CHAPTER-1

INTRODUCTION

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 COMPANY PROFILE

Name of company- Omnis Healthcare services pvt. Ltd.

Address- ¼ 4th floor najafgarh road, tilak nagar 110018

Email Id- helpdesk@[Link]

Industry- Healthcare & wellness

History of organization- Established at 16 october 2015

Organisation structure- 149 Employees

Director- 3

Manager- 8

IT- 3

Accoumts- 3

Operations- 5

Field staff- 7

Sales staff- 120

1.1. Background
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Over the last 50 years India has achieved a lot in terms of health improvement. But still India is
way behind many fast developing countries such as China, Vietnam and Sri Lanka in health
indicators (Satia et al 1999). In case of government funded health care system, the quality and
access of services has always remained major concern. A very rapidly growing private health
market has developed in India. This private sector bridges most of the gaps between what
government offers and what people need. However, with proliferation of various health care
technologies and general price rise, the cost of care has also become very expensive and
unaffordable to large segment of population. The government and people have started exploring
various health financing options to manage problems arising out of growing set of complexities
of private sector growth, increasing cost of care and changing epidemiological pattern of
diseases.

The new economic policy and liberalization process followed by the Government of India since
1991 paved the way for privatization of insurance sector in the country. Health insurance, which
remained highly underdeveloped and a less significant segment of the product portfolios of the
nationalized insurance companies in India, is now poised for a fundamental change in its
approach and management. The Insurance Regulatory and Development Authority (IRDA) Bill,
recently passed in the Indian Parliament, is important beginning of changes having significant
implications for the health sector.

The privatization of insurance and constitution IRDA envisage to improve the performance of
the state insurance sector in the country by increasing benefits from competition in terms of
lowered costs and increased level of consumer satisfaction. However, the implications of the
entry of private insurance companies in health sector are not very clear. The recent policy
changes will have been far reaching and would have major implications for the growth and
development of the health sector. There are several contentious issues pertaining to development
in this sector and these need critical examination. These also highlight the critical need for policy
formulation and assessment. Unless privatization and development of health insurance is
managed well it may have negative impact of health care especially to a large segment of
population in the country. If it is well managed then it can improve access to care and health
status in the country very rapidly.

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Health insurance as it is different from other segments of insurance business is more complex
because of serious conflicts arising out of adverse selection, moral hazard, and information gap
problems. For example, experiences from other countries suggest that the entry of private firms
into the health insurance sector, if not properly regulated, does have adverse consequences for
the costs of care, equity, consumer satisfaction, fraud and ethical standards. The IRDA would
have a significant role in the regulation of this sector and responsibility to minimise the
unintended consequences of this change.

Health sector policy formulation, assessment and implementation is an extremely complex task
especially in a changing epidemiological, institutional, technological, and political scenario.
Further, given the institutional complexity of our health sector programmes and the pluralistic
character of health care providers, health sector reform strategies in the context of health
insurance that have evolved elsewhere may have very little suitability to our country situation.
Proper understanding of the Indian health situation and application of the principles of insurance
keeping in view the social realities and national objective are important.

1.2 HISTORY OF INSURANCE IN INDIA

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In India, insurance has a deep-rooted history. It finds mention in the writings of Manu (
Manusmrithi ), Yagnavalkya ( Dharmasastra ) and Kautilya ( Arthasastra ). The writings talk in
terms of pooling of resources that could be re-distributed in times of calamities such as fire,
floods, epidemics and famine. This was probably a pre-cursor to modern day insurance. Ancient
Indian history has preserved the earliest traces of insurance in the form of marine trade loans and
carriers’ contracts. Insurance in India has evolved over time heavily drawing from other
countries, England in particular.
 
1818 saw the advent of life insurance business in India with the establishment of the Oriental
Life Insurance Company in Calcutta. This Company however failed in 1834. In 1829, the
Madras Equitable had begun transacting life insurance business in the Madras Presidency. 1870
saw the enactment of the British Insurance Act and in the last three decades of the nineteenth
century, the Bombay Mutual (1871), Oriental (1874) and Empire of India (1897) were started in
the Bombay Residency. This era, however, was dominated by foreign insurance offices which
did good business in India, namely Albert Life Assurance, Royal Insurance, Liverpool and
London Globe Insurance and the Indian offices were up for hard competition from the foreign
companies.
 
In 1914, the Government of India started publishing returns of Insurance Companies in India.
The Indian Life Assurance Companies Act, 1912 was the first statutory measure to regulate life
business. In 1928, the Indian Insurance Companies Act was enacted to enable the Government to
collect statistical information about both life and non-life business transacted in India by Indian
and foreign insurers including provident insurance societies. In 1938, with a view to protecting
the interest of the Insurance public, the earlier legislation was consolidated and amended by the
Insurance Act, 1938 with comprehensive provisions for effective control over the activities of
insurers.
 
The Insurance Amendment Act of 1950 abolished Principal Agencies. However, there were a
large number of insurance companies and the level of competition was high. There were also

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allegations of unfair trade practices. The Government of India, therefore, decided to nationalize
insurance business.
 
An Ordinance was issued on 19th January, 1956 nationalising the Life Insurance sector and Life
Insurance Corporation came into existence in the same year. The LIC absorbed 154 Indian, 16
non-Indian insurers as also 75 provident societies—245 Indian and foreign insurers in all. The
LIC had monopoly till the late 90s when the Insurance sector was reopened to the private sector.
 
The history of general insurance dates back to the Industrial Revolution in the west and the
consequent growth of sea-faring trade and commerce in the 17 th century. It came to India as a
legacy of British occupation. General Insurance in India has its roots in the establishment of
Triton Insurance Company Ltd., in the year 1850 in Calcutta by the British. In 1907, the Indian
Mercantile Insurance Ltd, was set up. This was the first company to transact all classes of
general insurance business.

1957 saw the formation of the General Insurance Council, a wing of the Insurance Associaton of
India. The General Insurance Council framed a code of conduct for ensuring fair conduct and
sound business practices.

In 1968, the Insurance Act was amended to regulate investments and set minimum solvency
margins. The Tariff Advisory Committee was also set up then.

In 1972 with the passing of the General Insurance Business (Nationalisation) Act, general
insurance business was nationalized with effect from 1 st January, 1973. 107 insurers were
amalgamated and grouped into four companies, namely National Insurance Company Ltd., the
New India Assurance Company Ltd., the Oriental Insurance Company Ltd and the United India
Insurance Company Ltd. The General Insurance Corporation of India was incorporated as a
company in 1971 and it commence business on January 1sst 1973.
 

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 1.3 IMPORTANT MILESTONES IN THE INDIAN INSURANCE
BUSINESS

 1907: The Indian Mercantile Insurance Ltd. was set up which was the first company of its
type to transact all general insurance business.
 1957: General Insurance Council, an arm of the Insurance Association of India, framed a
code of conduct for guaranteeing fair conduct and sound business patterns.
 1968: The Insurance Act improved for regulating investments and set minimal solvency
levels and the Tariff Advisory Committee was set up.
 1972: The General Insurance Business (Nationalization) Act, 1972 nationalized the
general insurance business in India. It was with effect from 1st January 1973.

107 insurers integrated and grouped into four companies viz. the National Insurance Company
Ltd., the New India Assurance Company Ltd., the Oriental Insurance Company Ltd. and the
United India Insurance Company Ltd. GIC was incorporated as a company.

