Despite strong growth in health insurance premiums over the past decade, the health protection gap (HPG) in India is one of the highest in the world, says Swiss Re Institute (SRI) in its report, titled “India’s insurance market: poised for rapid growth”.
As per a recent estimate from the Swiss Re Institute, the HPG in India was 35% vs 7.5% globally in 2021. As per WHO estimates, total public and private health spending in India was estimated to be 3.0% of GDP in 2019, well below the global average of 9.8%.
The government accounts for approximately one-third of total health expenditures. That constrains the capacity and quality of public services available, and drives those who can pay for treatment (around one-third of the population) to seek treatment in private hospitals. This has resulted in out-of-pocket expenditure accounting for more than half of total healthcare spending in India.
Low insurance penetration
Low insurance penetration is another reason for the high HPG in India. An estimated 7% of the population is pushed below the poverty line because of having to pay for healthcare services from their personal savings.
As per a report published by the apex public policy think tank of the Indian government Niti Aayog in October 2021, around 30% of India’s population has no health insurance. This segment predominantly constitutes the self-employed (agriculture and non-agriculture) informal sector in rural areas, and a broad array of informal, semi-formal and formal occupations in urban areas.
The Ayushman Bharat – Pradhan Mantri Jan Arogya Yojana (AB-PMJAY) and state government extension schemes provide comprehensive hospitalisation cover to the poorest 50% of the population. Around 20% of individuals are covered through social health insurance and private voluntary health insurance.
Factors that help close health protection gap
The COVID-19 pandemic has brought a shift in consumer behaviour towards purchasing health insurance and simultaneous investment by insurers to improve their digital capabilities. These developments should contribute to reducing the HPG, says the SRI.
Data- and digital-driven capabilities will likely make the buying process easier and, among others, should broaden insurance reach to millennials and the younger population. There is also evidence of the growing use of technology in the other areas of the insurance value chain. Several data-driven innovations and digital tools to speed up administrative tasks such as underwriting, claims processing and handling customer queries are gaining popularity.
