.

There will be the number of factors, which will lead to growth for the Health

Industry , Including Health Insurance . The Drivers of Growth under mentioned:

India is now the second fastest growing major economy in the


Third Largest Economy in the World.

Indian Healthcare has emerged as one of the largest services

sector in India.

Healthcare spending in India is expected to raise by 15%per


Healthcare spending could contribute 6.1%of GDP in 2012 and

employ around 9 million people

Along with these other reasons, as why the Health insurance will see a major

boom in the coming days in an account of many factors As under mentioned:

Shift from socialized to private providers

Booming Economy and High literacy rate

Shift life style- related diseases

Easier Financing

Increasing life expectancy

Recognition by government priority section

The majority of health care services in India are provided by the private sector

& the private sector in India is one of the largest in the world, having:-

80 percent of all qualified Doctors

75 percent dispensaries

60 percent of hospitals in India belonging to the private sector

With the booming economy and High literacy rates, the capacity to spend along

with the capacity of the people to pay has increased. As people earning &

education level increase with it will lead to more spending in health care. The

increase in purchasing power & education will lead to a number of positive

trends for the Health care industry as under-mentioned:-

When families move from middle income to rich, the highest

The top 33 per cent income earners in India accounted for 75

percent of total private expenditure on healthcare.

The proportion of households in the low –income group has

declined significantly and the ―Great Indian Middle-class‖ has


With Literacy the Per-capita expenditures on healthcare rise

with higher education level

Households that have higher education levels tend to spend

more per illness.

A Great Future of Health Insurance Industry of India

Source: S.K Sethi founder (

Table no.8.2.1 Great future of Health Insurance Industry

As People are conscious of health care and hence need for Health Insurance is

increasing year by year. Healthcare costs are increasing at 20% per year.

People have started giving more importance to health insurance with a life

insurance. large number of people are now on the verge of becoming buyer/

customer of health insurance.

Health Insurance industry achieve figure of 30% then the portfolio will be Rs

64414 Cr. in 2017-2018.

Health Insurance industry achieve figure of 60% then the portfolio will be Rs

223892 Cr. in 2017-2018

This is very much possible because of following facts:

a) People are conscious of health care and hence need for Health Insurance is

increasing year by year.

b) Healthcare costs are increasing at 20% per year. People have started giving

more importance to health insurance with a life insurance. We feel large

number of people are now on the verge of becoming buyer/ customer of health


c) There is talk of health insurance being made compulsory and we understand

PHD Chamber of Commerce is considering organizing a full fledged workshop

on this topic in near future. May be in the beginning health insurance will be

made compulsory either for senior citizens or some specific weaker segment of

our society- but sooner or later our society/ government will go for it on full

fledged basis as a part of its social security programme and implement this

proposal. This aspect will become more and more important as the population

of senior citizens will increase substantially during 2012-2025 period.

In the light of these facts , Health Insurance has a great future in our

country and achieving figures of Rs. 223892 crores is going to be a reality.


Current Impact Future Impact

(2008-2011) (2012-2015)
Increasing awareness of
Health Insurance

Raising Health care cost

Have increased the need
for the health Insurance

supportive demographic
profile(proposing middle
class, increasing dieses state

Detariffing of the general

insurance company(which
has increased the efforts
towards health insurance
& other personal lines of
The business)

Rationalization of the
premium rates (e.g. trends
of the upward revision of the
group health policies)
10 5 10 0 5 10
Figure no. 8.3.2 Market Drivers

Market Drivers Current Impact (2008-2011) Future Impact (2011-2014)

Increasing awareness of Health Insurance Rising healthcare costs have

increased need for health insurance Supporting Demographic Profiles

(Prospering Middle Class, increasing disease state, population) Detariffing of

the general insurance industry (which has increased emphasis and efforts by

insurance companies towards health insurance and other personal lines of

business) Rationalization of premium rates (e.g. trend of upward revision in

respect of Group Health policies) 0 5 10 0 5 10 In order to encourage foreign

health insurers to enter the Indian market the government has recently

proposed to raise the foreign direct investment (FDI) limit in insurance from

26% to 49% , Government initiatives are always supportive to Healthcare

Insurance Environment. The spending on Healthcare is increasing YOY from

2005 to 2025. The prospering middle class in India supports this spending

environment. The average annual household consumption in healthcare

(discretionary spending ) is expected to double between 2005 and 2025.

Source: Mckinsey There is a clear indication that seekers ( annual income

between INR 2,00,000 and 04,99,999) and strivers ( annual income between

INR 5,00,000 and 10,00,000) population is significantly increasing in the next

future. There will be a direct proportionality of this increase to healthcare

spending parity. Market Restraints Current Impact (2008-2011) Future Impact

(2011-2014) Inadequate healthcare infrastructure Limited reach Significant

underwriting losses for Health Insurance business in India Lack of

standardization and Accreditation norms in healthcare industry in India

Insufficient data on Indian consumers & disease patterns resulting in difficulty in

product development and pricing 0 5 10 0 5 10.

8.4 Market Restraints

Inadequate Health care


Limited Reach

Significant underwriting losses

for Health Insurance business
in India

Lack of Standardization norms in

Healthcare insurance industries
in India

Insufficient data on Indian

consumer & diseases pattern
resulting in difficulty In product
development and pricing

0 5 10 0 5 10

Figure no. 8.4.3 Market Restraints

Market Restraints Current Impact (2008-2011) Future Impact (2011-2014)

