Issue Focus

Health insurance in India: A study

of consumer insights
Mr. K T Thomas reckons that the Insurers ought to apprehend what the
consumers cogitate while exercising their purchase options so that they
can align their services suitably which would create a system that is
mutually beneficial.

- Thomas KT, PhD

I ntroduction
In spite of health being
dispensaries and clinics
(including Indian traditional
India offers a wide variety of
a major government medicine systems). In spite of
health care services to its
population. On one hand there
subject, majority of health being a major
are the advanced hospitals and
India’s health government subject, majority
diagnostic centres in urban
infrastructure is in the of India’s health infrastructure
areas and in contrast the rural private sector and more is in the private sector and more
areas depend significantly on than 70% of health care than 70% of health care
government health centres. expenses are met by expenses are met by consumers
Between these two extremes consumers and not the and not the government, as
there are government government shown in Figure 1. Given this
hospitals, private hospitals,
w unbalanced mix of health care
funding and low per capita
private practitioners,
income, medical costs are
Figure 1: Source of healthcare funding in India unaffordable for a majority of
India’s population.
To address health care
affordability, commercial
health insurance was
introduced in India by the
government owned general
insurers as a standardized
IRDAI Journal March - 2017

annual indemnity product in

mid 1980s. Today, with the
increased liberalization of the
insurance industry, many
private players have entered the
Source: National Health Accounts Cell (NHAC, 2009).
health insurance market

Health is Wealth 25
 Figure 2: Health Insurance Premium Growth in India (Rs in Crores) sector is shown in Table 1.
Most of the insurers have now
realized that group health
coverage, even as it brings in
revenue, is not a profitable
model and have shifted their
focus on to retail customers.
While the retail market offers a
large and profitable market, the
segment has been a challenge
due to limited research around
consumer insights. It is hence
imperative, that a study of
Source: IRDA, 2015 consumer insights will help
both health industry
resulting in increased population of India is covered
academicians and practitioners
awareness and growth of health under the various health
augment their knowledge of the
insurance, as shown in Figure insurance schemes (CBHI,
consumer and will help
2. 2015), with the majority
establish the framework within
covered under either
Even as health insurance which the consumers make
government or employer
shows a steep growth, the their choices.
programs (USAID, 2008) and
majority of the health
commercial private health
insurance members in India
insurance has around 2.3%
are still covered under employer
programmes or welfare
penetration of the country’s Most of the insurers
schemes. Currently only 18%
population (IPH, 2009). An have now realized that
(or around 22 crore) of the total
overview of health insurance group health coverage,
even as it brings in
Table 1 – Health insurance industry in India – key parameters revenue, is not a
profitable model and
Health insurance penetration 18%
have shifted their focus
(as a percentage of total population) on to retail customers.
Non-government (private) health insurance 2.3% While the retail
market offers a large
penetration (as a percentage of total population)
and profitable market,
Total number of firms providing health 20 the segment has been
insurance products a challenge due to
IRDAI Journal March - 2017

Total industry health premium Rs 20,096 Crores

limited research
around consumer
Number of TPAs 30 insights.
Total number of claims processed by TPAs 51.2 Lakhs
w
Source: CBHI, 2015; IRDA 2015