1.4 LIST OF INSURANCE COMPANIES IN INDIA:

LIFE INSURERS Websites

Public Sector
Life Insurance Corporation of India [Link]
Private Sector
Allianz Bajaj Life Insurance Company Limited [Link]
Birla Sun-Life Insurance Company Limited [Link]
HDFC Standard Life Insurance Co. Limited [Link]
ICICI Prudential Life Insurance Co. Limited [Link]
ING Vysya Life Insurance Company Limited [Link]
Max New York Life Insurance Co. Limited [Link]
MetLife Insurance Company Limited [Link]
Om Kotak Mahindra Life Insurance Co. Ltd. [Link]

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SBI Life Insurance Company Limited [Link]
TATA AIG Life Insurance Company Limited [Link]
AMP Sanmar Assurance Company Limited [Link]
Dabur CGU Life Insurance Co. Pvt. Limited [Link]
GENERAL INSURERS
Public Sector
National Insurance Company Limited [Link]
New India Assurance Company Limited [Link]
Oriental Insurance Company Limited [Link]
United India Insurance Company Limited [Link]
Private Sector
Bajaj Allianz General Insurance Co. Limited [Link]
ICICI Lombard General Insurance Co. Ltd. [Link]
IFFCO-Tokio General Insurance Co. Ltd. [Link]
Reliance General Insurance Co. Limited [Link]
Royal Sundaram Alliance Insurance Co. Ltd. [Link]
TATA AIG General Insurance Co. Limited [Link]
Cholamandalam General Insurance Co. Ltd. [Link]
Export Credit Guarantee Corporation [Link]
HDFC Chubb General Insurance Co. Ltd.  
REINSURER
General Insurance Corporation of India [Link]

1.5 CONCEPT AND FUNCTIONS OF INSURANCE

Insured, are you? The functions of Insurance will give you an idea on how to go ahead with the
approach of insurance and what type of insurance to choose. In a layman's words, insurance
means, ‘a guard against pecuniary loss arising on the happening of an unforeseen event’. In
developing economies, the insurance sector still holds a lot of potential which can be tapped.
Majority of the people in the developing countries remains unaware of the functions and benefits
of insurance and it is for this reason that the insurance sector is still to grow.

Tangible or intangible – an individual can insure anything! Be it a house, car, factory, or the

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voice of a singer, leg of a footballer, and the hand of an author.....etc. It is possible to insure all
these as they have the possibility of becoming non functional by any disaster or an accident.

BASIC FUNCTIONS OF INSURANCE:

1. [Link] Functions
2. [Link] Functions
3. [Link] Functions

Primary functions of insurance

 Providing protection – The elementary purpose of insurance is to allow security against

future risk, accidents and uncertainty. Insurance cannot arrest the risk from taking place,
but can for sure allow for the losses arising with the risk. Insurance is in reality a
protective cover against economic loss, by apportioning the risk with others.
 Collective risk bearing – Insurance is an instrument to share the financial loss. It is a
medium through which few losses are divided among larger number of people. All the
insured add the premiums towards a fund and out of which the persons facing a specific
risk is paid.
 Evaluating risk – Insurance fixes the likely volume of risk by assessing diverse factors
that give rise to risk. Risk is the basis for ascertaining the premium rate as well.
 Provide Certainty – Insurance is a device, which assists in changing uncertainty to
certainty.

Secondary functions of insurance

 Preventing losses – Insurance warns individuals and businessmen to embrace

appropriate device to prevent unfortunate aftermaths of risk by observing safety
instructions; installation of automatic sparkler or alarm systems, etc.
 Covering larger risks with small capital – Insurance assuages the businessmen from
security investments. This is done by paying small amount of premium against larger
risks and dubiety.

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  Helps in the development of larger industries – Insurance provides an opportunity to
develop to those larger industries which have more risks in their setting up.

Other functions of insurance

 Is a savings and investment tool – Insurance is the best savings and investment option,
restricting unnecessary expenses by the insured. Also to take the benefit of income tax
exemptions, people take up insurance as a good investment option.
 Medium of earning foreign exchange – Being an international business, any country
can earn foreign exchange by way of issue of marine insurance policies and a different
other ways.
 Risk Free trade – Insurance boosts exports insurance, making foreign trade risk free
with the help of different types of policies under marine insurance cover.

Insurance provides indemnity, or reimbursement, in the event of an unanticipated loss or disaster.

There are different types of insurance policies under the sun cover almost anything that one
might think of. There are loads of companies who are providing such customized insurance
policies.

1.6 CHALLENGES FACING INSURANCE INDUSTRY:

 Threat of New Entrants: The insurance industry has been budding with new entrants
every other day. Therefore the companies should carve out niche areas such that the
threat of new entrants might not be a hindrance. There is also a chance that the big
players might squeeze the small new entrants.
 Power of Suppliers: Those who are supplying the capital are not that big a threat. For
instance, if someone as a very talented insurance underwriter is presently working for a
small insurance company, there exists a chance that any big player willing to enter the
insurance industry might entice that person off.

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  Power of Buyers: No individual is a big threat to the insurance industry and big
corporate houses have a lot more negotiating capability with the insurance companies.
Big corporate clients like airlines and pharmaceutical companies pay millions of dollars
every year in premiums.
 Availability of Substitutes: There exist a lot of substitutes in the insurance industry.
Majorly, the large insurance companies provide similar kinds of services – be it auto,
home, commercial, health or life insurance.

How to choose an insurance company?

There are many factors to probe into when an investor chose an insurance company.

 The consumers as well as the investors should only focus on the insurer's financial
strength and capability to meet ongoing responsibilities to its policyholders.
 The fundamentals of the insurance company should be strong and should not indicate a
poor investment opportunity as this might also deter growth.

1.7 TOP INSURANCE COMPANIES IN INDIA:

Life Insurance Corporation of India -

The Life Insurance Corporation of India (LIC) is undoubtedly India's largest life insurance
company. Fully owned by government, LIC is also the largest investor of the country. LIC has an
estimated asset of Rs. 8 Trillion. It also funds almost 24.6% of the expenses of Government of
India.
Established in 1956 and headquartered in Mumbai, Life Insurance Corporation of India has 8
zonal offices, 100 divisional offices, 2,048 branch offices and a vast network of 10,02,149 agents
spread across the country.

Tata AIG Insurance Solutions-

Tata AIG Insurance Solutions, one of the leading insurance providers in India, started its
operation on April 1, 2001. A joint venture between Tata Group (74% stake) and American

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International Group, Inc. (AIG) (26% stake), Tata AIG Insurance Solutions has two different
units for life insurance and general insurance. The life insurance unit is known as Tata AIG Life
Insurance Company Limited, whereas the general insurance unit is known as Tata AIG General
Insurance Company Limited.

AVIVA Life Insurance -

AVIVA Life Insurance, one of the popular insurance companies in India, is a joint venture
between the renowned business group, Dabur and the largest insurance group in the UK, Aviva
plc. AVIVA Life Insurance has an extensive network of 208 branches and about 40
Bancassurance partnerships, spread across 3,000 cities and towns across the country. There are
more than 30,000 Financial Planning Advisers (FPAs) working for AVIAV Life Insurance. It
offers various plans like Child, Retirement, Health, Savings, Protection and Rural.

MetLife Insurance -
MetLife India Insurance Company Limited is another popular player in Indian insurance sector.
A joint venture between the Jammu and Kashmir Bank, M. Pallonji and Co. Private Limited and
other private investors and MetLife International Holdings, Inc., MetLife Insurance offers a wide
range of financial solutions to its customers including Met Suraksha, Met Suraksha TROP, Met
Mortgage Protector and Met Suraksha Plus etc. It has its branches situated over 600 locations
across the country. More than 50,000 Financial Advisors work for MetLife.

ING Vysya Life Insurance -

ING Vysya Life Insurance entered into the Indian insurance industry in September 2001. A joint
venture between ING Group, Ambuja Cements, Exide Industries and Enam Group, ING Vysya
Life Insurance uses its two channels, viz. the Alternate Channel and the Tied Agency Force to
distribute its products. The first channel has branches in 234 cities across the country and has got
366 sales teams. On the other hand, the later one has more than 60,000 advisors. Currently, ING
Vysya Life Insurance has tie ups with more than 200 cooperative banks.

Birla Sun Life Financial Services –

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Birla Sun Life Financial Services is a joint venture between Aditya Birla Group and Sun Life
Financial Inc, Canada. It has got an extensive network of more than 600 branches. More than
1,75,000 empanelled advisors work for Birla Sun Life, which currently covers over 2 million
lives.

MAX New York Life –

Max New York Life Insurance Company Ltd. is one of the top insurance companies in India. A
joint venture between Max India Limited and New York Life International (a part of the Fortune
100 company - New York Life), Max New York Life Insurance Company Ltd. started its
operation in April 2001. It currently has around 715 offices located in 389 cities across the
country. It also has around 75,832 agent advisors. Max New York Life offers 39 products, which
cover both, life and health insurance.

