Why is health insurance coverage still at very low level in India? My recent study (Icrier working paper No 233) addressed the issue of low level of insurance coverage in detail by examining the role of insurance agents in scaling-up the process. Selling health insurance is a less profit-oriented business for them as compared to life and other forms of insurance, because it involves just one-year term schemes that have to be renewed every year. But, life insurance schemes have long-term periods and once the insurance agents are successful in enrolling clients into them, there is an assured continuous flow of income through the years. Insurance agents? incidental expenses for selling health insurance are also relatively higher as compared to life and other forms of insurance.
At present, 98% of the total 1.4% of private health insurance coverage is inclined towards high-income people and that too in urban areas. This is why special programmes like the central government?s Universal Health Insurance (UHI) scheme are targeted towards low-income people. But there are several instances where the UHI schemes have been sold to high-income people rather than to the target beneficiaries.
Further, insurance agents think that as compared to life insurance, it is very difficult to convince clients about the importance of health insurance. This is because Indians are more familiar with life insurance schemes than the risk pooling forms of health insurance that have no money back guarantees of the premium at all. But life insurance schemes have both risk and saving components, offering premium money back with bonus even if the insured event does not occur. So agents just sell health insurance as a supplementary product to their existing customers, who have already bought other forms of insurance schemes.
The underlying reason for the existing level of health insurance penetration is mainly the 5% rural and social quota fixed by the IRDA. In fact, IRDA should devise methods for increasing agents? incentives for selling health insurance to the low-income households. Participation of non-profit entities like self-help-groups (SHGs) and similar organisations should also be ensured to target this demographic.
?The author is fellow, Icrier. svellakkal@icrier.res.in
