Buying or reviewing your Health Insurance? Health Insurance premium growth and Claims paid-An analysis based on IRDAI Report 2020-21

Covid-19 is seemingly losing its grip, but the effects it has left is still felt in various areas of our life. Economy was affected due to the pandemic globally. The health sector has suffered tremendously and the perception with which people look at health insurance has completely changed. Cost of hospitalisation and treatment are very high in most of the cases and it is not easy for an individual to manage medical emergencies. Illness or sickness is not the only concern for the consumers now, instead the focus is shifting on the importance of health insurance as a whole. They have understood that it is better to buy a comprehensive plan that provides for all critical diseases including those with pre-existing conditions. 

Talking about the two main parts of insurance, namely, health insurance and general insurance, a lot has changed in the past few years. If we look at the progressive part, the insurance industry itself has come up with new and innovative products to accommodate all types of consumer needs. The premiums too are rising but growing use of digitisation and technology will fill the gap and reach out to those segments of the society which still remain uncovered at reasonable prices. 

As far as health insurance is concerned, fifty percent of the Indian population is covered under the Ayushman Bharat Pradhan Mantri Jan Arogya Yojana and State Government schemes as per Niti Aayog’s latest report. Ayushman Bharat PM-JAY is the largest health insurance scheme in the world funded by the Government. These schemes provide comprehensive hospitalisation to almost 70 crore Indians. Another 20 percent is covered through either social health insurance or private health insurance. The rest of 30 percent of the population remains uncovered. They are mostly self employed citizens both in agriculture and non-agriculture sectors. 

General insurance falls into the non-life insurance category. India is the 15th non-life insurance market globally. Despite a challenging year, there has been modest growth in this sector.

In this article, we are going to explore the two main factors associated with insurance like premiums and claims paid. Claims play a decisive role because a lot depends upon how much one gets after paying premiums over a long period of time. The very purpose of buying an insurance is to rest assured that the insured gets what he/she has been promised. Statistical data helps to prove many things which otherwise we would have failed to notice in the direction of both premiums and claim settlements. 

In life insurance business, India has maintained its tenth rank (2020-21) in the world like previous year. India’s share in the global life insurance market was 2.90 per cent during 2020. Life insurance premium in India increased by 0.6 percent (-1.2 percent inflation adjusted real growth) in 2020. In non-life insurance business, India is ranked fourteenth in the world, improving by one rank from 2019. India’s share in the global non-life insurance market was 0.77 per cent during 2020. Here are a few highlights about the predicted growth of the industry:

• Private life insurers are likely to grow the retail APE at a CAGR of over 17% between 2021-23. Moreover, new retail term premiums are expected to double in 5 years. 
• The private non-life insurance will grow at 16% in FY22 and 14% in FY23.
• Standalone health insurers are expected to grow by over 25% in FY22 because of more concentration paid to healthcare. 

Insurance Regulatory and Development Authority-IRDA issues its Annual Report every year showing many details pertaining to the insurance sector in India. If we analyse the report, we can find some interesting statistics as shown in the following tables.

Total Gross Direct Premium of General and Health Insurers

Thus, the private sector has been able to grow its premium by 8 percent as compared to the previous year whereas the public sector has suffered a loss of 1.77 percent in the health as well general insurance combined as compared to the year 2019-20. 

During the year 2020-21, General and Health Insurance companies collected ₹58,238 crore as Health Insurance (excluding Personal Accident and Travel Insurance) premium registering a growth of 14.74 per cent over the previous year. The four public sector general insurers continue to hold a larger market share at 46.75 per cent. However, there is a reduction in the market share of public sector insurers from 48.53 per cent in 2019- 20. Stand-alone health insurers also recorded a slight reduction in the market share from 27.06 per cent in 2019-20 to 25.99 per cent in 2020-21. The share of private insurers has increased from 24.41 per cent in 2019-20 to 27.26 per cent in 2020-21.

Life insurance industry recorded a premium income of ₹6.29 lakh crore during 2020-21 as against ₹5.73 lakh crore in the previous financial year, registering growth of 9.74 per cent (12.75 per cent in 2019-20). While private sector insurers posted 16.50 per cent growth (13.42 percent in 2019-20) in their premium income, LIC recorded 6.30 per cent growth (12.41 per cent in 2019-20). 

During the year 2020-21, Life Insurers have procured a total premium of ₹834 crore from various health insurance products. While Renewal premium contributed 80 per cent (₹667 crore) of total premium, New Business contributed the remaining 20 per cent (₹167 crore). During the year 2020-21, Life Insurers have issued 4.37 lakh new policies covering 5.56 lakh lives, while they renewed 9.26 lakh policies covering 12.39 lakh lives. The private sector insurers registered a growth of 2.89 per cent in the number of new policies issued against their previous year. LIC and the Industry have shown a decline.