Bajaj Allianz –

Bajaj Allianz is a joint venture between Bajaj Finserv Limited and Allianz SE, where Bajaj
Finserv Limited holds 74% of the stake, whereas Allianz SE holds the rest 26% stake. Bajaj
Allianz has been rated iAAA by ICRA for its ability to pay claims. The company also achieved a
growth of 11% with a premium income of Rs. 2866 crore as on March 31, 2009.
Bharti AXA Life Insurance -

Bharti AXA Life Insurance, one of the top insurance companies in India, is a joint venture
between Bharti group and world leader AXA. Bharti holds 74% stakes, whereas AXA holds the
rest of 26%. Bharti AXA has its branches located in 12 states across the country. It offers a range
of individual, group and health plans for its customers. Currently more than 8000 employees
work for Bharti AXA Life Insurance.

1.8 HEALTH INSURANCE IN INDIA

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HEALTH INSURANCE IN INDIA: CURRENT SCENARIO

Introduction

The health care system in India is characterised by multiple systems of medicine, mixed
ownership patterns and different kinds of delivery structures. Public sector ownership is divided
between central and state governments, municipal and Panchayat local governments. Public
health facilities include teaching hospitals, secondary level hospitals, first-level referral hospitals
(CHCs or rural hospitals), dispensaries; primary health centres (PHCs), sub-centres, and health
posts. Also included are public facilities for selected occupational groups like organized work
force (ESI), defence, government employees (CGHS), railways, post and telegraph and mines
among others. The private
sector (for profit and not for profit) is the dominant sector with 50 per cent of people seeking
indoor care and around 60 to 70 per cent of those seeking ambulatory care (or outpatient care)
from private health facilities. While India has made significant gains in terms of health indicators
- demographic, infrastructural and epidemiological (See Tables 1 and 2), it continues to grapple
with newer challenges. Not only have communicable diseases persisted over time but some of
them like malaria have also developed insecticide-resistant vectors while others like tuberculosis
are becoming increasingly drug resistant. HIV / AIDS has of late assumed extremely virulent
proportions. The 1990s have also seen an increase in mortality on account of non-communicable
diseases arising as a result of lifestyle changes. The country is now in the midst of a dual disease
burden of communicable and noncommunicable diseases. This is coupled with spiralling health
costs, high financial burden on the poor and erosion in their incomes. Around 24% of all people
hospitalized in India in a single year fall below the poverty line due to
hospitalization (World Bank, 2002). An analysis of financing of hospitalization shows that large
proportion of people; especially those in the bottom four-income quintiles borrow money or sell
assets to pay for hospitalization (World Bank, 2002)

This situation exists in a scenario where health care is financed through general tax revenue,
community financing, out of pocket payment and social and private health insurance schemes.

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India spends about 4.9% of GDP on health (WHR, 2002). The per capita total expenditure on
health in India is US$ 23, of which the per capita Government expenditure on health is US$ 4.
Hence, it is seen that the total health expenditure is around 5% of GDP, with breakdown of
public expenditure (0.9%); private expenditure (4.0%). The private expenditure can be further
classified as out-of-pocket (OOP) expenditure (3.6%) and employees/community financing
(0.4%). It is thus
evident that public health investment has been comparatively low. In fact as a percentage of GDP
it has declined from 1.3% in 1990 to 0.9% as at present. Furthermore, the central budgetary
allocation for health (as a percentage of the total Central budget) has been stagnant at 1.3% while
in the states it has declined from 7.0% to 5.5%.
Table 1. Socioeconomic indicators
Land area 2% of world area

Burden of disease (%) 21% of global disease burden

Population 16% of world population

Urban : Rural 28:72

Literacy rate (%) 65.38

Sanitation (%) Rural – 9.0; Urban – 49.3

Safe drinking water supply (%) Rural – 98; Urban – 90.2

Poverty (%) Below poverty line – 26

Rural – 27.09; Urban – 23.62

Poverty line (Rs.) Rural – 327.56; Urban – 454.11

Health sector and its financing: present scene and issues for the future
During the last 50 years India has developed a large government health infrastructure with more
than 150 medical colleges, 450 district hospitals, 3000 Community Health Centers, 20,000
Primary Health Care centers and 130,000 Sub-Health Centers. On top of this there are large
number of private and NGO health facilities and practitioners scatters though out the country.

Over the past 50 ears India has made considerable progress in improving its health status. Death
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rate has reduced from 40 to 9 per thousand, infant mortality rate reduced from 161 to 71 per
thousand live births and life expectancy increased from 31 to 63 years.
However, many challenges remain and these are: life expectancy 4 years below world average,
high incidence of communicable diseases, increasing incidence of non- communicable diseases,
neglect of women's health, considerable regional variation and threat from environment
degradation. It is estimated that at any given point of time 40 to 50 million people are on
medication for major sickness in India. About 200 million workdays are lost annually due to
sickness. Survey data indicate that about 60% people use private health providers for outpatient
treatment while 60 % use government providers for in-door treatment. The average expenditure
for care is 2-5 times more in private sector than in public sector.

India spends about 6% of GDP on health expenditure. Private health care expenditure is 75% or
4.25% of GDP and most of the rest (1.75%) is government funding. At present, the insurance
coverage is negligible. Most of the public funding is for preventive, promotive and primary care
programmes while private expenditure is largely for curative care. Over the period the private
health care expenditure has grown at the rate of 12.84% per annum and for each one percent
increase in per capital income the private health care expenditure has increased by 1.47%.
Number of private doctors and private clinical facilities are also expanding exponentially. Indian
health financing scene raises number of challenges, which are: increasing health care costs, high
financial burden on poor eroding their incomes, increasing burden of new diseases and health
risks and neglect of preventive and primary care and public health functions due to under
funding of the government health care.

Given the above scenario exploring health-financing options becomes critical. Health Insurance
is considered one of the financing mechanisms to over come some of the problems of our system

1.9 Consumer and social perspective on health insurance

With the liberalization of insurance and entry of private companies in this business it is very
important that specific interventions are developed which focus on increasing the consumer
awareness about insurance products. One of the major challenges after privatization of insurance

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would be how to develop such mechanisms, which help making consumers aware about the
various intricacies of insurance plans. As of now information, knowledge and awareness of
existing insurance plans is very limited. This is also shown by the study of Gumber and Kulkarni
(2000) among the members of SEWA, ESIS and mediclaim schemes. With Consumer Protection
Act coming in force it has become easy for aggrieved consumers to complain and seek redressal
for their problems. Consumer organizations such as CERC of Ahmedabad have been helping
consumers to get due justice in disputes with the insurance companies. Their experience would
be varying valuable in guiding development of health insurance plans that are transparent and
just.

Many a times the insurance claims are rejected due to some small technical reasons. This leads to
disputes. Most of the time the conditions and various points included in insurance policy
contracts is not negotiable and these are binding on consumers. There is no analysis on what is
fair practice and what is unfair practice. Given that insurance companies are large and almost
monopoly setting the consumers is treated as secondary and they do not have opportunity to
negotiate the terms and conditions of a contract. Many times insurance companies do not strictly
follow the conditions in all cases and this create confusion and disputes. (Shah M 1999)
The most important area of dispute and unfair treatment is the knowledge and implications of
pre-exiting conditions. A number of cases of litigation are disagreement on these pre-existing
conditions. These problems also arise because of lack of specification of number of areas and
properly spelling out the conditions. This is also because some chronic conditions such as high
blood pressure and diabetes can increase the risk of may other disease of organs such as heart,
kidney, vascular and eyes diseases. The patients with these pre-existing conditions are denied
claims for treatment of complications. This is not fair and leads to disputes.

1.10 Impact of Health insurance on structure and quality of private provision

The experiences in liberalizing the private health insurance suggest that it has undesirable effects
on the costs of health care. The costs of care generally go up. Given the present system of fee for
service and current scenario of health infrastructure in private sector, the development of
insurance will need improvements in quality and change in structure. The new investments to

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improve quality will result into high cost and therefore increase in prices of insurance products.
There would be developments in the direction of exploring options of managed care, which
would help in reducing the costs. The developments would be needed in the direction of strong
information base and accreditation system for providers. The structure of the health sector will
have to change from multiple-single doctor hospitals and clinics to larger hospitals and
polyclinics, which provide services of multiple specialities and can operate at larger scale. This
will allow them to provide high quality professional care at competitive prices. As one of the
responses to these issues Third Party Administrators (TPA) are rapidly emerging in India. Here
we can learn from the models, which have emerged elsewhere. But their applicability to Indian
situation needs to be examined carefully. These aspects of the health sector will need detailed
study.
We lack adequate information base to operate insurance schemes at large scale. The insurance
mechanism prevalent in many developed countries has their history. Health reforms experiences
in many countries are replete with the suggestion that the systems cannot be replicated easily.