26 Health is Wealth
Methodology channels (USAID, 2008; 1997; Hibbard and Jewett,
NHAC, 2009) as key variables 1997; Trude et al., 2006) and
The methodology of the
in health insurance the related customer service
research is briefly described
penetration. Several other aspects (Reidenbach and
below.
research studies have identified McClung 1999; Kim, Y. et al.,
Literature Review. The IRDAI market related factors such as 2008) also play an important
publishes an annual report the brand name and presence role in consumer preferences.
which provides the snapshot of (Isaacs, 1996; Robinson, 1999;
Survey Methodology. A
the performance of the health Hung, 2008;), insurance
questionnaire was designed
insurance industry (IRDA, benefits, choice and features
using a 5-point Likert scale and
2015). In addition to the (Davis et al., 1995; Tumlinson
was conducted in the urban
IRDAI, the Ministry of Health et al., 1997; Gates et al., 2000)
cities of Chennai and
and Family Welfare, as important to consumer’s
Coimbatore in Tamil Nadu.
Government of India choice. The medical services
Tamil Nadu is representative of
(MOHFW) provides a provided (Long and Marquis,
government-level view of
health care, financing and Table 2: Health insurance - Respondent Insights
health insurance (NCMH, Response (%)
2005; NHAC, 2009; CBHI,
Source of insurance
2015). Apart from these
Employer provided 18.1%
government sources, several
global and Indian Self or family purchased 28.5%
developmental organizations Government provided 14.6%
have published reports on Not applicable 38.8%
health insurance in India.
Primary reason for buying insurance
These include publications
from USAID (USAID, 2008), To cover medical expenses 53.6%
Institute of Public Health Other reasons 46.4%
(IPH, 2009), World Health Purchasing role
Organization (WHO, 2012) Needed medical coverage (patient) 45.2%
and Public Health Foundation
Other 54.8%
of India (Reddy et al., 2011).
From a consumer research Awareness of the TPA role?
perspective, various authors Yes 58.8%
have identified respondent age, No 41.2%
education and gender (Marquis
Expected annual premium in Indian Rupees (INR)
et al., 2006; Bawa and Verma,
Up to 6,000 59.7%
2012; Hibbard et al., 2008) as
IRDAI Journal March - 2017

being relevant to consumer More than 6,000 40.3%

preferences on health Preferred buying channel
insurance. Other studies also Direct (Sales Representative) 43.0%
identified awareness,
Internet/Phone 57.0%
availability and banking

Health is Wealth 27
 the national population even for expensive in-patient
behaviour with respect to treatments. Retail insurance
Although health
health insurance usage, being purchases are around 28%, insurers pay significant
amongst the top 5 states in which although appears higher fees to their TPAs, 41%
submission of healthcare claims than the national average and of the consumers are
(IIB, 2011). The questionnaire indicates the urban focus of the not aware of the TPA
was administered to 550 insurers. role. This is a matter of
respondents and 520 responses concern for the insurers
Health insurers also face
were received. After screening because the TPA is
challenges because of the
these responses for missing and most often the first
fundamental positioning of
inconsistent responses, 495
health insurance as a product
touch point with
valid responses were considered
category. Although health
consumers in areas
for analysis. The respondents
insurance is meant to defray
such as enrolment,
were selected in a systematic
medical expenses, close to half claims settlement and
random manner from the
(46%) of the respondents customer service.
consumers (patients and care
indicate that they would
w
takers) of hospitalization
purchase health insurance for
services in tier-one tertiary The other key insight is on
other reasons (such as tax
hospitals. purchasing role. Unlike many
benefit, add on product and
Findings and Managerial access to a good hospital other service sectors, in health
Implications network). This alters the core insurance the final consumer
product concept and health (patient) is not the actual
As seen in Table 2, 38.8% of the
insurers run the risk of their buyer. The dynamics of social
respondents do not have any
product being evaluated by and family construct means
kind of health insurance. This
consumers on aspects which health insurance market and
is reflective of the fact that
are beyond their control and on the post-purchase customer
health expenses in India are
parameters for which it has not service has to be viewed
met by patients from their own
been designed for. differently than in normal
funds (out of pocket funds),
services.
Figure 3: Consumer’s preference of insurance firm Although health insurers pay
significant fees to their TPAs,
41% of the consumers are not
aware of the TPA role. This is a
matter of concern for the
insurers because the TPA is
most often the first touch point
IRDAI Journal March - 2017

with consumers in areas such

as enrolment, claims settlement
and customer service.
The final two sections in the
table give the consumer
perspective on premium he/she

