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Untapped non-life insurance sector seen as big investment opportunity

India has one of the lowest penetration in the world in the non-life health insurance segment, despite continuously rising life expectancy and high spending on healthcare, according to a study by the Associated Chambers of Commerce and Industry of India or Assocham.

The study released today by Assocham president K P Singh reveals that in India non-life insurance premium constitutes merely 0.58 per cent of gross domestic product, compared to an overage of 7.1 per cent in most industrialised countries.

This was primarily because in India non-life insurance is not considered important and people perceive it as an unnecessary expenditure.

It states that the healthcare expenses and risks thereof are not transferred to insurance companies since they is not covered and financed. Inadequate health insurance forces a situation where expenses are borne by the private sector.

The total premium income of General Insurance Corporation from mediclaim portfolio is about Rs 1 billion. Out of this, around ten per cent of the portfolio comprises of its own employees.

The Assocham chief said the study estimates that today Indian health insurance market has a potential of more than $4 billion per annum and this was expected to increase to $ 12 billion by 2007.

Non-life insurance premium at a percentage of GDP is estimated at 2.70 for Japan, 2.55 for South Korea, 1.89 for Malaysia, 1.62 for Singapore, 1.38 for Taiwan, 1.23 for Thailand, 0.86 for the Philippines, 0.68 for China, 0.66 for Indonesia, and 0.51 for Pakistan, the study pointed out.

In most nations there is a concept of statutory health insurance. In India, it is only in the form of Employees State Insurance to provide healthcare facility only to the employees with earning capacity up to Rs 6,500 per month, mostly to the industrial workers.

Identifying the problems that restrict the spread of health insurance in India, the Assocham study notes that there is inadequate affiliation of insurance companies to various hospitals and other medical infrastructural support.

The medical systems and procedures of treatment vary largely in India; various systems like allopathic, ayurvedic, homeopathic, etc, exist and therefore, correct valuation and authenticity of insurer's claim is difficult to judge.

Indeed, the customer service levels are very low and there is high payout time with unjustified refusal to meet claims, says the study.

Due to these reasons, there is annual business erosion since the non-life insurance involves renewal of policies which are valid only for one year. There is huge loss of rollover premiums.

The study points out that there is vast potential for private and foreign investment in this sector. There is also a need for investment in medical infrastructure to support the insurance policies. These funds can be made available by expanding insurance covers and gathering premia on that account.

Singh said, Indian players would need foreign collaborations and investments, to penetrate into the Indian healthcare market. These collaborations would bring in, equity, technical expertise, knowledge and experience to share the risks.

UNI

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