- Date : 21/01/2020
- Read: 6 mins
With Indian markets set to touch $220 billion by 2020, Health Insurance has become the toast of investors.
In October 2019, the Sydney-based Insurance Australia Group (IAG) announced it was exiting India and selling its 26% stake in SBI General to Premji Invest and Warburg Pincus. The stated reason was that they wanted to focus on their core markets in Australia and New Zealand.
However, what was interesting about this event was the Australian reaction. A leading newspaper in the country, The Australian said that the decision was “unwise”, and a columnist called it “arguably the dumbest decision” taken by IAG head Peter Harmer.
The columnist's chagrin is understandable since the IAG exit came at a time when India’s insurance sector is poised to become an estimated $280-billion market by 2020. This sector is a hotbed of opportunities with insurers looking to either expand or cobble together mergers and acquisitions (M&As).
India’s insurance sector is currently undergoing a take-off phase, with insurers and customers increasingly using digital technology when selling and buying insurance.
New players are coming in. Private equity (PE) firms such as Warburg Pincus and Premji Invest are not the only companies in their category entering the sector. There are others, such as Singapore's GIC, KKR, Temasek and Carlyle who are also keen on acquiring stakes in insurance companies.
According to global consultancy PwC's report titled Competing in a New Age of Insurance, the last two decades can be divided into three distinct phases:
- 2000–2008: The period of taking baby steps, seizing opportunities and expanding;
- 2008–2014: The period of uncertainty, which led to insurers re-strategising;
- 2014 onwards: Era of growth in sectors like health insurance, accompanied by a digital revolution in insurance.
Investors and insurance companies have been quick to spot growth areas driven by evolving customer needs; the health insurance segment being a prime choice.
Market tracker Mordor Intelligence says this is the fastest developing segment in the non-life insurance sector, recording a growth of 24% in FY17. According to them, “By registering a CAGR of 23%, for the past 10 years, health insurance sector is the fastest developing market segment. The main reason behind this phenomenal growth may be the liberalisation of the economy and growing general awareness among the public on healthcare.”
Consequently, billionaire investor Rakesh Jhunjunwala has joined a consortium to buy Star Health, India’s largest health insurer. The deal is valued at around $1 billion.
In the early part of 2019, PE investor True North announced that it would buy Max India's 51% stake in Max Bupa Health for Rs. 511 crore.
In June, the Indo-German joint venture HDFC ERGO picked up the entire stake of Apollo Hospitals (about 51%) in Apollo Munich Health Insurance, and another Indo-German venture, for Rs.1,347 crore.
Perhaps sensing future trends in investments, sectoral watchdog IRDAI is reportedly planning to issue redesigned guidelines for insurers looking to disinvest through the IPO route.
Mordor identified five principal drivers in India’s health insurance segment, as listed below:
- Increasing awareness owing to the growing healthcare costs;
- Renewed focus on the health vertical by insurers;
- Availability of specific products for senior citizens and children;
- Availability of a wide range of products, depending on customer needs;
- The medical inflation rate of more than 15%
However, in the India Fit 2019 report, the California-based health platform GOQii identified another influencer - health and fitness-conscious millennials.
According to this report, 85% of Indian millennials believe that they should get health insurance before the age of 30. However, they seem to have veered away from traditional health insurance offerings and are looking for policies that take into account the state of their individual health and fitness.
In other words, they are looking for better value. 70% of millennials were willing to share personal health data with insurers to get discounts on health plans for themselves.
Thus, when it comes to health insurance, new-age consumers have a vested interest in staying healthy. They want comprehensive wellness plans that encompass features such as preventive health check-ups, stress management, nutritional guidance and gym memberships.
This shows us how the customer’s method of buying insurance is changing. People are increasingly switching to the digital mode of doing business. However, the traditional method of using insurance agents is still widely preferred.
Customers are purchasing insurance online because of the associated cost. It is cheaper since there is no agent’s commission fee involved in the digital process.
Plus, buying insurance online ensures that one has direct access to all the information pertaining to the entire range of products offered by various insurers. This enables the customer to compare features and rates.
In a nod to evolving consumer tastes, insurers are also investing in technology and collaborating with tech firms such as IBM to create products designed to meet specific customer needs.
For instance, Reliance General now uses video chat to process claims – as witnessed in the post-floods period in Kerala this year. This brings down the processing time to a few hours from a few weeks. Reportedly, Reliance General settles over 50% of its claims through the use of video chat each month.
To offer mobile insurance, e-commerce giant Flipkart partnered with Bajaj Allianz in October 2018.
Digit Insurance, a smaller new-age insurer, uses blockchain-based systems to process small-ticket claims such as servicing damaged phones.
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Incidentally, when it comes to non-life insurance categories, health insurance is not the one with the highest sales. Leading the pack is motor insurance, and this is simply because it is mandatory to buy motor insurance if one owns a motor vehicle.
According to the data released by the India Brand Equity Foundation, motor insurance accounted for 38.2% of non-life insurance premiums earned between April 2018 to November 2018. This was followed by health insurance at 25.7% and crop insurance at 17%.
The Pradhan Mantri Jan Suraksha Bima Yojana is an affordable insurance scheme for BPL groups. On the opposite side of the spectrum, HNI clients can get a health cover from SBI General that includes air ambulance cover up to Rs.1 lakh. They can also get insurance covers for private jets, and high-end bicycles from Bajaj Allianz. Last year, HDFC Ergo launched a cyber-insurance policy.
Remember, all types of insurance are important. They are designed to protect an individual's life and assets. They also keep one guarded against major financial strains. Life insurance and health insurance offer tax benefits as well.
Finally, be it general insurance or life insurance, it is advisable to purchase the policy online. This way, one can cut out the middlemen and make the purchase according to their convenience. There is no need to visit the insurer’s office, fill out the forms or submit a stack of documents. Take a look at this guide to health insurance to understand the nuances comprehensively.