Inadequate healthcare infrastructure Limited reach Significant underwriting

losses for Health Insurance business in India Lack of standardization and

Accreditation norms in healthcare industry in India Insufficient data on Indian

consumers & disease patterns resulting in difficulty in product development and

pricing 0 5 10 0 5 10



2009-10 2010-11 2009-10 2010-11

National 4625.18 6220.70 13.36 14.61

New India 6042.51 7097.14 17.45 16.67

Oriental 4736.71 5457.33 13.68 12.82

United 5239.05 6376.66 15.13 14.98

Public Total 20643.45 25151.83 59.63 59.07

Royal Sundaram 913.11 1144.00 2.64 2.69

Reliance 1979.65 1655.43 5.72 3.89

IFFCO Tokio 1457.84 1783.18 4.21 4.19

TATA AIG 853.80 1173.09 2.47 2.76

ICICIC Lombard 3295.06 4251.87 9.52 9.99

Bajaj Allianze 2482.33 2869.96 7.17 6.74

Cholamandalam 784.85 968.00 2.27 2.27

HDFC Ergo 915.40 1279.91 2.64 3.01

Future General 376.61 600.16 1.09 1.41

Universal Sompo 189.28 299.10 0.55 0.70

Shriram 416.93 780.89 1.20 1.83

Bharti AXA 310.82 553.90 0.90 1.30

Raheja QBE 1.32 4.90 0.00 0.01

SBI General 43.02 - 0.10

L & T General - 17.24 - 0.40

Private –Total 13977.00 17424.63 40.37 40.93

Grand Total 34620.45 42576.45 100.00 100.00

Table no 8.5.2 Gross Direct Premium

The premium underwritten by 15 private sector insurers (other than the insurers

carrying on exclusively business) in 2010-11 was 17,425 crore as against

13,977 crore in 2009-10. ICICI Lombard continued to be the largest private

sector non- life insurance Company, with market share of 9.99 per cent. It

reported a marginal increase in market share up from 9.52 per cent in 2009-10,

Bajaj Allianz , the second largest private sector non-life insurance company ,

which underwrote a total premium of 2,870crore, saw decline in market share

from 7.17 per cent in 2009-10 to 6.74per cent during the year under review. Of

the 15 private insurers , 12 reported increase in premium underwritten and one

insurer namely, Reliance general witnessed a significant decline in premium

underwritten (reported a negative growth of 16.38 per cent). The other two

insurers had commenced their operations in 2010-11.

In case of public sector non life insurers, all four companies expanded their

business with an increase in respective premium collections. The market share

of these companies, other than for national, however, declined from their

previous year respective levels, which helped to improve its market share to

14.61 percent in 2010-11(13.36 per cent in the previous year). It reported

growth of 34.50 per cent , which is higher than the industry average for 2010-

11, New India , with insurance premium of 7,097 crore , remains the largest

general insurance company in India with market share of 16.67 percent.

8.6 Non- Life Insurance claims settlement facts –figure

Year Outstand No.of Total No. of %of No. of % of

ing as on claims claims claims claims claims repudiat

1st April reported settlement settlement settled/ repudia ion –

2010 during during during total ted repudiat

2010-11 2010-11 2010-11 claims ed /total

processe claim

d process


2010 3331724 26598505 29930229 25535978 85.3 779645 2.6



Source- Irda

Table no. 8.6.3 Claim settlement Facts and Figures

From the total no claim processed during the year by the non-life insurers, the

percentage of claims repudiated at the industry level is only 2.6 percent.

As against this, the industry settled 85.3 per cent claims of the total claims

lodged and the balance 12.1 percent outstanding at the end of the year.

Overall the number of repudiated claims has been increasing. The rise is due to

the fact that the sector is expanding rapidly and business volumes are

increasing. The number of polices issued by non-life insurance companies is

increasing year on year, the same stood at 7.93 crores in the year 2010-11.

The number of claims intimations would also be more and there for an increase in

claim repudiation numerical terms.

8.7 Budget 2012: Hike Sec 80D limits to boost health insurance

The market builds up a lot of expectations before the presentation of the

Budget, and both, the common man and industry have always been anxious to

understand its implications. Insurance is a vital service in a growing economy,

and helps regulated risk-taking by individuals and enterprises. Still, penetration

of general insurance in India is abysmally low. The adoption of general

insurance products such as health among retail consumers will get only better

with promising measures by the government. Here are some proposed

changes that can help the insurance industry move to the next level of growth

and consolidation. The measures will also help the industry to render better

service to their customers.

Considering extremely low penetration of GI products in our country, there is a

pressing need for concerted effort to make insurance all the more affordable

and an attractive proposition for the common man. Clearly, abolition of the

service tax will enable this process. Currently the service tax stands at 10.3%

including education cess and the Government should consider waiving off the

service tax on premiums paid. Alternatively, they should at least exempt health

insurance products from the purview of service tax. This move will help to

develop health insurance in the country by aiding greater penetration

Currently, the qualifying amounts under Section 80D for self, spouse and

dependent children is up to Rs. 15,000/- and additional deduction up to Rs.

15,000 for the parents. Given the high cost of medical care and to encourage

more people to purchase health insurance, Section 80D limits should be

increased substantially from the current levels.



9.1 Reasons for poor penetration of Health Insurance

9.2 Major Issues In Health insurance
9.3 Major issues in handling of Health Insurance
9.4 Fraud in Health Insurance


9.1 Reasons for Poor Penetration of Health Insurance in India.

Penetration of health insurance has been slow and halting, despite the huge

market estimated to range between Rs 7.5–20 crores. Some reasons that

explain for the slow expansion of health insurance in the country are as


1. Lack of regulations and control on provider behavior

The unregulated environment and a near total absence of any form of control

over providers regarding quality, cost or 282 Financing and Delivery of

Health Care Services in India ata-sharing, makes it difficult for proper

underwriting and actuarial premium setting. This puts the entire risk on the

insurer as there could be the problems of moral hazard and induced demand.

Most insurance companies are therefore wary about selling health insurance as

they do not have the data, the expertise and the power to regulate the

providers. Weak monitoring systems for checking fraud or manipulation by

clients and providers, add to the problem.

2. Unaffordable premiums and high claim ratios

Increased use of services and high claim ratios only result in higher premiums.

The insurance agencies in the face of poor information also tend to

overestimate the risk and fix high premiums. Besides, the administrative costs

are also high—over 30%, i.e. 15% commission to agent; 5.5% administrative fee

to TPA; own administrative cost 20%, etc. Patients also experience

problems in getting their reimbursements. Including long delays to partial


3.Reluctance of the health insurance companies to promote their

products and lack of innovation

Apart from high claim ratios, the non-exclusivity of health insurance as a

product is another reason. In India, an insurance company cannot sell non-life

as well as life insurance products. Since insurance against fire or natural

disaster or theft is far more profitable, insurance companies tend to compete by

adding low incentive such as premium health insurance products to

important clients, cross-subsidizing the resultant losses. With a view to get the

non-life accounts, insurance companies tend to provide health insurance cover

at unviable premiums. Thus, there is total lack of any effort to promote health

insurance through campaigns regarding the benefits of health insurance and

lack of innovation to make the policies suitable to the needs of the people.

4. Too many exclusions and administrative procedures

Apart from delays in settlement of claims, non-transparent procedures make it

difficult for the insured to know about their entitlements, because of which the

insurer is able to, on one stratagem or the other; reduce the claim amount, thus

demotivating the insured and deepening mistrust. The benefit package also

needs to be modified to suit the needs of the insured. Exclusions go against the

logic of covering health risks, though, there can be a system where the

existing conditions can be excluded for a time period—one or two years but not

forever. Besides, the system entails equity implications.

5. Inadequate supply of services

There is an acute shortage of supply of services in rural areas. Not only is there

non-availability of hospitals for simple surgeries, but several parts of the country

have barely one or two hospitals with specialist services. Many centres have no

cardiologists for several non communicable diseases that are expensive to treat

and can be catastrophic. If we take the number of beds as a proxy for

availability of institutional care, the variance is high with Kerala having 26 beds

per 1000 population compared with 2.5 in Madhya Pradesh.

