Standalone health insurance companies fail to make a mark

Tags: Insurance

Players unable to make any breakthrough either in premium generation or in product innovation

The Insurance Regulatory and Development Authority (Irda) paved the way for entry of standalone health insurance companies in 2006. Star Health and Allied Insurance was the first company that commenced operations in May 2006, followed by Apollo Munich Health in August 2007, Max Bupa in 2009-10, and Religare Health Insurance in July this year. TTK Group, along with Cigna Corporation of the US, also has plans to roll out operations in 2013.

While pure health insurance companies may be attracted to launch operations due to vast underpenetration of health insurance in India, the fact is that those on ground have not made a highly notable impact.

Says Sanjay Pande, executive director of Amicus Advisory, a health insurance consultancy firm, “No doubt, globally it takes seven-10 years for standalone health insurers to break even, but most Indian players have not made encouraging breakthroughs in terms of premium income. Also they have not brought in the much annticipated product innovations, such as bringing a pure OPD cover, HIV/cancer/ maternity/ long-term speciality covers. Also, they have not expanded expansively so as to reach out to larger, under-represented geographies.”

Take for instance, Star Health and Allied Insurance, now in the seventh year of operations, registered a negative growth of 38 per cent in business with a gross underwritten premium of Rs 375.41 crore during April-September 2012, compared with Rs 605.51 crore in the same period last year. The insurer lost government schemes to insure population of Andhra Pradesh and Tamil Nadu (in 2011) under health insurance and reported a loss of Rs 59 crore for the half-yearly period ended September 30. The insurer had a gross premium of Rs 1,137 crore in FY12 and Rs 1,228 in FY11.

Apollo Munich in its sixth year of operations had a gross premium of Rs 214 crore during April-September 2012, a growth of 38 per cent over the same period last year. For the first quarter ended June 30, Apollo Munich had a loss of Rs 2.10 crore. The insurer had a gross premium of Rs 476 crore in FY12, Rs 283 crore in FY11.

The gross premium underwritten for Max Bupa during April-September 2012 stood at Rs 77.36 crore, compared with Rs 46.64 crore in the same period last year. The company had a loss of Rs 30 crore in April-June 2012 and plans to break even in 2015.

Says head of retail of a private non-life insurance company, “While the total health insurance premium for the industry till March was Rs 15,000 crore, pure health insurers contributed 10-15 per cent of it. This year, health insurance premium would reach around Rs 18,000 crore.”

Star Health has 220 branches, while Apollo Munich has 50 branches and relies on its 30,000 agents to bring business. Max Bupa has 20 branches, but through telesales has a presence in 500 cities.

The gross health insurance premium for the industry during April-July 2012 was Rs 16,014 crore, registering a growth of 20 per cent over the corresponding period last year. The sector has been grown rapidly at 18-20 per cent per annum, clearly outpacing the GDP growth of the country and is the fastest growing non-life insurance segment.

Says V Jagannathan, chairman and managing director of Star Health and Allied Insurance, “Government health insurance schemes of Tamil Nadu and Andhra Pradesh together, were giving us Rs 1,500 crore premium. We lost the contracts and took a big hit on business and, therefore, had a negative growth in premium. We are now focusing on selling individual mediclaim policies. From year one, we have been making profits except last year where we registered a loss due to operational reasons. We plan to do a minimum of Rs 800-1,000 crore this year largely by selling retail policies.”

With the insurance regulator insisting that insurers offer life-long renewability in health insurance policies, all the standalone health insurers are offering it in their policies.

Speaking about product innovation, Jagannathan said, “We were the first to bring out a policy for senior citizens, AIDS and a combi product for life and health. The loss ratios of public sector general insurers in health business is 110 per cent, while for us, it is below 100 per cent.”

Antony Jacob, chief executive officer, Apollo Munich said, “You cannot compare us to public sector insurers. We had the highest incremental premium in FY12. We were the first to bring in no-claim bonus, and introduced maternity benefits in retail policies and cover OPD up to Rs 15,000 in our Maxima policy. We will break even this year.”

Neeraj Basur, chief financial officer at Max Bupa Health Insurance said, “We are in line with our internal growth trajectory and will break even in the sixth year. We have brought several product innovations such as high range covers that can go up to Rs 50 lakh and have introduced expanded family covers where a family floater policy can cover up to 13 relationships.”

“Ninety per cent of our business is retail, while only 10 per cent is group (corporate) health insurance,” added Basur.

Nayan Shah, managing director of Paramount Health Services said, “Standalone health insurers have a limited product range with variations in the old mediclaim policy. They compete for the same class of people with general insurers. They need to go beyond add-ons and focus on preventive healthcare/medical management, introduce long-term care products for senior citizens, disabled, chronically ill and make it attractive for the younger generation to buy health insurance.”


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