1. Health Insurance for Health Security
Priya Gilbile
Head – Health Risk Management
Date: 26th May 2016

2. Health insurance industry – Overview
In most of the developed countries, healthcare is largely funded by the government, leading to limited role of health Insurance

3. Health insurance industry – Overview
However, most of the Indian spending takes place in out of pocket expenses, excluding which, Private spending is lower than most markets

4. Key growth drivers for the health insurance industry
Health insurance industry – Overview
Key growth drivers for the health insurance industry

5. Health insurance industry – Structure & Growth
Overall health insurance expected to grow 2x in next 5 years & exceed INR 40,000 cr
Indian health insurance GWP (INR cr) – Split by segment
SAHI market is expected to grow at % from FY to
General insurers are expected to fall from 29% of market in to ~21% in driven by falling GWP of big players like ICICI Lombard
Public insurers are expected to remain steady ~60% of the total health insurance market by FY
15,453
17,494
20,443
41,923
SAHI
21-25%
insurers
8%-12%
13%-17%
insurers FY FY FY FY
Source: IRDA reports, market data, team analysis

6. Health insurance industry – Structure & Growth
B2C is the fastest growing segment and is expected to be the largest segment by FY19-20
Current focus area for Max Bupa
Segment wise GWP (INR cr)
13,062
15,453
17,494
20,443
41,923
6-10%
B2G
43-45%
B2B
45-49%
B2C
(E)
Source: IRDA reports, market data, team analysis

7. Shift towards B2C segment is predominant amongst SAHIs
Health insurance industry – Structure & Growth
Shift towards B2C segment is predominant amongst SAHIs
Standalone Health Insurers
Private General Insurers
Public Sector
Insurers
1,608
1,668
2,172
2,852
3,438
4,205
4,482
4,763
8,015
9,580
10,841
12,829 2%
MBHI’s strategy of non-participation in B2B segment in line with the market trends; others seem to be following suit
Source: IRDA reports, market data, team analysis

8. Health insurance industry – Structure & Growth
While the market is fragmented with 23 active players, 4 large PSUs still command ~60% of the market
Health Insurance market - GWP split by players (FY 14-15)
Standalone Health Insurers
Private General Insurers
PSU Insurers
Rs. 2,852 Cr
14% Market Share
Rs. 4,763 Cr
23% Market Share
Rs. 12,829 Cr
63% Market Share
Max Bupa share has increased to 4.9% of private insurers during FY (from 4.4% in the previous year)
Source: IRDA reports

9. Cost of activation for distribution channels
Impediments and Challenges
Impediments and Challenges
Poor Penetration
Low Product Differentiation
Need for greater customer engagement
Fragmented product market
Price Barrier
Discretionary Purchase
Cost of activation for distribution channels
Cost of activation for distribution channels
Lack of Trust
Lack of Trust

10. Key shifts and trends in the HI industry
Health insurance industry & our play
Key shifts and trends in the HI industry
Health insurance industry
Still dominated by PSU insurers, but private insurers gaining share
Advent of Standalone Health Insurers (6 currently) – focus on wellness and health partners
New entrants evincing interest in the HI industry (Kotak, Birla, Reliance Capital)
Early signs of niche product proposition visible – disease specific (cancer, dengue), maternity, & alternative treatments (Ayush, Homeopathy, Bariatric surgery)
Low profitability due to irrational pricing, high medical inflation and moral hazard
Huge potential going forward
Small but rapidly growing health insurance market
Policy changes and regulatory developments to boost growth
Prudent underwriting/pricing, HRM oriented products and ability to manage claims are critical to success
Policy & regulatory developments
Insurance laws (amendment) bill
Universal Health Assurance Mission - fully funded for poor; incentives for others
Increase in tax exemption for HI
Distribution related changes (Banca, Agent recruitment & licensing, deregulation of commission rates, rural and social obligations)
Pro-consumer regulatory activism (Exposure draft on Protection of Policyholder’s interest)
Health care industry
Rising healthcare costs and increasing burden of non- communicable diseases
Mostly state-run and free hospitals with low overall quality
Organized private sector healthcare providers small, but growing rapidly
Economic developments & demand demographics
Economic recovery with positive impact on healthcare/HI industry
Majority of the population not covered by health insurance
Two-thirds of health spends funded by own sources
Growing middle class with high expectations and higher disposable income increasing demand for better health care and risk mitigation

11. Health insurance industry is set for a quantum growth
Health insurance industry & our play
Health insurance industry is set for a quantum growth
Opportunities
Looking forward
Low health insurance penetration and coverage
HI penetration (premium as % of GDP) is only ~0.2%
Only ~5% of total population covered under personal HI
FICCI estimates that only 15% of population has any kind of health insurance
2X industry growth over 5 years (~ Rs 40,000 cr)
Rising healthcare costs and standards of care
Regulatory & policy level incentives
Increase in government funding
Overall boom in the opportunities for access to necessary treatment
45%
PHI coverage as % of total population
13%
12% 5%
Australia
Spain UK
India
However, industry is faced with challenges too
Rising burden of non-communicable diseases
Unregulated health ecosystem
Regulatory headwinds
Margin pressure
Increasing claims cost and operating expenses putting a downward pressure on cost structures
India has one of the highest out-of-pocket expenses (primarily OPD, consultation, diagnostics & pharmacy)
Double-digit medical inflation
Continued increase in lifestyle related diseases
Increasing affluence
Base of middle class expected to increase by 150 mn
76%
86%
59%
53%
OOP as % of private expenditure
Increased regulatory activism
Continued focus on consumer protection impacting re- pricing, product sophistication, etc
Australia
Spain UK
India
* SAHI – Standalone Health Insurers

12. Thank you