6. Co-variety risks

High prevalence levels of risks that could affect a majority of the people at the

same time could make the enterprise unviable as there would be no gains in

forming large pools. The result could be higher premiums. In India this is an

important factor due to the large load of communicable diseases. A study of

claims (Bhat 2002) found that 22% of total claims were for communicable



Health Insurance

20% Lack of underwriting Diciplin

Lack of product innovation

Lack of Product awareness

amoung Distributores
Lack of customer awarness
Increased Compitation
Increased in Hospital tariff
11% (claim cost)


In India there has been many issues in handling the Health Insurance

because Lack of underwriting Discipline, Lack of product innovation, Lack of

product awareness , increased competition, increased claim cost and many

more, because of this major problem customers did not get there product in

proper manner.

According to this graph it shows that the percentage of underwriting discipline if

very high so to reduce such type of problem government has to take strict

action against this issues , because it affect the loyalty of the customer and

brand image of the company also. Insurance company is leading in product

innovation; a product is bundle of satisfaction that a customer buys. A growth

oriented firm always looks beyond the existing products or services and there

firm should respond to dynamic environment & offer new services. So because

of lack of product innovation customer are not ready to purchase that product.

Lack of product awareness among distributors, if they are not in position to

introduce the product to customer it will not be in a position to understand the

importance and uses of health insurance. it is rightly said that awareness

develop brand equity , due to awareness a customer recognized the product

and purchase the same , a customer is in position to identify the product

because of such awareness. The firm has to fight competition, promotion will

be focused on attracting new users and retained repeat customers . The firm

may improve service quality and new features and offer low premium prices to

attract money conscious customers.


Employed dissatisfied due to

delayed claim sattlement
Services from TPA not up to
Services from broker not up to

After sales service 22%

Changes in regulation (service

tax being imposed)

policy cancellation notice 13%

changes in regulation 13%

0% 20% 40% 60% 80%

Series 1

Figure no.9.3.2 Major Issues in Handling Health Insurance

There are many Indian citizens who are dissatisfied with the services of health

insurance providers. The main reason for their dissatisfaction is the rejection of

health insurance claims. Majority of these people do not want to know the

cause behind the rejection, but instead show frustration for not being offered

the required coverage or reimbursement. Research shows that many of these

claims get rejected because of a wrong choice made by an individual at the

time of choosing a health insurance plan.

People should understand their health insurance plans before buying to avoid

these confusions. One important point that everybody should keep in mind is

the associated waiting period. This is the time period before which there is no

coverage offered for the particular ailment. If a person claims for the same

illness before the waiting period elapses, he/she would not be offered the

coverage. The other important point that a person should ponder over is to go

through the exclusions section. It will help in informing him/her about the

uncovered perils.

The single grievance that any dissatisfied health insurance consumer would

have is that of slow settlement of claims, or that of disputed claims. In order to

overcome the concept of Third Party Administrators was introduced which was

essentially for outsourcing claim settlement. The cashless model of

hospitalization also depends on the TPAs, where policy holders are allowed to

avail medical treatment at any of the networked hospitals without having to pay

cash upfront. However, TPAs are also a source of discontentment among

consumers. The survey shows that their quality of service and infrastructure

needed to improve, and that the service form hospitals was really not up to the


Most of the brokers are not provided the services up to mark, after selling the

policy they are not taking care about the after sale service procedure The study

revealed that the satisfaction levels in health insurance plans was the least.

Indicating that the health insurance segment needs to consolidate its services

and bring down the dissatisfaction levels of consumers who use the service.

because of the half knowledge of the customer ,the policy can get not approve

and customer get the cancellation notice from company,

There is much confusion with regard to cashless hospitalization facility. People

should remember that this facility can be availed only in network hospitals and

thus, going to non-network hospitals to seek treatment on cashless basis does

not make any sense. The common cause behind all these problems is that

people do not read the terms and conditions of their health insurance policy

carefully and thus, face problems at the time of claim settlement. Many of these

people do not look into their healthcare needs while buying insurance, which is

the other important point to be pondered over.


As India‘s insurance industry matures, fraud risk management is going to be a

major concern for insurers and business leaders. Insurers will need to

continuously reassess their processes and policies to manage and mitigate the

risk of fraud. Fraud risk in the insurance value chain can emanate from internal

and external factors External fraud risk can arise at various stages, e.g.,

registration of clients, underwriting, reinsurance and the claims process The

severity of fraud can range from a slight exaggeration to deliberately causing

loss of insured assets.

In the insurance industry, fraud has always been considered a sensitive issue.

The million dollar question continues how to reduce fraud , these companies to

prove that fraudulent activities exist, for instance, knowing a claim is fraudulent

is one thing, but proving this to be fraudulent is a different matter. Fraudulent

claims and surrenders received by insurers, which also adds up our survey

According to Researcher survey report, there are various types of insurance

frauds, which occur in all the areas of insurance e.g., as claims and surrenders,

fake documentation, mis-selling, collusion between parties, etc. All insurance

fraud can be classified under the categories of soft and hard fraud, as describe


Different types of frauds affecting Insurance


Collusion between Different

Parties types of
Fake Document Insurance

Commission Rebetting

0% 10% 20% 30% 40%

Source: Fraud Investigation & Dispute Services

Figure no.9.4.4 Frauds affecting Health Insurance companies

 Hard fraud : This occurs when people unlawfully obtain money from insurance

companies by a reporting a false injury or accident

 Soft fraud: This happens when people either lie to their insurance companies or

hide certain information for their financial gain.

Today when India‘s insurance industry is working toward reducing cost, one of

its main focus areas to control or reduce costs is by proactively arresting fraud,

which can be achieved through an effective Fraud risk assessment (FRA)


Some essential characteristics of a FRA programs includes:

 Effective policy holder and vendor due diligence process

 Effective claims validation

 Mystery shopping, i.e. gathering market intelligence relating to tied and

corporate agents, brokers etc.

 Channel reviews pertaining to tied agency ,bancassuarce and tele calling

 Contract compliances review including review of adverting expenses,

intellectual property (IP) compliance etc.

 Effective fraud analytics and electronic dashboard.

In its quest to restrict unfair practices, IRDA has formulated the insurance

regulatory and development authority (Protection of policyholder‘s Interests)

regulations 2002, To counter the increase in the number and complexity of

frauds, IRDA has announced draft regulations for open market consultation, to

reduce ―Unfair practices‖ and the ―Information gap‖ in domestic insurance.