Self-regulation is an important in any market driven system. The regulation from outside does
not work. Implementation of regulation in this sector is difficult. We significantly lack
mechanisms and institutions, which would ensure self- regulation and continuing education of
provides and various stakeholders. The accreditation systems are hard to implement without
mechanisms to self-regulate. For example it took 35 years in US to put the accreditation system
effectively in place. For example, it has been difficult for many States in India to put nursing
homes legislation in place. Given the deterioration on standards in medical education, lack of
regulation by medical council and rising expectations of the community it is difficulty to ensure
quality standards in Indian health care system. Given this situation health insurance systems will
have to deal with this complex issue of quality of care in years to come.

1.11 Role of regulators

The government has established Insurance Regulatory and Development Authority (IRDA)
which is the statutory body for regulation of the whole insurance industry. They would be
granting licenses to private companies and will regulate the insurance business. As the health
insurance is in its very early phase, the role of IRDA will be very crucial. They have to ensure

26
that the sector develops rapidly and the benefit of the insurance goes to the consumers. But it has
to guard against the ill effects of private insurance. The main danger in the health insurance
business we see is that the private companies will cover the risk of middle class who can afford
to pay high premiums. Unregulated reimbursement of medical costs by the insurance companies
will push up the prices of private care. So large section of India's population who are not insured
will be at a relative disadvantage as they will, in future, have to pay much more for the private
care. Thus checking increase in the costs of medical care will be very important role of the
IRDA.

Secondly, IRDA will need to evolve mechanisms by which it puts some kind of statue in place
that private insurance companies do not skim the market by focusing on rich and upper- class
clients and in the process neglect a major section of India's population. They must ensure that
companies develop products for such poorer segments of the community and possibly build an
element of cross-subsidy for them. Government companies can take the lead in this matter and
catalyze new products for the poor and lower middle class as they have done in the past.

Thirdly the regulators should also encourage NGOs, Co-operatives and other collectives to inter
into the health insurance business and develop products for the poor as well as for the middle
class employed in the services sector such as education, transportation, retailing etc and the self
employed. This could be run as no-profit-no loss basis similar to the scheme pioneered by Indian
Medical Association for its members. Special licenses will have to be given to NGO for this
purpose without insisting on the minimum capital norms, which are for commercial insurance
companies.

1.12 VARIOUS HEALTH INSURANCE PRODUCTS AVAILABLE IN

INDIA

The existing health insurance schemes available in India can be broadly categorized as:

Voluntary health insurance schemes or private-for-profit schemes Mandatory health insurance

27
schemes or government run schemes (namely ESIS, CGHS) Insurance offered by
NGOs/Community based health insurance Employer based schemes

1. Voluntary health insurance schemes or private-for-profit schemes:

In private insurance, buyers are willing to pay premium to an insurance company that pools
similar risks and insures them for health related expenses. The main distinction is that the
premiums are set at a level, which are based on assessment of risk status of the consumer (or of
the group of employees) and the level of benefits provided, rather than as a proportion of
consumer’s income.

In the public sector, the General Insurance Corporation (GIC) and its four subsidiary companies
(National Insurance Corporation, New India Assurance Company, Oriental Insurance Company
and United Insurance Company) provide voluntary insurance schemes.

The most popular health insurance cover offered by GIC is Mediclaim policy

Mediclaim policy: - It was introduced in 1986. It reimburses the hospitalization expenses

owing to illness or injury suffered by the insured, whether the hospitalization is domiciliary or
otherwise. It does not cover outpatient treatments. Government has exempted the premium paid
by individuals from their taxable income.
Because of high premiums it has remained limited to middle class, urban tax payer segment of
population.

Some of the various other voluntary health insurance schemes available in the market are :- Asha
deep plan II , Jeevan Asha plan II, Jan Arogya policy, Raja Rajeswari policy, Overseas
Mediclaim policy, Cancer Insurance policy, Bhavishya Arogya policy, Dreaded disease policy,
Health Guard, Critical illness policy, Group Health insurance policy, Shakti Shield etc. At
present Health insurance is provided mainly in the form of riders. There are very few pure health
insurance policies under voluntary health insurance schemes.

28
2. Mandatory health insurance schemes or government run schemes (namely ESIS,
CGHS)

Employer State Insurance Scheme (ESI):- Enacted in 1948, the employers’ state insurance
(ESI) Act was the first major legislation on social security in India. The scheme applies to power
using factories employing 10 persons or more and non-power & other specified establishments
employing 20 persons or more. It covers employees and the dependents against loss of wages
due to sickness, maternity, disability and death due to employment injury. It also covers funeral
expenses and rehabilitation allowance. Medical care comprises outpatient care, hospitalization,
medicines and specialist care. These services are provided through network of ESIS facilities,
public care centers, non-governmental organizations (NGOs) and empanelled private
practitioners. The ESIS is financed by three way contributions from employers, employees and
the state government.

Even though the scheme is formulated well there are problem areas in managing this scheme.
Some of the problems are :-

 Large numbers of posts of medical staff remain vacant due to high turnover and low
remuneration compared to corporate hospitals.
 Rising costs and technological advancement in super specialty treatment. Management
information is not satisfactory.
 The patients are not satisfied with the services they get Low utilization of the hospitals.

In rural areas, the access to services is also a [Link] these problems indicate an urgent need
for reforms in the ESIS Scheme.

Central Government Health Insurance Scheme (CGHS):- Established in 1954, the CGHS
covers employees and retirees of the central government and certain autonomous and semi
autonomous and semi-government organizations. It also covers Members of Parliament,
Governors, accredited journalists and members of general public in some specified areas.

29
Benefits under the scheme include medical care, home visits/care, free medicines and diagnostic
services. These services are provided through public facilities with some specialized treatment
(with reimbursement ceilings) being permissible at private facilities. Most of the expenditure is
met by the central government as only 12% is the share of contribution.

The CGHS has been criticized from the point of view of quality and accessibility. Subscribers
have complained of high out of pocket expenses due to slow reimbursement and incomplete
coverage for private health care (as only 80% of the cost is reimbursed if referral is made to
private facility, when such facilities are not available with the CGHS).

Universal Health Insurance Scheme (UHIS):- For providing financial risk protection to the
poor, the government announced UHIS in 2003. Under this scheme, for a premium of Rs. 165
per year per person, Rs.248 for a family of five and Rs.330 for a family of seven , health care for
sum assured of Rs. 30000/- was provided. This scheme has been made eligible for below poverty
line families only. To make the scheme more saleable, the insurance companies provided for a
floater clause that made any member of family eligible as against mediclaim policy which is for
an individual member. In spite of all these, the scheme was not successful.

The reasons for failing to attract rural poor are many :-

The public sector companies who where required to implement this scheme find it to be
potentially loss making and do not invest in propagating it. To meet the target, it is
learnt that several field officers pay the premium under fictious names. Identification of eligible
families is a difficult task Poor find it difficult to pay the entire premium at one time for future
benefit, foregoing current consumption needs. Paper work required to settle the claims is
cumbersome Deficit in availability of service providers Set back due to health insurance
companies refusing to renew the previous year’s policies.

In 2004, the government also provided an insurance product to the Self Help Group (SHG) for a
premium of Rs.120 and sum assured of Rs.10000/-. However, the intake is negligible. The
reasons for poor intake are similar to those cited above.

