One major change was implementing the Indian Insurance Act,
first proposed by the previous government.
The Act enables global reinsurers to enter as 100 per cent
owned branches and increases overall foreign direct investment (FDI) in the
insurance industry from the current limit of 26 per cent to 49 per cent. While
there are many aspects of insurance, the most significant opportunity not only
for insurers but also for Indian society, is the health insurance sector.
India is one of the fastest growing health insurance markets
in the world. It has grown rapidly since the industry opened to private and
foreign players in 1999 with the establishment of the Insurance Regulatory
Developments Authority. In 2014, the health insurance market grew to $2.7bn
from just $150m in 2004. It is on track to hit $8bn by 2020.
There are a number of factors driving this growth.
From a workforce perspective, just 10 per cent of India’s
300m working population work within formal sectors such as government, the
public sector or in large private companies, which often offer health insurance
perks. The rest work in the informal sectors, meaning they are self-employed or
working in family businesses and, therefore, without corporate health insurance
cover.
It is this end of the market that is most dependent on
financial security during ill health. Yet, in the absence of health insurance
plans, many are liable for medical bills and loss of potential income during
treatment.
Demographically, the population boom, rising life expectancy
and increased incidences of lifestyle-related diseases means that total
healthcare expenditure is growing rapidly. It is expected to rise from $70bn to
$280bn by 2020.
Despite this, there is a low spend per capita compared with
countries where healthcare is largely funded by the government, meaning that
some 62 per cent of total expenditure on health is paid for out of pocket.
India has one of the lowest penetration rates of pre-paid
health coverage and medical insurance in the world. This is due to its
geographical size, the capital required to invest in developing the
distribution network and the current lack of focus from insurers in the
individual health insurance sector.
The limitation on foreign investment rules in insurance did
not give much incentive for a lot of foreign experienced players to participate
in this market. There are just five standalone health insurance companies and
17 private sector insurance companies offering health insurance. So there is
low consumer choice, coverage and competition. Compare this with the UK, which
has 911 general insurers. India itself had over 100 players in general
insurance before the market was nationalised in 1972.
Active foreign participation is critical for the sector,
bringing better standards and driving competition, with better quality
products, customer coverage and choice. The increase in the FDI limit will
create significant opportunities for foreign players to enter the market
through joint ventures, mergers or acquisitions.
Yet there are some significant challenges that remain, such
as finding the right acquisition target or a partner with the right balance of
local knowledge and cultural compatibility in the boardroom between the two
organisations. Successful firms will be those that are comfortable with local
regulatory requirements and have working knowledge of India’s business
environment.
Modi’s government has promised to revamp India’s healthcare
sector and make services more affordable and accessible for all walks of
society. With the doors opening to India’s insurance industry, the
health
insurance sector will play an increasingly important role in
delivering this commitment to its citizens from all walks of life.
Source: http://insurancegeneralindia.tumblr.com/post/122318481099/indias-insurance-reform-will-benefit-insurers-and
Hey Nishant Thanks for sharing this informative blog. its seems very helpful. but can you please brief me about general insurance plans.
ReplyDeleteThanks Tom for your comment.for more details about general insurance you can follow this blog.
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