The Insurance Regulatory and development authority (IRDA) has put in place

a significant regulation to bring about transparency in the selling process by

stipulating that‖ All Insurance companies (Life and General)have to resolve

complaints from policy holders within 14 days and any failure to do so will

attract penalty . Any failure on the part of insurers to follow this procedure and

time frame will attract penalties by IRDA.‖

Some of the proposed Regulation:

 An amendment of IRDA‘s regulations to protect policyholder‘s interests and

issuances of key feature documents for insurance products

 Guidelines on distance marketing and sale process verifications of insurance


 Standardization of terms and conditions on unit-linked insurance products

 IRDA‘s acquisition for the distribution of insurance products

In its bid to check financial fraud , IRDA has made it mandatory for all insurers

to obtain recent photograph of new customer



10.1 Guidelines to meet the need of customer

10.2 SWOT analysis
10.3 How to choose best health insurance Plan




Contact the Insurance division to see if the insurance seller is legitimate ,

licensed broker

Read before Sign

If something is unclear get an Explanation in writing from the agent or company

before signing the Insurance form.

Get contract in writing. The only guarantee of coverage is in contract

Ask the agent to Explain thoroughly the policy , the policy ,the coverage and its

limits and conditions

Check the reports rating, the responsiveness of insurance companies to

customer claims

Get copy of every document you sign as apply for and buy the Insurance


Keep your receipt and cancelled check.

Read your policy as soon as you received it .Be sure that what you received is

what you paid for.



 India is now the second fastest growing economy in the world

 Third largest economy in the world

 Indian health care has emerged as one of the largest services

sector in India

 Healthcare spreading in India is expected to raise by 15% per


 Healthcare Spending could contribute 6.1% of GDP in 2012 and

employ around 9 million peopIe


 Inadequate healthcare infrastructure

 limited Reach

 Significant underwriting losses for business in India

 Lack of standardization and Accreditation norms in health

industry in India

 Insufficient data on Indian consumers & disease patterns

resulting in difficulty in product development and Pricing.


 Increasing awareness of health Insurance as raising

Healthcare costs have increased need for Health care cost

 Supporting Demographic profiles (Prospecting middleclass,

Increasing disease state population)

 There is clear indications that seekers(annual income

between INR2,00,000 and 4,99,999) and strivers (annual

income INR5,00,000 and 10,00,000) population is

significantly increasing the next future. There will be a direct

proportionality of this increase to healthcare spending parity.

 The disease rates in India are increasing . India has one of

the highest heart disease and diabetes rates in the world

 Shift to lifestyle related diseases .


 New modern private insurance companies are indulging in

money –making business with little interest in insurance

 Insurance policies contain too many exclusive clauses

 Most Insurance companies now use ‗call centres and staff

attempt to answer questions by reading from a script, It is

difficult to speak to anybody with export knowledge.


Ever since the new ideas and new techniques have been witnessed in the

market, health insurance has gained real importance. It is very important to

choose the right kind of plan not only for your benefit but for family‘s as well.

The basic idea of the insurance companies is to bring more and more plans

which would suit your needs the best way. And hence, there are innumerable

unique plans made available in the market by the insurance companies. The

only thing you need to know is the right kind of criteria while choosing any plan.

There are certain tips which would surely help you choose the right kind of


While choosing a plan, the first priority for is to acknowledge your needs

and then act accordingly while choosing the kind of plan you need.

Check out the prices of the various policies available in the market.

Compare them and buy the plan as per your paying capacity.

Search for the individual or family policies available, as are much more

economical and provides higher coverage for all the members of your


Normally a broker is the best option when buying a policy cover as he

can review all the terms of the policy properly and doesn‘t push an

individual towards buying any policy.

Preferably, avoid insurance policies which have tie-ups with any

particular hospitals or have specific conditions for buying the plans.

The most important thing is to be truthful with the broker or the insurance

company and give them all the proper details required for their


Rest will depend upon the insurance policy taken by you and the way it would

be helpful in the near future. The better way is to maintain utmost care in your

well being and your eating habits. This would keep you away from the germs as

well as harmful diseases.

Key Players


11.6 Comparison of Health Insurance Companies




ICICI Lombard GIC Ltd. is a joint venture between ICICI Bank

Limited, India's second largest bank with consolidated total assets of over USD

91 billion at March 31, 2012 and Fairfax Financial Holdings Limited, a Canada

based USD 30 billion diversified financial services company engaged in general

insurance, reinsurance, insurance claims management and investment


ICICI Lombard GIC Ltd. is the largest private sector general insurance

company in India with a Gross Written Premium (GWP) of Rs. 5,358 crore for

the year ended March 31, 2012. The company issued over 76 lakh policies and

settled over 44 lakh claims and has a claim disposal ratio of 99% (percentage

of claims settled against claims reported) as on March 31, 2012.

The company has been conferred the "Golden Peacock Award 2012" for

Corporate Social Responsibility, "Golden Peacock Innovation Award-2010" for

Rashtriya Swasthya Bima Yojana. It also received the "Skoch Financial

Inclusion Award-2011" in the micro finance category. The company has been

conferred with 'NASSCOM - CNBC TV18 IT User Award 2010' for Best

Technology Implementation in the Insurance Sector. It has been awarded

CNBC Awaaz Consumer Award 2010 for being the 'most preferred brand' in the

General Insurance category. ICICI Lombard Auto Insurance has been rated

highest in customer satisfaction by J.D. Power Asia Pacific in India among 11

auto insurance providers. It was awarded Customer and Brand Loyalty award

in the 'Insurance Sector - Non-Life' at the 3rd Loyalty awards, 2010 and the

'General Insurance Company of the Year' at the 11th Asia Insurance Industry

Awards. The company also won the NDTV Profit Business Leadership Award

2007 and was adjudged as the most Customer Responsive Company in the

Insurance category at the Economic Times Avaya Global Connect Customer

Responsiveness Award 2006. It has the Gold Shield for 'Excellence in Financial

Reporting' by the ICAI (Institute of Chartered Accountants of India) for the year

ended March 31, 2006.


Family Protect Premier

Health Advantage Plus

Critical Care

Personal protect

Health Care Plus

Popular Product

 Health Advantage Plus-

Health Advantage which covers not only hospitalization expenses

but also outpatient expenses like dental, up to a limit. Maternity cover is also

available under this product. The company has also added Health insurance

Guide, an interactive tool to help the customer Selecta plan to suit his


Health Advantage Plan has two fixed Premium brackets of Rs.

15,000 and Rs. 20,000 for senior citizens. This ensures that you get the entire

Tax benefit.


1. A Choice of cover of Rs. 2 lakh and Rs.3 lakh at the same premium rate

2. You can avail Outpatient treatments under this policy

3. You can cover 2 individuals in the same policy at the same rate.

4. Pre existing illness covered after 2 years

5. No pre-screening or medical test till age limit 55

6. The premium does not change as per age.


Bajaj Allianz General Insurance Company Limited is a joint venture between

Bajaj Finserv Limited (recently demerged from Bajaj Auto Limited) and Allianz

SE. Both enjoy a reputation of expertise, stability and strength.