Bifurcating it  further, the new business share by the public sector is showing a growth of 3.45% against its counterpart in 2019-20 at 25.25%. The private sector has a growth  in new business for 2020-21 standing at 16.40% against 11.45% growth in 2019-20. Notably the share of the private sector in 2021 in the new business was 33.83% whereas the public sector held 66.17% in the total. (Includes the first year premium, single premium, new business premium and renewal premium)

We can find out the major private players which have witnessed growth in their direct premium collection in the last year as compared to the previous year. 

Gross Direct Premium of Health Insurers 

Now we shall have a look at the reasons behind the rise in the collection of premiums of the above companies one by one,

1. Raheja QBE General Insurance Co. Ltd-The Gross Written Premium of the company during the year 2018-19 grew and the company recorded a record growth of 39%. Paytm acquired Raheja QBE in a Rs. 568 crore deal and entered the General insurance sector in 2020. The mission of the company is to create sustainable shareholder value and this move helped it to leverage new heights by expanding the customer base to a larger extent by including new and innovative products. Raheja QBE reported a net loss of Rs.62.1 crore for the year ended March 2020, compared with Rs. 20.3 crore in 2019-20.
2. Go Digit General Insurance Co. Ltd.-The company’s group health business grew 11 times to Rs. 170 crore during the pandemic.  This was due to masses of people realising the importance of health insurance. The company recorded a 44 percent rise against the five percent overall industry growth.  In the first two quarters of FY20-21, the Bengaluru based company recorded Gross Written Premium at Rs. 2196 crore versus Rs. 1312 crore a year before. The simplified retail insurance documents help consumers to understand the terms easily. The products too are developed in a more realistic way that will help people to make claims when the need arises. With over 2 crore customers the company puts weightage on transparency, honesty and simplicity. 
3. HDFC ERGO General Insurance Co. Ltd– In FY21, the company achieved the dual milestones of more than ten thousand crores in premiums and more than Rs. 500 crore in profits. There was an increase in paid up capital of the company during 20-21. HDFC ERGO health insurance is now merged with HDFC ERGO General Insurance Co. Ltd. This made the company the second largest retail health insurer in the country with 10% market share. The company has served the health policy holders with seamless innovative digital technologies and timely service. The company serviced over 45,000 Covid-19 related claims. 
4. Kotak Mahindra General Insurance Co. Ltd-The company recorded a growth of 25.5% in its Gross Written Premium. The company raised its capital on Rights basis during 2020-21.The company scaled up its operational capabilities which enabled it to sell more policies during the year. 
5. Magma HDI General Insurance Co. Ltd-The company is recognised for its work and has received multiple awards in past two years which includes Rising Star Company of the year in 2020.The company has more than 130 branches and has a strong experience in finance and insurance. It has been formed as a joint venture between India’s Magma Fincorp Limited or Poonawalla Fincorp Limited and Germany’s HDI Global SE. It is known for its wide range of products in the health sector and thrives to be a responsible insurer in India. 

Claims of Life Insurers 

In case of individual life insurance business, during the year 2020-21, out of the total 11.01 lakh claims, the life insurers paid 10.84 lakh claims, with a total benefit amount of ₹26,422 crore. The number of claims repudiated was 9,527 for an amount of ₹865 crore and the number of claims rejected was 3,032 for an amount of ₹60 crore. The claims pending at the end of the year was 3,055 for ₹623 crore.

Out of the total number of claims registered by life insurers with respect to health insurance products, insurers have paid 79 percent of claims while 20 percent of the number of claims were repudiated or rejected. 

LIC paid benefits of ₹2.86 lakh crore in 2020-21, constituting 70.85 per cent of the premium underwritten (₹2.53 lakh crore in 2019- 20, 66.62 per cent of the premium underwritten). 

The claim settlement ratio of LIC was 98.62 per cent as at March 31, 2021 compared to 96.69 per cent as at March 31, 2020 and the proportion of claims repudiated/rejected has decreased to 1.0 per cent in 2020-21 from 1.09 per cent in the previous year. 

The claim settlement ratio of private insurers was 97.02 per cent during 2020-21 (97.18 per cent during 2019-20) and the proportion of repudiations came down to 2.0 per cent in the year 2020-21 from 2.50 per cent in previous year. The life insurance industry’s settlement ratio increased to 98.39 per cent in 2020-21 from 96.76 per cent in 2019-20 and the repudiation/rejection ratio decreased to 1.14 per cent from 1.28 per cent in 2019-20.

INCURRED CLAIMS RATIO OF  HEALTH INSURERS  is shown in the table below both in the public and private sectors (in percentage).

Death Claim Settlement Ratio of the top ten private health insurance companies for 2020-21

Overall the life insurance’s industry’s settlement ratio increased to 98.39% in 20-21 from 96.76% in 2019-20. A higher claim ratio means the credibility on the part of the insurance company that settles majority of its claims successfully raised by its customers. The chances of the company settling the claim is higher. 