30
3. Insurance offered by NGOs/Community based health insurance
Community based schemes are typically targeted at poorer population living in communities.
Such schemes are generally run by charitable trusts or non-governmental organizations (NGOs).
In these schemes the members prepay a set amount each year for specified services. The premia
are usually flat rate (not income related) and therefore not progressive. The benefits offered are
mainly in terms of preventive care, though ambulatory and inpatient care is also covered. Such
schemes tend to be financed through patient collection, government grants and donations.
Increasingly in India, CBHI schemes are negotiating with for profit insurers for the purchase of
custom designed group insurance policies.
CBHI schemes suffer from poor design and management. Often there is a problem of adverse
selection as premiums are not based on assessment of individual risk status. These schemes fail
to include the poorest of the poor. They have low membership and require extensive financial
support. Other issues relate to sustainability and replication of such schemes.
Some of the popular Community Based Health Insurance schemes are: - Self-Employed
Women’s Association (SEWA), Tribuvandas Foundation (TF), The Mullur Milk Co-operative,
Sewagram, Action for Community Organization, Rehabilitation and Development (ACCORD),
Voluntary Health Services (VHS) etc.

4. Employer based schemes

Employers in both public and private sector offers employer based insurance schemes through
their own employer. These facilities are by way of lump sum payments, reimbursement of
employees’ health expenditure for out patient care and hospitalization, fixed medical allowance
or covering them under the group health insurance schemes.
The Railways, Defense and Security forces, Plantation sector and Mining sector run their own
health services for employees and their families.

1.13 HEALTH INSURANCE FOR SENIOR CITIZENS

Ageing health policy questions are now frequently raised in India. India has not yet found a
clear,fair and adequate system for financing the growing demand for long-term care as the
population ages. The migration of population for jobs and livelihood from rural areas to urban

31
areas and between cities has led to the breaking down of the age old traditional “joint” or
“extended” family system in India. This system provides a good supporting structure for the care
of older persons by keeping families together, pooling financial resources and making family
members available in case of need. This weakening in the traditional support systems for older
people is expected to lead to a rapid increase in the demand for formal care provided by
institutions such as nursing and residential homes and also services provided in the community.

At present, there are no social schemes or federal or central government mechanisms for funding
of health care for the aging population. The reliance is currently on private sector, voluntary
organizations and indigenous programs that deliver 80% of health care (the remainder is in the
form of Government hospitals and Municipal corporations). The medical infrastructure to handle
substantial number of older adults is lacking. There is no provision for organized long term care
for chronically sick, except for the upper middle class and the rich who can afford to provide
good care at home with some professional help. Hence, there is a need for innovative, cost
effective health insurance products for senior citizens which cater effectively to their needs.

LONG TERM CARE

This paper focuses primarily on long-term care as the subject of long-term care (LTC) is
receiving increasing attention both in the research community and by Government because of the
belief that an ageing population will greatly swell the demand for long term care services and
create huge public expense. One of the issues which need to be determined is by how much
demand will increase; another is to address the ambiguity over whether long-term care is a
response to a medical condition, a social need or both. The corollary is to decide how the burden
is to be shared between the individual, the family and the state.

Before going on to discussing what different nations are doing, it is essential we first appreciate
the nature and significance of long-term health care.

Long-term care is administered to people who have reached a stage in life in which they are

32
dependent on others for social, personal and medical needs. It is usually associated with the very
old, but, in fact, could begin at any age depending on the reasons for their disability – perhaps a
road accident, a mental or a congenital condition. An important social objective for long-term
care is to ensure that people are given the opportunity to choose where their care is delivered.
Given that older people prefer to remain at home the availability and affordability of help to
support this is crucial.

Various countries have different insurance systems to cover LTC. India is acquainted with short-
term health schemes provided by non-life insurers and the government. The need of the hour in
India, keeping in view the increasing tendency to opt for nuclear family system and increased
longevity, is a comprehensive long term health care facility for all. If we look at most developed
economies (a microcosm of which is discussed here below), we see that most of these nations
have a working and workable LTC system for the benefit of its citizens, primarily the senior
citizens.

Experiences from other countries need to be studied, so that we can develop a model based on
good innovations from various countries while keeping the realities of Indian health system.

1.14 IMPLICATIONS OF PRIVATIZATION ON HEALTH INSURANCE

The privatization of insurance sector and constitution of IRDA envisage improving the
performance of state insurance sector in the country by increasing benefits from competition in
terms of lowered costs and increased level of consumer satisfaction. However, the implications
of the entry of private insurance companies in health sector are not very clear. There are several
contentious issues pertaining to development in this sector and these need critical examination.
Role of private insurance varies depending on the economic, social and institutional settings in a
country or a region.

Critics of private insurance argue that privatization will divert scarce resources away form the
pool, escalate health costs, allow cream skimming and adverse selection. According to this view,
private health insurance largely neglects the social aspect of health protection. In the contrast,

33
supporters of private health insurance claim that private insurance can bridge financing gaps by
offering consumers value for money and help them avoid waiting lines, low quality care and
under the table payments-problems often observed when households can use public health
facilities for free or participate in mandatory social insurance schemes. Both the arguments are
correct in the sense, private health insurance can be valuable tool to compliment or supplement
existing health financing options only if they are carefully managed and adapted to local needs
and preferences.

India, with relatively developed economy and a strong middle class population, offers most
promising environment for private health insurance development. Currently, private health
insurance plays only a marginal role in health care systems but it is gradually gaining
importance.
Private health insurance is certainly not the only alternative or the ultimate solution to address
alarming health care challenges in India. However, it is an option that warrants- and already
receives-growing consideration by policy makers in the country. Thus the question is not if this
tool will be used in the future but whether it will be applied to the best of its potential to serve
the needs of the country’s health care system.

1.15 Objective of the study

This dissertation presents review of health insurance situation in India - the opportunities it
provides, the challenges it faces and the concerns it raises. A discussion of the implications of
privatization of insurance on health sector from various perspectives and how it will shape the
character of our health care system is also attempted. Some terms are as follows:

 To understand the position of health insurance in India

 To understand the different schemes of health insurance provided by different

companies.

34
 To find out the future of Insurance sector in India

35
 CHAPTER II:

RESEARCH METHODOLOGY

36
RESEARCH METHODOLOGY
To be able to estimate the reliability of a report, the methods which it is based upon have to be
considered. Hence, this third chapter, methodology, will give the reader an insight into my
research process, selection and data collection.

2.1. REASEARCH PROCESS:

My work began with health study, followed by preparation for my data collection.
My data collection included the detail about various health insurance companies and their
schemes, which I analyzed. I drew conclusions from the analysis which gave me an answer to our
purpose. The different steps are separately presented below under
corresponding headlines.

2.2. HOW TO FIND:

To be able to see which direction we wanted our empiric study to take we began by
considering the subject of the Indian Insurance Sector. To get the essential information for the
frame of reference I carried out a literature study,concentrating on relevant books and articles. The
literature was of scientific character and mainly concerned the topics like insurance sector in
India, role of health insurance,benefits of health insurance,history and current scenario of health
sector in India. In addition to the books, I used articles from various well known journals.

A preliminary treatment
After acquiring literature needed, it can be beneficial to prioritize them and make
organized notes of the content before starting the work of the frame of references.I used Patel &
Davidson’s (1994) ideas of organizing the literature before carrying out the actual text.
Prioritizing the literature was followed by a thorough review of the highly prioritized books. I
made this by making a document each for all the literature with the highest rating. In the
documents I specified the main context,their angle of approach and for which areas in our frame
of reference it could be of interest. By doing this, we facilitated the organization and production of
the frame of reference.

37
Keep a critical mind
I have tried to keep a critical approach to the theories and to get different angels on all
areas of interest in the process of change while reviewing the literature. Knowledge
critique is a way of adapting logical thoughts according to Eriksson & Wiedersheim-Paul
(1999). I ma aware that caution should be taken when using consultant literature since
it intends to be uncritical and written in a selling way. .

2.3. SOURCES OF DATA

The data collected for this project is basically primary and secondary data which is
collected from Journal, Magzines, Internet and [Link] it is really a very difficult task to
take views of higher authorities of any company in such a less time and analyse their
reponses.

Primary Data:

Primary data are originated by the researcher for the specific purpose of addressing the problem

at hand. Since primary data is collected with specific purpose, it is the most significant. Depth

interviews, focus groups, observations and surveys are the major methods of gathering primary

data. In this particular study, surveys have been used as a means for obtaining primary data.

Secondary Data:

Secondary data are data that are collected by usually journals, existing reports, and statistics by

public and private authorities are used collect Secondary data. Here, the secondary data have

been collected using marketing journals and other existing reports that were based on the topic.