Bajaj Allianz General Insurance received the Insurance Regulatory and

Development Authority (IRDA) certificate of Registration on 2nd May, 2001 to

conduct General Insurance business (including Health Insurance business) in

India. The Company has an authorized and paid up capital of Rs 110 crores.

Bajaj Finserv Limited holds 74% and the remaining 26% is held by Allianz,

SE.As on 31st March 2010, Bajaj Allianz General Insurance maintained its

premier position in the industry by achieving growth as well as profitability.

Bajaj Allianz has made a profit before tax of Rs. 180 crores and has become

the only private insurer to cross the Rs.100 crore mark in profit before tax in the

last four years. The profit after tax was Rs. 121 crores, 27% higher than the

previous year.

Bajaj Allianz General Insurance has received the prestigious "Business Leader

in Bajaj Allianz today has a countrywide network connected through the latest

technology for quick communication and response in over 200 towns spread

across the length and breadth of the country. From Surat to Siliguri and Jammu

to Thiruvananthapuram, all the offices are interconnected with the Head Office

at Pune.

Bajaj Allianz has received iAAA rating, from ICRA Limited, an associate of

Moody's Investors Service, for Claims Paying ability. This rating indicates

highest claims paying ability and a fundamentally strong position.

Bajaj Allianz General Insurance has received the prestigious "Business Leader

in General Insurance", award by NDTV Profit Business Leadership Awards

2008. The company was one of the top three finalists for the year 2007 and

2008 in the General Insurance Company of the Year award by Asia Insurance



1. Individual Health Guard

2. Family floater Health Guard

3. Extra Care

4. Health Ensure

5. Critical illness care

Popular Product:-

Health Guard

Health Guard (Mediclaim), Silver health (Senior Citizen) and Star package

(Family Floater), there are also other plans like Hospital Cash which gives an

amount on every day of hospitalization and Critical Illness which gives a lump

sum in the event that the insured contracts one of the critical illnesses listed like

cancer during the policy period. Bajaj was the first company to come up with a

captive TPA with ensuing efficiencies.


The member has cashless facility at over 2900 hospitals across India

With Health Guard, the member has access to cashless facility at various

empanelled hospitals across India.

Pre and post - hospitalization expenses covers relevant medical expenses

incurred 60 days prior to and 90 days after hospitalization

Covers ambulance charges in an emergency subject to limit of Rs. 1000 /-

No tests required up to 45 years up to SI 10 lacs*

10% co- payment applicable if treatment taken in non-network hospitals

20% co-payment applicable for members of age group 56 -65 years, opting this

policy for first time

Waiver on 10% co-payment is available on payment of additional premium

Pre-existing diseases covered after 4 years continuous renewal with Bajaj



Star Health and Allied Insurance:

Star Health and Allied Insurance Company Limited (Star Health) is a joint

venture between Oman health Insurance Company, ETA Ascon Group and a

number of insurance veterans in the country. It is also the first dedicated health

insurance company in India. Known for its innovation, Star has some very

unique products like Diabetes Safe which is for diabetic patients and Star Net

plus which is designed for HIV+ patients. Star Health insurance has an in-

house TPA which increases its efficiency in dealing with cashless cases. They

also have a unique feature where in customers calling a toll free number can

get free consultations with a general physician.

Star Health and Allied Insurance Company Limited (Star Health) has a capital

base of Rs.438 crores, more than sufficient to form a General Insurance

Company. However, Star Health has chosen to be in the field of Health. It is

India's first stand-alone Health Insurance Company in India and deals in

Personal Accident, Mediclaim and Overseas Travel Insurance.


Medi Classic

Diabetes safe

Family Health optima

Star Health

Senior citizen Red carpet

Star critical plus

Popular Product

Family Health optima:

Star Health brings you this Unique insurance policy with unique benefits for -

coverage for both future ailments / diseases and for pre existing diseases /



No Third Party Administrator; direct in-house claims settlement

Faster & hassle-free claim settlement

Cashless hospitalization

Network of more than 4900 hospitals across India

24x7 Toll- free Helpline

Free General Physician Consultation over phone. Doctors on duty 24x7. By

quoting the policy number, any person can contact our Doctor on the toll free

number 1800 425 2255 for medical advices.

Free Health magazines are issued to policy holders at regular intervals


New India is a leading global insurance group, with offices and branches

throughout India and various countries abroad. The company services the

Indian. It is one of the first Indian owned companies when it was formed in

1919. It offers different health insurance products like Mediclaim policy, senior

citizen and universal health insurance policy. New India is a leading global

insurance group, with offices and branches throughout India and various

countries abroad. The company services the Indian subcontinent with a

network of 1068 offices, comprising 28 Regional offices, 393 Divisional offices

and 648 branches. With approximately 21000 employees, New India has the

largest number of specialist and technically qualified personnel at all levels of

management, who are empowered to underwrite and settle claims of high

magnitude. New India has been rated "A-" (Excellent) by A.M.Best Co., making

it the only Indian insurance company to have been rated by an international

rating agency. Rating based on following factors:

Superior Capital Position

Strong Operating Performance

Only Company to develop significant International operations, long

record of successful trading outside India


Mediclaim Policy

Senior citizen policy

Universal health Insurance

Popular Product:

Mediclaim Policy

We have designed a new Policy called as Family Floater Mediclaim Policy for

covering the family members with one sum insured. All the terms and

conditions of Individual Mediclaim Policy 2007 will be applicable for Family

Floater Mediclaim Policy

This insurance is available to persons between the age of 18 years to 60

years. The persons beyond 60 years can continue their insurance provided

they are insured under Mediclaim policy with our Company without any break.


 Existingpolicy holders can continue to renew their mediclaim policy till


 The policy offers an attractive discount in premium for family cover

 LoyaltyDiscount is offered on continuous policy renewal

 Good Health Discount is provided for claim free years

 Cost of Health Check up is also provided after a certain period of time









April to December 2011

According to the latest statistics released by the IRDA, gross premium

underwritten by non-life insurers in the health segment during the period April

to December FY2011-12, grew 17.5 per cent to Rs96.4 billion as compared to

Rs82.1 billion in the same period in the previous financial year.


Figure no.11.6.1 Comparison of Health Gross Premium

Notes: The total health premium figure includes domestic and overseas

medical insurance

Among the Public Sector Undertakings (PSUs), United India Insurance and

National Insurance each registered a strong growth of 29.1 per cent and 24.8

per cent respectively.