According to the IRDAI Report 2020-21, the claim settlement ratio of LIC was 98.62% as of March 31, 2021 compared to 96.69% as of March 31, 2020. The percentage of rejection also decreased from 1.09% to 1% in 2019-20. One should always look at the average claim settlement  taken out by the company while choosing an insurance company  and if a company has a CSR higher than 80% then, it is considered to be good. But those with more than 90% CSR are considered to be more versatile. Check the claim settlement ratios of different companies on the official site of IRDAI to find out their performances in terms of CSR.

Max Life Insurance:The company paid 99.35% claims on individual business policies and 99.27% claims on group business policies. The company’s solvency ratio has been 202% which is 1.35 times more than the mandatory 150%. The company is in a very strong and stable financial condition. The total sum assured went up by 19% than the previous year. Assets under management also rose by 32%. In FY20-21 the company earned 72% higher consolidated revenues than 2019-20. Profits after tax reported to be 105% higher than the previous year. 

Aegon Life Insurance: Aegon settled death claims to the amount of Rs. 105.98 crore in FY21. The result is quite satisfactory from the point of view of the customers. Due to COVID-19, the company processed more death claims like never before in their 13 years of existence. Digitisation made the process improve to a greater extent.  Its digital servicing initiative has been very promising and is focused on customer friendly tools. 

Bharti Axa Life Insurance: The company has been able to maintain consistency in higher claim settlement ratio in case of death claims. The company’s premium grew by 4%.The company reported losses, however the losses were lower than the immediate previous year because of higher investment income and efficient expense control. There was a 16% growth in cash renewal collection. The customer base increased by 2% during the year. 

LIC: LIC is one of the oldest and largest life insurance companies. It ensures that the process at their branches are hassle-free and strict with no fraudulent claims being raised. The company has more than 2000 branches across India. It is the only public sector life insurer of our country. The company truly abides by its motto ’your welfare is our responsibility.

Pramerica Life Insurance:The company focuses on providing life insurance to both corporate and individuals. The sum assured is worth more than ten thousand crore rupees and the assets under management is Rs. 6,081.46 crores. The company has extensive reach in the rural areas making it win the Client Model Insurer Asia Award under distribution category 2014. It also won Skoch Financial Inclusion Award 2011 for launching a rural awareness campaign in 93 villages.The company initiated its operations in 2008 and is a collaboration between Prudential International Holdings and DHFL Investments Limited. It covers around 2.1 million lives through its life insurance policies. 

PARTICIPATION OF WOMEN IN LIFE INSURANCE

Women comprise almost  49 per cent of the total population in India. Women contribute  to the economy to a greater extent and their contribution is increasing on a yearly basis. It is high time for the life insurers to understand their special requirements, and provide them suitable products to choose from . A study is made on the share of women in life insurance business. (Only individual new business data – number of policies and first year premium for the year 2020-21 has been taken into account)

• The number of policies issued to women in the year 2020-21 is around 93 lakh policies which represents  33.00 percent share as against a share of 32.23 percent in 2019-20. 
• In 19 States/UTs, the share in no. of policies bought by women to the total policies sold is higher than the all-India average of 33 per cent. 
• The total number of individual policies sold in the year 2020-21 are worth Rs. 2.81 crore, with a first year premium (FYP) ,including single premium of ₹113,889 crore. 
• The proportion of policies on women in case of private Life Insurers is 27 per cent and that of LIC is 35 per cent. 

Availability of Life Cover to Women-

Life Insurance is available to women on the same terms as that of men, however their  income earning capacity surely matters for this purpose. Women are being given preferential treatment by most of the Life insurers while charging the premium as their life expectancy is higher. 

Insurance of women segments depends on literacy levels as well like, financial independence, financial decision making and possible moral hazard. 

IRDAI started publishing this data in the Annual Report to highlight the gender gap in life insurance in order to draw the attention and action of the Life Insurance industry, policy and opinion makers towards this important segment to be covered. 

Participation of women in Life Insurance Marketing

•  6,61,390 women are working as agents in the life insurance industry, which is  27 per cent of the total individual agency force as at March 31, 2021. Out of the total number of women agents, the share of private life insurers is 53 per cent and LIC is 47 per cent. 

• Among the private life insurers, Ageas Federal Life Co. has the highest percentage of women agents at 43 percent followed by Star Union Di-iachi Life Insurance Co. at 42 percent and Max Life Insurance Co. at 41 percent.

Thus, in crux the overall importance of life insurance is on a rise in India. Covid-19 has been an eye-opener for those who believe that insurance is something that’s not needed for young or fit people. Postponing it would not be a wise decision. Better to plan it now when you have all the details available at your fingertips. The above article is based on the figures present in the IRDAI Report (2020-21).  It represents a very in depth analysis of all the necessary details pertaining to the entire insurance industry. 

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Krishna Rath is a SEBI Registered Investment Adviser, and since 2015 has been educating netizens on investments and insurance. Krishna is a fee only SEBI RIA and is Odisha's first SEBI RIA. With background in IT, Krishna is changing the advisory space with new innovations in AdvisoryTech.

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