How Group Health Insurance Can Solve the Health Security Gap In India

The big challenge for group health insurance is the serviceability levels

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The group health insurance market is projected to grow to $11 billion (INR 80,000 crore) by 2025 and is 1.5 times the size of the retail health market (IRDA Industry Statistics, IBEF and Mordor Intelligence reports). These numbers projected were pre-pandemic and have all the reasons to go up due to the increasing awareness and necessity of health insurance post-COVID.

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What is group health insurance?

Group health insurance is simply covering larger groups under a single health policy. These groups can take any form such as associations, trade bodies and societies. However, the biggest chunk of group health insurance comes from employer-employee group health insurance policy, wherein the employees of an organization are covered with a health insurance and can cover employee families as well. The premium cost under group health insurance could be as low as 50 per cent of the cost of retail health policies. There are also other benefits under group insurance that include day 1 coverage of maternity and diseases, no pre-policy checks and simpler claim settlement as there are no issues with respect to claim rejection on grounds of pre-existing diseases and exclusions.

The challenges of group health insurance

The big challenge for group health insurance is the serviceability levels. This can include support on quote negotiation, member addition and deletions, claims settlement and member education. Generally, an intermediary like a broker or an agent is expected to support the groups on these services. However, the market is highly price sensitive, and the margins earned by intermediaries in the group health insurance is also quite low. When you combine that with the willingness of an intermediary to compromise even on these margins, you are looking at very poor service levels.

And with an even smaller ticket size for MSMEs in India for group health insurance, this market has generally been ignored by insurance intermediaries. It hardly makes any business sense to service a group health insurance to a 10-member organization as the premium cost would be around INR 30,000 and the margins for intermediaries would come down to INR 2,500 only. These margins would not justify any intermediary to service MSME the market and the focus would always be on larger organizations. The only way that the SME market can be served optimally would be through higher margins as well as huge economies of scale.

What is new-age insurtech doing

These are challenges that employee welfare insurtechs like HealthySure are addressing. Bringing in technology to solve the problems of catering to these markets and ensuring high level of serviceability through economies of scale. Tools like whatsapp and digital cards are used for quick claim servicing. Dedicated portals are used for seamless member management. There are also 360 degree healthcare services integrated into the platform to provide comprehensive healthcare not limited to health insurance. These insurtechs have seen good amount of venture capital interest over the last couple of years.

How can group health insurance solve the under-penetration problem?

Despite the pandemic, India's penetration of insurance and health cover is still very low. There is a huge scope for social health security to be provided through organizations as is the case with some countries like the US. The regulator and the government can mandate health insurance coverage just like provident fund or pension for private employees and this will go a long way to address the gap. There are more than 100 million private organizations in India and MSMEs constitute the largest chunk. Promoting group health insurance among organizations will go a long way to have the larger population covered under social health security.

What can the government and the regulator do to promote group health insurance

The regulator also needs to relook at the margins for intermediaries in the market to bring up the service levels as well as interest from intermediaries to service the market. It will be very difficult to have deeper penetration of group insurance without the support of insurance intermediaries.

There are mandatory schemes like ESIC, that help in providing organization sponsored baseline health coverage. But not everyone is eligible to be covered and there are also challenges in hospital network coverage and quality of healthcare under the scheme. This is where private and public insurance companies come in to underwrite the risk. But this also needs to be lucrative on the distribution side.

There is also a huge potential to make the insurance buying process easier by simplifying insurance underwriting and bringing in fintech innovations on the payments side.