38
 CHAPTER III:
ANALYSIS OF DATA

39
3.1. Health Insurance in India Opportunities, Challenges and Concerns
Health Insurance
Health insurance in a narrow sense would be ‘an individual or group purchasing health care
coverage in advance by paying a fee called premium.’ In its broader sense, it would be any
arrangement that helps to defer, delay, reduce or altogether avoid payment for health care
incurred by individuals and households. Given the appropriateness of this definition in the Indian
context, this is the definition, we would adopt. The health insurance market in India is very
limited covering about 10% of the total population. The existing schemes can be categorized as:
 Voluntary health insurance schemes or private-for-profit schemes;
 Employer-based schemes;
 Insurance offered by NGOs / community based health insurance, and
 Mandatory health insurance schemes or government run schemes (namely ESIS, CGHS).

3.2. Voluntary health insurance schemes or private-for-profit schemes

In private insurance, buyers are willing to pay premium to an insurance company that pools
people with similar risks and insures them for health expenses. The key distinction is that the
premiums are set at a level, which provides a profit to third party and provider institutions.
Premiums are based on an assessment of the risk status of the consumer (or of the group of
employees) and the level of benefits provided, rather than as a proportion of the consumer’s
income.

In the public sector, the General Insurance Corporation (GIC) and its four subsidiary companies
(National Insurance Corporation, New India Assurance Company, Oriental Insurance Company
and United Insurance Company) and the Life Insurance Corporation (LIC) of India provide
voluntary insurance schemes. The Life Insurance Corporation offers Ashadeep Plan II and
Jeevan Asha Plan II. The General Insurance Corporation offers Personal Accident policy, Jan
Arogya policy, Raj Rajeshwari policy, Mediclaim policy, Overseas Mediclaim policy, Cancer
Insurance policy, Bhavishya Arogya policy and Dreaded Disease policy (Srivastava 1999 as
quoted in Bhat R & Malvankar D, 2000)

40
Of the various schemes offered, Mediclaim is the main product of the GIC. The Medical
Insurance Scheme or Mediclaim was introduced in November 1986 and it covers individuals and
groups with persons aged 5 – 80 yrs. Children (3 months – 5 yrs) are covered with their parents.
This scheme provides for reimbursement of medical expenses (now offers cashless scheme) by
an individual towards hospitalization and domiciliary hospitalization as per the sum insured.
There are exclusions and pre-existing disease clauses. Premiums are calculated based on age and
the sum insured, which in turn varies from Rs 15 000 to Rs 5 00 000. In 1995/96 about half a
million Mediclaim policies were issued with about 1.8 million beneficiaries (Krause Patrick
2000). The coverage for the year 2000-01 was around 7.2 million.

The year 1999 marked the beginning of a new era for health insurance in the Indian context.
With the passing of the Insurance Regulatory Development Authority Bill (IRDA) the insurance
sector was opened to private and foreign participation, thereby paving the way for the entry of
private health insurance companies. The Bill also facilitated the establishment of an authority to
protect the interests of the insurance holders by regulating, promoting and ensuring orderly
growth of the insurance industry. The bill allows foreign promoters to hold paid up capital of up
to 26 percent in an Indian company and requires them to have a capital of Rs 100 crore along
with a business plan to begin its [Link], a few companies such as Bajaj Alliance,
ICICI, Royal Sundaram, and Cholamandalam among others are offering health insurance
schemes. The nature of schemes offered by these companies is described briefly.

 Bajaj Allianz: Bajaj Alliance offers three health insurance schemes namely, Health
Guard, Critical Illness Policy and Hospital Cash Daily Allowance Policy.

- The Health Guard scheme is available to those aged 5 to 75 years (not allowing entry for those
over 55 years of age), with the sum assured ranging from Rs 100 0000 to 500 000. It offers
cashless benefit and medical reimbursement for hospitalization expenses (pre-and post-
hospitalization) at various hospitals across India (subject to exclusions and conditions). In case
the member opts for hospitals besides the empanelled ones, the expenses incurred by him are

41
reimbursed within 14 working days from submission of all the documents. While pre-existing
diseases are excluded at the time of taking the policy, they are covered from the 5th year
onwards if the policy is continuously renewed for four years and the same has been declared
while taking the policy for the first time. Other discounts and benefits like tax exemption, health
check-up at end of four claims free year, etc. can be availed of by the insured.

- The Critical Illness policy pays benefits in case the insured is diagnosed as suffering from any
of the listed critical events and survives for minimum of 30 days from the date of diagnosis. The
illnesses covered include: first heart attack; Coronary artery disease
requiring surgery: stroke; cancer; kidney failure; major organ transplantation; multiple sclerosis;
surgery on aorta; primary pulmonary arterial hypertension, and paralysis. While exclusion
clauses apply, premium rates are competitive and high-sum insurance
can be opted for by the insured.

- The Hospital Cash Daily Allowance Policy provides cash benefit for each and every completed
day of hospitalization, due to sickness or accident. The amount payable per day is dependant on
the selected scheme. Dependant spouse and children (aged 3 months – 21years) can also be
covered under the Policy. The benefits payable to the
dependants are linked to that of insured. The Policy pays for a maximum single hospitalization
period of 30 days and an overall hospitalization period of 30/60 completed days per policy
period per person regardless of the number of confinements to hospital/nursing home per policy
period.

 ICICI Lombard: ICICI Lombard offers Group Health Insurance Policy. This policy
is available to those aged 5 – 80 years, (with children being covered with their parents)
and is given to corporate bodies, institutions, and associations. The sum insured is
minimum Rs 15 000/- and a maximum of Rs 500 000/-. The premium chargeable
depends upon the age of the person and the sum insured selected. A slab wise group
discount is admissible if the group size exceeds 100. The policy covers reimbursement of
hospitalization expenses incurred for diseases contracted or injuries sustained in India.
Medical expenses up to 30 days for Pre-hospitalization and up to 60 days for post-

42
 hospitalization are also admissible. Exclusion clauses apply. Moreover, favourable claims
experience is recognized by discount and conversely, unfavourable claims experience
attracts loading on renewal premium. On payment of additional premium, the policy can
be extended to cover maternity benefits, pre-existing diseases, and reimbursement of cost
of health check-up after four consecutive claims-free years.

 Max New York Life Insurance: The leading private life insurance company - Max
New York Life Insurance Company Ltd. has launched 'lifeline' - a health insurance
product on Wednesday, 5th March 2008, across India. Now, the company can boast of
offering complete health and life insurance products across ll regions in India. This newly
launched health insurance product of Max New York Life Insurance Company offers
three groups of heath insurance solutions.

The Director Marketing Product Management and Corporate Affairs of Max New York
Life Insurance said that these three distinct heath insurance products are meant to cover
eventualities like hospitalization, surgery and critical illness of the insured. He points out
that these plans have been structured with features like coverage for a wide range of
ailments, no claim discount on revised premium for a healthy life, a fixed premium for a
five-year term, free second opinion from the best health care institutions of India on
detection of illness. Further, it also has provision for a free telephonic medical helpline
across India.

The hospitalization - is covered by "Medicash plan", which is meant to provide a fixed

amount of cash benefit on a day-to-day basis during the entire period of hospitalization of
the insured. The Medicash plan would also cover expenses for admission in ICU, lump
sum benefits against an unlimited number of surgeries and recuperation benefits.

The second plan of the newly launched health insurance of Max New York Life
Insurance, is the "Wellness Plan", which is a more attractive one and covers 'critical
illness' like cancer, alzheimers, heart ailments, liver disease, deafness, permanent
disability, etc. The Wellness plan covers thirty eight critical illnesses, which is the highest

43
 number of illness covered under one insurance plan in India by any insurance company.
The third health insurance policy of Max New York Life Insurance is a term plus health
protection plan known as "Safety Net". This provides coverage to the insured person for
any losses incurred by him/her in eventualities like critical illness, accident, disability and
death.

With 21 lakh life insurance policies and with an assured sum of Rs 62,000 crores in its
kitty Max Life Insurance wishes to achieve business at least five percent higher than it
did in the last financial year. The company also announced that it would go for an
expansion drive and would also increase the number of branch offices in Tamil Nadu
within the fiscal year 2008-2009. Max New York Life Insurance Company is one of the
fastest growing life insurance companies in India and is the first life insurance company
of India to be awarded with ISO 9001:2000 certification. This Rs 907.4 crores insurance
company is one of the most respected companies in India. After making strong inroads
into the Indian life insurance market with a strong product portfolio the company is
expected to do well with its new product line in the Indian health insurance sector as
well.