28 Health is Wealth
Table 3: Consumer preferences when choosing a health insurer profitability. In terms of
Average score purchasing channel, the key
(maximum 5) insight is the clear shift to
Company attribute: Good hospital network 4.29 technology enabled sales
Benefit: Coverage benefit 4.27 channels over traditional sales
approaches.
Product offering : Wide choice 4.27
The next finding is on the
Operations aspect: Responsiveness 4.46
consumer’s choice of insurance
Customer service: Service at hospital 4.51 firm. Figure 3 shows that
customers have discerned their
is willing to pay and the cannot afford to increase
preferred firms and some of the
preferred channel. The response premium and will instead need
firms have clearly established
on premium amount clearly to focus on eking better
themselves as preferred brands
indicates that majority of efficiencies in their business
(i.e. ranked as first or second
consumers will balk at higher process to improve their
choice) for health insurance
premium. Health insurers

Table 4: Summary of findings and managerial implication

Findings (Respondent insights) Implications for health managers
Purchasing health insurance for non- Policy level directives and industry efforts
medical reasons are needed to educate consumers on health
insurance role and benefits.
Purchaser of health insurance is Understand the purchase process and
not the final consumer of services purchasing roles and design products with
end consumer in mind.
Respondent not aware of the TPA role Educate consumers about the health
insurance service value chain.
Preference for lower premium Introduce cost-effective products to meet
consumer price points.
Preference for Internet / telephone channels Focus on technology-enabled channels in
addition to direct sales models.
Clearly established brand preferences Invest into brand visibility and brand values
to build consumer loyalty.
Preference for good hospital network Widen the choice of network providers
through improved provider credentialing.
Preference for coverage benefit Design products with appropriate coverage
benefits.
IRDAI Journal March - 2017

Expects wide choice of products Introduce products with varying risk and
premium options.
Expects responsiveness from insurer Orient employees towards customer service.
Also streamline workflows and IT systems to improve responsiveness.
Expects good service at hospital Continuous evaluation of hospitals to ensure
exemplary customer service.
Health is Wealth 29
 purchase. of the industry depends on Ministry of Health &
many environmental and Family Welfare,
The final set of findings is shown
regulatory factors. Even as Government of India.
in Table 3. This table highlights
health insurers turn their focus
the various aspects that 3. Davis, K. Collins, K.S.,
on to the retail markets, they
consumers consider when Schoen, C., & Morris, C.
need to address the inherent
choosing a health insurer. (1995). Choice matters:
challenges in this segment.
When compared to attributes Enrollees’ views of their
Insurers should make specific
such as brand image and health plans. Journal of
efforts to increase awareness
branch locations, consumers Health Affairs, 14(2), 99-
amongst consumers,
have rated the presence of a 112.
streamline the marketing
good hospital network as the
message and improve the 4. Gates, R., McDaniel, C &
preferred attribute. In terms of
customer service experience, Braunsberger, K. (2000).
benefit, the highest rating has
across the value chain. At a Modeling Consumer
been placed on coverage
more strategic level the firms Health Plan Choice
(medical benefits) than on
need to continually evaluate Behavior to Improve
cashless transaction and tax
consumer insights which will be Customer Value and
benefits. Consumers have also
a key input in developing an Health Plan Market
preferred a firm with wide
effective retail marketing Share. Journal of
product choice than cheaper
strategy and help create a more Business Research, 48,
products. In terms of
sustainable insurance model. 247-257.
operations, they prefer dealing
As more retail consumers 5. Hibbard, J.H., & Jewett,
with a firm whose employees
embrace health insurance J.J. (1997). Will quality
are responsive and not
services, this will enable the report cards help
surprisingly, in terms of
sector to grow and fulfill its consumers? Journal of
customer service, they have
social role of becoming a key Health Affairs, 16(3),
rated the service at the hospital
contributor to the country’s 218-228.
as most important.
health policy.
The study has highlighted 6. Hibbard, J.H., Greene, J.,
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Health is Wealth 31