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Main Challenges and issues for health

insurance.
An understanding of the key issues and challenges for health insurance in
india is vital to the development of a new strategy or amendment of an
existing one.

Tariffed regime: with claims to premium ratio at 130%, the health


insurance sector in india has been a loss making portfolio. However,
this was triggered on account of complacency in underwriting skills,
and competing on price for health products, while seeking cross
subsidization of this loss making segment by profitable
businesses(motor).
Dearth of underwriting skills: insurers lacked rational pricing. A
shift to the detariffed regime, will now cause cross subsidization to
end and will give impetus to health insurance as a profit making
business. However this poses a new problem for non-life insurers
honing appropriate underwriting skills that were dormant enough to
disappear in the tariffed regime will be a staggering task.
Price hikes and attrition: appropriate pricing strategies would
imply that insurers have to be on their toes in order to address
customer reaction to their price hikes. This reaction may include
attrition which is further aggravated by the yearly renewal of
policies and thus a corridor for customers to step down, in turn
making it herculean for insurers to acquire new customers. Thus a
price hike to be complemented/ justified by customized product
solutions, creative bundling and unbundling of risks, increased
awareness of products, and innovations in various facets of the
marketing value chain from product design to pricing to distribution
channels.
Moral hazards dilemma: on one hand, insurers have to seek to
reduce moral hazard and adverse selection, whilst on the other
hand, by virtue of judicious acumen, they have to seek to increase
number of policies sold, for insurance as a concept to make sense
via pooling of risk on account of law of large markets.
Information asymmetry and fraudulent claims: reducing
informations asymmetry and installing effective systems preventing
fraudulent claims are the need of the hour. These would also help
reduce errors of omission wherein a valid claimant is denied claim
amount or has to face unnecessary delays.
Provider unpreparedness: there is no standardization with
respect to treatment protocols and quality, either through

registration or accreditation. There is no way of controlling claims as


prices vary from one hospital to another and over time.
Intermediary unpreparedness: Third party administrators were
rammed in the scene in lieu of the procedural handling of cashless
transactions, unfortunately, without provision of adequate
information systems and streamlined processes. Thus training TPAs
and extending support to them via responsive and effective claim
settlement tools is an impending need. This would help insurers
reduce the incongruence between themselves and the TPAs; who by
most customers are regarded as the face of the insurer, thus a
cardinal touch point.
Regulatory barrier: the 26% foreign equity cap is definitely a
challenge and it is difficult to find a local partner in a risky, less
understood business which was de-regulated only 6 years ago.
Additionally, there exists a high capital requirement of USD 22
million suggesting that in the first few years of operations, insurers
will have to charge premiums that are sufficient to compensate for
the investment, however, sacrificing volumes on account of price
sensitivity and once again posing a hindrance in achieving the law
of large numbers.
Payer unpreparedness: the insurer is unable to design schemes
that are profitable due to lack of comprehensive data on health
requirements and usage patterns of different socio economic
segments.