 Royal Sundaram Group: The Shakthi Health Shield policy offered by the Royal
Sundaram group can be availed by members of the women’s group, their spouses and
dependent children. No age limits apply. The premium for adults aged up to 45 years is
Rs 125 per year, for those aged more than 45 years is Rs 175 per year. Children are
covered at Rs 65 per year. Under this policy, hospital benefits up to Rs 7 000 per annum
can be availed, with a limit per claim of Rs 5 000. Other benefits include maternity
benefit of Rs 3 000 subject to waiting period of nine months after first enrolment and for
first two children only. Exclusion clauses apply (Ranson K & Jowett M, 2003)

 Cholamandalam General Insurance: The benefits offered (in association with

the Paramount Health Care, a re-insurer) in case of an illness or accident resulting in
hospitalization, are cash-free hospitalization in more than 1 400 hospitals across India,
reimbursement of the expenses during pre- hospitalization (60 days prior to

44
 hospitalization) and post- hospitalization (90 days after discharge) stages of treatment.
Over 130 minor surgeries that require less than 24 hours hospitalization under day care
procedure are also covered. Extra health covers like general health and eye examination,
local ambulance service, hospital daily allowance, and 24 hours assistance can be availed
[Link] clauses apply.

 Employer-based schemes:Employers in both the public and private sector offers

employer-based insurance schemes through their own employer-managed facilities by
way of lump sum payments, reimbursement of employee’s health expenditure for
outpatient care and hospitalization, fixed medical allowance, monthly or annual
irrespective of actual expenses, or covering them under the group health insurance policy.
The railways, defence and security forces, plantations sector and mining sector provide
medical services and / or benefits to its own employees. The population coverage under
these schemes is minimal, about 30-50 million people.

3.3. Social Insurance or mandatory health insurance schemes or government

run schemes (namely the ESIS, CGHS)

Social insurance is an earmarked fund set up by government with explicit benefits in return for
payment. It is usually compulsory for certain groups in the population and the premiums are
determined by income (and hence ability to pay) rather than related to health risk. The benefit
packages are standardized and contributions are earmarked for spending on health services The
government-run schemes include the Central Government Health Scheme (CGHS) and the
Employees State Insurance Scheme (ESIS).

 Central Government Health Scheme (CGHS)

Since 1954, all employees of the Central Government (present and retired); some autonomous
and semi-government organizations, MPs, judges, freedom fighters and journalists are covered
under the Central Government Health Scheme (CGHS). This scheme was designed to replace the

45
cumbersome and expensive system of reimbursements (GOI, 1994). It aims at providing
comprehensive medical care to the Central Government employees and the benefits offered
include all outpatient facilities, and preventive and promotive care in dispensaries. Inpatient
facilities in government hospitals and approved private hospitals are also covered. This scheme is
mainly funded through Central Government funds, with premiums ranging from Rs 15 to Rs 150
per
month based on salary scales. The coverage of this scheme has grown substantially with
provision for the non-allopathic systems of medicine as well as for allopathy. Beneficiaries at
this moment are around 432 000, spread across 22 cities.

The CGHS has been criticized from the point of view of quality and accessibility. Subscribers
have complained of high out-of-pocket expenses due to slow reimbursement and incomplete
coverage for private health care (as only 80% of cost is reimbursed if referral is made to private
facility when such facilities are not available with the CGHS).

 Employee and State Insurance Scheme (ESIS)

The enactment of the Employees State Insurance Act in 1948 led to formulation of the
Employees State Insurance Scheme. This scheme provides protection to employees against loss
of wages due to inability to work due to sickness, maternity, disability and death due to
employment injury. It offers medical and cash benefits, preventive and promotive care and health
education. Medical care is also provided to employees and their family members without fee for
service. Originally, the ESIS scheme covered all power-using non-seasonal factories employing
10 or more people. Later, it was extended to cover employees working in all non-power using
factories with 20 or more persons. While persons working in mines and plantations, or an
organization offering health benefits as good as or better than ESIS, are specifically excluded.
Service establishments like shops, hotels, restaurants, cinema houses, road transport and news
papers printing are now covered. The monthly wage limit for enrolment in the ESIS is Rs. 6 500,
with a prepayment contribution in the form of a payroll tax of 1.75% by employees, 4.75% of
employees' wages to be paid by the employers, and 12.5% of the total expenses are borne by the
state governments. The number of beneficiaries is over 33 million spread over 620 ESI centres
across states. Under the ESIS, there were 125 hospitals, 42 annexes and 1 450 dispensaries with

46
over 23 000 beds facilities. The scheme is managed and financed by the Employees State
Insurance Corporation (a public undertaking) through the state governments, with total
expenditure of Rs 3 300 million or Rs 400/- per capita insured person.

 Other Government Initiatives

Apart from the government-run schemes, social security benefits for the disadvantaged groups
can be availed of, under the provisions of the Maternity Benefit (Amendment) Act 1995,
Workmen’s Compensation (Amendment) Act 1984, Plantation Labour Act 1951, Mine Mines
Labour Welfare Fund Act 1946, Beedi Workers Welfare Fund Act 1976 and Building and other
Construction Workers (Regulation of Employment and Conditions of Service) Act, 1996.

Ques.1 What is your age?

particulars no. of respondents percentage

up to 30 19 38
31-40 13 26
41-50 25 30
above 50 3 6
total 50 100

upto 30
31-40
41-50
above50

The following graph depicts that 64% of the respondents below age 40 and only 6% of the
respondents are of age 50. It indicates that young people are more aware and conscious toward
insurance policies. Category.

Ques.2 What is your qualification?

47
 particulars no. of respondents percentage
10th level 10 20
12th level 13 26
graduates 25 50
postgraduates 12 24
total 50 100

10thlevel 12thlevel

graduate post grauate

The following graph depicts that 20% of the respondents have education till 10th and 26% of the
respondents are 12th pass 50% respondents are graduates,24% are post graduates It indicates that
graduates are much conscious than under graduates.

Ques.3 What is your occupation?

PARTICULARS NO OF RESPONDENTS PERCENTAGE

48
 GOVT 14 28
PRIVATE 21 42
PROFFESIONALS 9 18
SELF EMPLOYED 6 12
TOTAL 50 100

GOVT

PRIVATE

PROFESSION

SELFEMPLOYED

The following figure shows that 42%of the respondents are private employees, 28% are govt.
employees, 18% are professionals and 12% are self employee it means employees are more
aware towards insurance policies

Ques.4 What is your marital status?

PARTICULARS [Link] RESPONENTS PERCENTAGE

married 33 66
single 17 34

49
 TOTAL 50 100

single

married

It is observed that from the above table that 33 respondents are married 17 respondents are single
married persons are more aware of insurance.

Ques.5 How many dependents do you have?

PARTICULARS [Link] RESPONENTS PERCENTAGE

1 16 32
2 8 16
MORE THAN 2 26 52
TOTAL 50 100

50
 1 2 MORE THAN 2

It is observed that from the above table that 26 respondents have more than 2 dependents, 8
respondents have 2 dependents and 16 have 1 dependents

Ques.6 What is your annual income?

PARTICULARS NO OF RESPONDENTS PERCENTAGE

BELOW 50000 9 18
50001-100000 17 34
100001-150000 11 22
ABOVE150000 13 26
TOTAL 50 100

51
 below50000
50001-100000
100001-150000
above150000

The following graph depicts that 34% of the respondents are in the income level of 50001-100000 ,26%
respondents has got above 100000 income,22% of respondents comes in net annual income and rest 18% comes
under below 50000 category.

Ques.7 Where do you invest your money?

PARTICULARS NO OF RESPONDENTS PERCENTAGE

INSURANCE 12 24
MUTUAL FUNDS 18 36
BANKS 10 20
SHARE MARKET 10 20
TOTAL 50 100

52
 bank

insurance
mutual funs

stock mkt

The following graph depicts that 36% of the respondents are interested in mutual funds, 24%
respondents are interested in investing in insurance 20% are interested in banks an rest of the
20% are interested in share market

Ques.8 What is a reason to take insurance policy?