Among private players, ICICI Lombard occupied the top position with a market

share of 12.7 per cent and growth of 13.2 per cent. With the exception of

Reliance General, Star Health & Allied Insurance, Bajaj Allianz all the other

companies recorded a growth in health insurance premiums during the period

April to December FY2011-12, as compared to the same period of FY2010-11.

Health insurance industry in India, covering developments in the period

December 2011 to February 2012.The health insurance sector continues to

record good 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, as compared to the same period in the previous

financial year.

With the health insurance portability in place, the sector has seen a range of

innovative products. Companies have started offering better features while

keeping the prices consistent. The products include critical illness, travel

insurance and products that reinstate the sum insured. IRDA is working to roll

out both Life and Non-Life insurance cover to people with HIV/AIDS and those

vulnerable to such diseases. The authority proposes to implement the orders

effective 1 October 2012.

As per the recent insurance fraud survey, rising incidences of fraud have

impacted claim costs for insurance companies and premiums for policy holders.

FY2011-12 has seen insurers working on remedies to reduce fraudulent claims,

and setting up an in-house claim settlement process.






Survey has been done to know the Awareness, Preference and consumption

pattern of health insurance. By using Questionnaire method.


Q.1 Do you have any Insurance Policy?

(a) Yes (b) No

Yes No


Figure no.12.1

Parameters Percentage
Yes 54%
No 46%
Table no.12.1

Analysis:-The analysis shows that green symbolize of Insurance 68%

Respondents having Insurance Policy 32% Respondents don‘t have any kind of

Insurance Policy.

Q.2 Are you aware about Health Insurance?

(a)Yes (b) No

Yes No









Figure no. 12.2

Parameters Percentage
Yes 68%
No 32%
Table no.12.2


The condition of health insurance in India is not up to mark. Most of the

respondent does not use health insurance to finance their medical expenditure.

These people pay for their medical expenditure from their pocket. As a result,

many of these uninsured individuals either end up with poor quality healthcare

or have to bear financial hardships. The awareness about Health insurance is

very low due to many reasons.

Q.3 If yes, do you know benefits of health insurance?

Yes No


Figure no.12.3

Parameters Percentage
Yes 64%
No 36%
Table no.12.3


Because of lack of product benefit customer are not ready to purchase that

product. Lack of product awareness among distributors ,if they are not in

position to introduce the product to customer it will not be in a position to

understand the importance and uses of health insurance. it is rightly said that

awareness develop brand equity , due to awareness a customer recognized the

product and purchase the same , a customer is in position to identify the

product because of such awareness.

Q.4 Do you have any Health Insurance Policy?

(a) Yes (b) No

Yes No








Figure no 12.4

Parameters Percentage

Yes 54%

No 46%

Table no 12.4


54% Respondents having Health Insurance policy. 46% Respondents don‘t

have Health Insurance policy. Because lack of awareness about Health

Insurance and major issues in handling of Health Insurance 50%people not

having Health Insurance.

Q.5 If yes, which companies plan do you avail?

(a) ICICI Lombard

(b) Bajaj Alliance

(c ) Star Allied

(d) New India Assurance










ICICI Bajaj Star Allied New India Others
Lombard Alliance Assurance

Figure no.12.5

Parameters Percentage






Table no.12.6


India‗s largest Pvt. Sectors Bank, which is also in Health insurance, ―ICICI

Lombard‖ is one of the best health insurance company and ―Star Allied Health

Insurance‖ company approximately equally preferred by the consumers , It has

been successfully able to sustain in this competitive market. The company offer

attractive products as per expectations of the customers .Although the premium

amount is high but customers still opt this companies Insurance product. It

has created as his own brand image. only because of quality services. In case

of New India Assurance company and Bajaj Allianz the most target audience

are middleclass and lower middle class , as the companies premium amount is

less than other insurance company.

Q.6 How did you get this health Policy?

(a)Employer Provides (b) Own purchase (c) Family Provides

Health Policy




Health Policy



Own Purchase Employer Family Provides

Figure no. 12.6

Parameters Percentage

Employer Provider 15%

Own Purchase 57%

Family Provider 28%

Table no.12.6


The Analysis shows that 57% respondents purchased own Health Insurance

.Single premium provide lots of extra lifetime facility, as compare to family

floater plan customer will get maximum sum assured. very few companies are

provide health insurance for their employee and in case of family floater

company charge more premium as per the age of the family member.

Q.7 How much premium do you pay annually?

(a) 1000- 5000 (b) 5001- 10000 (c) 10001 – 15000 (e) Above 15000








1000- 5000 5001- 10000 10001 – 15000 Above 15000

Figure no.12.7

Parameter Percentage
1000-5000 33%
5001-10000 35%
1001-15000 25%
Above 15000 10%
Table no.12.7


Most of the respondents having insurance policy between the range of 1000-

15000 ,Insurance companies offered insurance policy as per the age of the

customer but one most important thing researcher found that as the premium

amount is increase automatically customer will get better coverage and benefit

but some middleclass and lower-class customers not able to pay more amount

for premium.

Q.8 Why did you purchase this health insurance plan?

(a) Health Expenses recover

(b) Tax benefits

(c) Recover Future uncertainty

Health insurance plan

20.00% Health insurance plan
Health Tax benefits Recover Future
Expenses uncertainty

Figure no.12.8
Parameters Percentage

Health expenses Recover 44%

Tax Benefit 21%

Recover future Uncertainty 33%

. Table no. 12.8


The main concern of any insurer by purchasing any Health Insurance is to

cover their Health expenses ,the number of diseases increases day by day and

peoples are paying high amount for that so to recover that expense people

preferred Health Insurance. and most of the customers purchase health plan

for the tax benefit and recover the future uncertainty.

Q.9. Kindly Rate The Following Factors Important To You In Opting Health
Insurance (More than one)

b) Service of Insurer ( ) ( ) ( ) ( ) ( )

d) Network Coverage of Hospital ( ) ( ) ( ) ( ) ( )

e) Premium Amount ( ) ( ) ( ) ( ) ( )

f) Coverage Amount ( ) ( ) ( ) ( ) ( )

g) Coverage of Diseases ( ) ( ) ( ) ( ) ( )

h) Number of claims allowed per year ( ) ( ) ( ) ( ) ( )

Important Factors
0% Important Factors

figure no.12.9

Parameters Percentage

Service of Insurer 30%

Network Coverage Hospitals 20%

Premium Amount 30%

Coverage of Diseases 10%

Number of claim allowed per year 10%

Table no.12.9


For the continued development of the health insurance market, and also to

protect the long-term interests of the insured persons, the prices of health

insurance products should continue to be affordable to ensure wider

acceptance and increased reach, while on the other, the insurance industry

requires that this line of business remains commercially viable and better after

sale service.

Q.10 How Well Do You Think, You Are Covered By Your Current Health
Insurance Policy?

a) Definitely well-covered

b) Probably well-covered

c) Not well-covered

d) Probably not well-covered

Coverage by current insurance policy






10% Coverage by current insurance



figure no.12.10

Parameters Percentage

Definitely Well-Covered 32%

Probably Well-Covered 25%

Not Well- Covered 28%

Probably not well-covered 15%

Table no.12.10


43% respondents says that their health insurance plan not well covered and

probably not well covered the percentage is quite high. people should

understand their health insurance plans before buying to avoid these

confusions. One important point that everybody should keep in mind is the

associated waiting period. This is the time period before which there is no

coverage offered for the particular ailment. If a person claims for the same

illness before the waiting period elapses, he/she would not be offered the


Q.11 Which according to you is the most important aspect that every

health insurance plan should cover?

a) Hospital care

b) Preventive care

c) Maternity

d) Health specialists

e) Choice of doctors

Plan Cover
Plan Cover

Figure no.12.11

Parameters Percentage

Hospital care 34%

Preventive care 8%

Maternity 13%

Health specialist 27%

Choice of Doctors 18%

Table no.12.11


Most of the respondents says that they want better coverage of hospitals and

coverage of maternity also because many of the reasons doctors are taking

decision for suzerain so its not affordable for common men and they want their

own family doctors for treatment so this are the main things that researcher


Q .12. What Are The Reasons, You Do Not Have Any Health Insurance

a) It's Too Expensive

b) Insurance Is Not Important, No Reason To Get It

c) It Is Too Hard To Understand/Confusing

d) I Do Not Have Trust On Insurance Companies

e) Employer Sponsored Cover Is Sufficient For Me

f) All of Them


5% Reasons

Figure no 12.12

Parameters Percentage
Too expensive 28%

Insurance Is Not Important 5%

Not having trust on insurance company 16%

Employer sponsored 23%

All of them 20%

Table no.12.12


Respondents think health insurance is too expensive high premium and other

problems have resulted in a very complicated and perhaps unsustainable

health insurance system. Respondents says that the concept of insurance is

very hard and confusing to understand because of that insurance agents

mislead people and not provide them actual hidden charges information and

because of other customers experience other peoples are also not having trust

on Insurance company.




1 Rank

Figure no.12.13

Star Allied Health Insurance


1 Rank

Figure no. 12.14






Figure no. 12.15


1.5 Rank

Figure no 12.16

1.5 Rank

Figure no.12.17

Based on the responses collected from the respondents and after tabulating

and using ranking technique it was found that :-

ICICI LOMBARD consistently stand on 1st and 2nd rank , The policy covers

reimbursement of hospitalization expenses incurred for diseases contracted

or injuries sustained in India. Exclusion clauses apply. Moreover, favorable

claims experience is recognized by discount and conversely, unfavorable claims

experience attracts loading on renewal premium. On payment of additional

premium, the policy can be extended to cover maternity benefits, pre-

existing diseases, and reimbursement of cost of health check-up after four

consecutive claims-free years. In case of Star Allied Health Insurance got

approximately equally preferred by the customers they given similarly 2nd rank to

both of them. But in case of Bajaj Allianz and New India Health Insurance, both

the companies premium is low as compare to other company most of the middle

class people preferred this companies plan but they are not providing the

services up to the mark the coverage of health hazard , Converge of risk and

list of Associated Hospitals as compare to ICICI LOMBARD and Star Allied is

not up to level.

As per rank given by the Respondents to ―Bajaj Allianz” Standard Health

Insurance policies, it has become the 3rd most preferred Health insurance

company. Many of other companies like HDFC standard life Insurance, Apollo

Munich, Cholamandalam, United Health Insurance companies Health Plans are

less impressive, and are Ranked fourth by Respondents.


A systematic approach was followed to identify the requirements of a Target

customers to provide them with benefit and reasonable degree of security.

Today everyone believes investment in Health Insurance –it is vital for the


Health insurance has emerged as one of the fastest growing segments in the

non-life insurance industry with 30 per cent growth in 2010-11. For the purpose

of regulation, health insurance companies are classified as non-life companies.

Health insurance‘s annual premium collections are over Rs 6,000 crores.

Despite the high growth, the business is a huge challenge for insurers because

of the high losses over soaring medical expenses.

Awareness and Perception of policy holder: Out of total 300 respondents only

75percent people have proper knowledge about Health insurance plan. It

shows that there has been 30:70 split between cashless and Reimbursement

Health insurance policy. Even from researcher field experience it was quite

evident that policy holder has not wider information about their insurance


Knowledge about coverage and exclusion of policy: Most of the time Policy

Holders have inadequate knowledge on illness covered in their polices,

exclusion of illness in the policy, cashless Reimbursement and list of

empanelled hospitals. Similarly only 8.2% of policyholders are aware about the

fact that insurance companies charged extra fees for TPA. Claim settlement

and after sales Services:- Majority of the customers complaining that there has

been always delay in claim settlement and other after sale service. Most of the

time the agreed time for claim settlement is one month but actual time for claim

settlement is two to three month.

Generally Policy holders avoid dealing directly dealing with their Insurance

Company due to various procedure hassles. Insurance agents seems to have

major influence on policy holder s decision and policy holders more trust and

faith of them On one hand, because the prices of health insurance products

most of the customers avoid best Health Insurance Plan.






This paper makes an attempt to understand the awareness, preference and

consumption pattern of Health insurance plan.

The result of this study shows that the annual premium is the most important

factor that influences the decision or choice of health Insurance plan. This

means that households having higher income have higher probability of buying

healthcare plan. Thus, less income groups may not opt for health insurance

plan. Thus there is a need to develop more products that cater to need of larger

and all levels of income groups. Apart from annual premium, hospital network

and disease coverage or coverage of services hold importance in making

choice of healthcare plan. Thus, insurance company should provide larger

network of hospitals and services in their plans in order to satisfy their customer

fully. Accessibility of service provider and company reputation also moderately

influence the decisions. The decision made for choosing the plan is mainly

influenced by self perceptions. Family and relatives and past experience hold

second position for assisting in the choice of plan. Most people would prefer to

buy healthcare plan from private insurance companies for they provide better

services and innovative products. Thus, there is large scope for private

insurance companies to grow.

The legal and regulatory framework of private health insurance, particularly

because it operates in the voluntary market, should continually balance

competing goals of access, affordability and quality of healthcare and provide

health coverage to a larger fraction of the population with varying risk

characteristics and ability to pay. Regulations, aside from their aim of providing

protection of health insurance policyholders and beneficiaries, can be potent

tools to promote access to healthcare, control pricing of health coverage vis-à-

vis healthcare providers and enhance quality of healthcare. Allowing the

participation of other entities that provide health coverage, such as Hospital

and/or Professional entities, and self-insured health insurance schemes of

Mutual Benefit Associations and Cooperatives would further increase the reach

and depth of private health insurance. Licensing standards for compliance

which are enforced on health care provider facilities as well as self-regulation in

the medical profession and within provider groups are necessary for continuing

improvement of healthcare quality. Private health insurance cannot grow if

reasonable consumer expectations relating to access, cost and quality of

healthcare remain promises rather than realities.