PARTICULARS [Link] RESPONDENTS PERCENTAGE

TO COVER RISK 15 30
TO AVOID TAX 8 16
INVESTMENT 17 34
GOOD RETURN 10 20
TOTAL 50 100

53
 cover risk avoid tax investment good return

It is observed that from the above table that 15 respondents take insurance policy to secure their
future, 8 respondents take insurance to avoid tax and 17 take insurance for investment purpose,
10 respondents observe that it gives good return.

Ques.9 Which policy would you like to prefer?

PARTICULARS NO OF RESPONDENTS PERCENTAGE

TERM PLAN 18 36
MONEY BACK 12 24
RIDERS 10 20
ENDOWMENT PLAN 10 20
TOTAL 50 100

54
 endowment

riders

term plan

money back

The following figure shows investor attitude towards the policy 18 respondents wants to take
term plan 12 respondents wants to take money back 10 respondents wants to take riders,
consumer is much crazy in taking term policy.

Ques.10 What are your sources of awareness?

PARTICULARS NO OF RESPONDENTS PERCENTAGE

FRIENDS 12 24
AGENTS 18 36
ADVERTISEMENT 10 20
OTHER 10 20
TOTAL 50 100

55
 advertisement
friends
agents
others

The following graph depicts that 36% of the respondents get knowledge through agents in
mutual funds, 24% respondents get knowledge through friends, and 20% get knowledge from
advertisement and other sources

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 CHAPTER IV: SUMMARY AND
CONCLUSION

SUMMARY & CONCLUSION

The preceding sections of this paper present the health insurance scenario in India. Given the
situation, there are few issues of concern or barriers towards implementing a social health
insurance scheme in India. These are enumerated below along with the possible way ahead.

India is a low-income country with 26% population living below the poverty line, and 35%
illiterate population with skewed health risks. Insurance is limited to only a small proportion of
people in the organized sector covering less than 10% of the total population. Currently, there no
mechanism or infrastructure for collecting mandatory premium among the large informal sector.
Even in terms of the existing schemes, there is insufficient and inadequate information about the

57
various schemes. Data gaps also prevail. Much of the focus of the existing schemes is on hospital
expenses. There continues to be lack of awareness among people about health insurance. In spite
of existing regulation in some States, the private sector continues to operate in an almost
unhindered manner. The growth of health insurance increases the need for licensing and
regulating private health providers and developing specific criteria to decide upon appropriate
services and [Link] insurance per se, suffers from problems like adverse selection, moral
hazard, cream-skimming and high administrative costs. This is coupled with the fact that in the
absence of any costing mechanisms, there is difficulty in calculating the premium. There is also a
need to evolve criteria to be used for deciding upon target groups, who would avail of the SHI
scheme/s and also to
address issues relating to whether indirect costs would be included in health insurance. Health
insurance can improve access to good quality health care only if it is able to provide for health
care institutions with adequate facilities and skilled personnel at affordable cost.

Given this scenario, the challenge, then, for Indian policy-makers is to find ways to improve
upon the existing situation in the health sector and to make equitable, affordable and quality
health care accessible to the population, especially the poor and the vulnerable sections of the
society. It is in a way inevitable that the state reforms its public health delivery system and
explores other social security options like health insurance. Implementing regulations would be
one, but by no means the best mechanism to contain provider behaviour and costs. This can only
be done by developing mechanisms where government and households can together pool their
funds. This could be one way of controlling provider behaviour.

There is an urgent need to document global and Indian experiences in social health insurance.
Different financing options would need to be developed for different target groups. The wide
differentials in the demographic, epidemiological status and the delivery capacity of health
systems are a serious constraint to a nationally mandated health insurance system. Given the
heterogeneity of different regions in India and the regional specifications, one would need to
undertake pilot projects to gather more information about the population to be targeted under an
insurance scheme and develop options for different population groups. Health policy-makers and
health systems research institutions, in collaboration with economic policy study institutes, need

58
to gather information about the prevailing disease burden at various geographical regions; to
develop standard treatment guidelines, to undertake costing of health services for evolving
benefit packages to determine the premium to be levied and subsidies to be given; and to map
health care facilities available and the institutional mechanisms which need to be in place, for
implementing health insurance schemes. Skill- building for the personnel involved, and capacity-
building of all the stakeholders involved, would be a critical component for ensuring the success
of any health insurance programme.

The success of any social insurance scheme would depend on its design,the implementation and
monitoring mechanisms which would be set in place and it would also call for restructuring and
reforming the health system, and developing the necessary prerequisites to ensure its success.

59
CHAPTER V: SUGGESTIONS AND
RECCOMENDATIONS

60
Health insurance is like a knife. In the surgeon’s hand it can save the patient, while in the hands
of the quack, it can kill. Health insurance is going to develop rapidly in future. The main
challenge is to see that it benefits the poor and the weak in terms of better coverage and health
services at lower costs without negative aspects of cost increase and overuse of procedures and
technology in provision of health care.

In India has limited experience of health insurance. Given that government has liberalized the
insurance industry, health insurance is going to develop rapidly in future. The challenge is to see
that it benefits the poor and the weak in terms of better coverage and health services at lower
costs without the negative aspects of cost increase and over use of procedures and technology in
provision of health care. The experience from other places suggest that ifhealth insurance is left
to the private market it will only cover those which have substantial ability to pay leaving out the
poor and making them more vulnerable. Hence India should proactively make efforts to develop
Social Health Insurance patterned after the German model where there is universal coverage,
equal access to all and cost controlling measures such as prospective per capita payment to
providers. Given that India does not have large organized sector employment the only option for
such social health insurance is to develop it through co-operatives, associations and unions. The
existing health insurance programmes such as ESIS and Mediclaim also need substantial reforms
to make them more efficient and socially useful. Government should catalyze and guide
development of such social health insurance in India. Researchers and donors should support
such development.

61
 Limitations of the study

1. The study is confined to limited period.

2. Accuracy of the study is mostly based on the secondary data.

3. The analysis and conclusion made by me as per my limited understanding and there may
be something variation in the actual situation.

4. The accurate decision cannot be taken by the information collected; people were
relucatewhile giving their personal information.

5. Dynamic nature of the environment, that is relevant today may mot relevant in future.

62
 BIBILIOGRAPHY

 Gumber A., Kulkarni V. 2000. Health Insurance for Informal Sector: Case Study of Gujarat.
Economic and Political Weekly, Sep. 30.
 Dholakia R. Economic reforms: Implications for Health Insurance. Presentation at One day
workshop on 'Health Insurance in India'. Indian Institute of Management, Ahmedabad. Oct.
30, 1999.
 Ellis RP., Alam M, Gupta I. 1996 Health Insurance in India: Prognosis and Prospectus.
Boston University: Boston and Institute of Economic Growth: Delhi. December 18.
 IIMA 1999. Indian Institute of Management, Ahmedabad. Report of the one day workshop
on 'Health Insurance in India'. Oct. 30, 1999.
 WHO statistics
 IRDA journals
 Directorate General Of Health services
 Health Policy Challenges for India: Private Health Insurance and Lessons from the
international Experience by Ajay Mahal
 Health Insurance in India by Sujatha Rao
 Different Countries, Different Needs: The Role of Private Health Insurance in Developing
Countries by Denis Drechsler, Johannes Jütting
 [Link]

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 Questionnaire

1. What is your age?

a. Up to 30 b. 31-40
c. 41-50 d. Above 50

2. What is your qualification?

a. 10th b. 12th
c. Graduate d. Post graduate

3. What is your occupation?

a. Private job b. Govt. job
c. Professional d. Self employed

4. What is your marital status?

a. Married b. Single

5. How many dependents do you have?

a. One b. Two
c. More than two

6. What is your annual income?

a. Below 50000 b. 50001-100000
C.100001-150000 d. Above 150000

7. Where do you invest your money?

a. Insurance b. Mutual fund
c. Bank d. Stock market

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8. What is a reason to take insurance policy?
a. Safety b. Tax saving
c. Investment d. Good return

9. Which policy would you like to prefer?

a. Term plan b. Endowment plan
c. Riders d. Money back

10. What are your sources of awareness?

a. Advertisement b. Friends
c. Agents d. Others

65