The analysis clearly shows that there is demand for cash less health insurance

scheme but the customers want reduction in number of exclusions and

inclusion of pre-existing diseases. They want the TPAs to be efficient and

perform up to the expectation of the policyholders and insurers. Even though

the insurers are providing need based plans but more should be done to meet

the needs arising out of changing lifestyles of people. The population of elderly

people, in India, is rising and they would require institutional care, which is

totally missing. The plans need to include pregnancy related expenses,

inclusion of chronic and debilitating diseases, HIV and AIDS, TPAs need to be

more efficient in claims processing and providing better networking for the

policyholders. These challenges can be overcome by setting up and stand-

alone health insurance companies that are run on-profit objective. In most of

the countries life insurance companies underwrite health insurance. In India,

life insurers should be allowed to underwrite health insurance. The tax benefits

available at present should be hiked and continued with. The health plans

should be wide based in order to include outpatient care along with in-patient.

To create the awareness of health insurance is very important, the Government

and all the associated bodies should all offer their support in spreading health

insurance awareness so that Indian citizens are aware of the right to seek

quality healthcare without any financial thought. and it will help to increase the

awareness of health Insurance among the people.


The Health Insurance recommendations, some of the keys ones are as follows:

♦ Lowering The Limit Of Capital Requirement:

The capital requirement for health insurance companies be reduced to Rs 25

crore from the current Rs 100 crore. Present Rs 100-crore requirement is a

deterrent since a larger capital requirement will bring in additional cost

associated with such capital.

♦ Raising The FDI Limit:

The foreign direct investment (FDI) limit be raised to 51 % from the existing %.

This could attract global health insurance players and encourage them to take

a long-term perspective of their investments in the country.

♦ Grading And Accreditation Of Health Providers:

The grading and accreditation of hospitals and health providers in a post-tariff

regime. The parameters used to evaluate the hospitals would include medical

specialties (evaluated on the availability of equipment, qualification and

adequacy of medical personnel). The provision of a database is something that

could be taken up by the Tariff Advisory Council in active collaboration with the


♦ Advertisement Of Health Insurance:

Large efforts should be laid towards developing health insurance as an

alternative and acceptable method of personal finance risk management tool.

The whole aim should be to divert towards popularizing health insurance as a

concept in rural areas under the guidance of the ministry of finance and the


The Research also recommends that

(1)Life insurance companies to develop underwriting guidelines and sell health

insurance policies because of their wide distribution network.

(2) Multiple health insurance products should be offered at various price points

to customers.

(3) IRDA should engage the services of the Ministry of Health and Family

Welfare, Indian Medical Council, Indian Medical Association, healthcare

associations and other bodies.

Other Recommendations

♦ Abolition of the service tax on health insurance products. It has also been

suggested that income tax holidays be accorded to the health insurance

companies for 10 years from the date of incorporation.

♦ Introduction of a common pool for terminally ill people/people who do not

have access to any kind of health insurance.

♦ Fraudulent claims, when discovered and proved, should be treated as

criminal offence and subject to strict legal action including imprisonment.

♦ Systems of co-payment, co-insurance and voluntary deductibles to be used to

(1) Make health insurance more viable,

(2) Control frauds

(3) Refrain customers wanting to avail luxury facilities.




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Name of Respondent: -
Date: -
(a) Male (b) Female
Age (in Years)
(a) 18 - 25 (b) 26 – 35 (c) 36 - 45 (d) above 45
(a) 12th (c) Graduate (d) Postgraduate (e) Professional
Monthly Income (in Rs.)
(a) Below 10,000 (b) 10,001-20,000 (c) 20,001-30,000 (d) above 30,000
(a) Student (b) Private Employee (c) Govt. Employee

(d) Business Man

Q.1 Do you have any Information regarding Insurance?

(a) Yes (b) No

Q.2 Are you aware about Health Insurance?

(a)Yes (b) No

Q.3 If yes, do you know benefits of health insurance?

(a) Yes ( b ) No

Q.4 Do you have any Health Insurance Policy?

(a) Yes (b) No

Q.5 If yes, which companies plan do you avail?

(a) ICICI Lombard

(b) Bajaj Alliance

(c ) Star Allied

(d) New India Assurance

(e) Others

Q.6 How did you get this health Policy?

(a)Employer Provides (b) Own purchase (c) Family Provides

Q.7 How much premium do you pay annually?

(a) 1000- 5000 (b) 5001- 10000 (c) 10001 – 15000 (e) Above 15000

Q.8 Why did you purchase this health insurance plan?

(a) Health Expenses recover

(b) Tax benefits

(c) Recover Future uncertainty

Q.9 Kindly Rate The Following Factors Important To You In Opting Health
Insurance (More than one)

(a) Service of Insurer ( ) ( ) ( ) ( ) ( )

(b) Network Coverage of Hospital ( ) ( ) ( ) ( ) ( )

(c) Premium Amount ( ) ( ) ( ) ( ) ( )

(d) Coverage Amount ( ) ( ) ( ) ( ) ( )

(e) Coverage of Diseases ( ) ( ) ( ) ( ) ( )

(f) Number of claims allowed per year ( ) ( ) ( ) ( ) ( )

Q.10 How Well Do You Think, You Are Covered By Your Current Health
Insurance Policy?

(a) Definitely well-covered

(b) Probably well-covered

(c) Not well-covered

(d) Probably not well-covered

Q 11. Which according to you is the most important aspect that every

health insurance plan should cover Hospital care?

(a)Preventive care


(C). Health specialists

(d.)Choice of doctors

Q.12 Your Experience With Your Current Health Insurance Company:

(a) Name of the Insurance Company…………………………

(b) Customer Service


(c) Claim Refund….

Very Satisfied…Satisfied……..Not Much satisfied……Dissatisfied

(d) Complain Addressable System…

Very Satisfied…Satisfied……. Not much Satisfied…….Dissatisfied

(e) Role of TPA

(Very Satisfied…Satisfied…...Not Much Satisfied...........Dissatisfied

If Not……..

Q 13. What Are The Reasons, You Do Not Have Any Health Insurance

(a) It's Too Expensive

(b) Insurance Is Not Important, No Reason To Get It

(c) It Is Too Hard To Understand/Confusing

(d) I Do Not Have Trust On Insurance Companies

(e) Employer Sponsored Cover Is Sufficient For Me

(f) All of Them