India Market. Health Insurance Update. Introduction. In this issue. Industry statistics April to September Market update.

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1 India Market Health Insurance Update India Issue 13 December 2011 Introduction We are pleased to circulate our quarterly newsletter on the health insurance industry in India, covering developments in the period September to November The health insurance sector continues to grow at a healthy pace. As per statistics released by the Insurance Regulatory and Development Authority (IRDA), the industry recorded 21.3 per cent growth in gross premium written in the first half of FY , as compared to the same period in the previous financial year. The health insurance portability facility, which was earlier scheduled to become operational from July 2011, was finally implemented starting October. Portability will allow health insurance policyholders to switch companies while retaining their no-claims benefit. It is likely that consumers can now expect a slew of innovative health insurance plans as insurers compete to attract and retain customers. Insurers, however, say that the cost of health insurance is unlikely to come down. In this issue Industry statistics April to September 2011 Market update New entrants Company news Other market developments Regulatory update Products New / planned launches Government health schemes Other Other industry updates Contact details The central and the state governments are taking a number of initiatives to revamp and expand the network of existing government health schemes. The central government plans to introduce a universal health insurance scheme with premiums linked to income levels. The Planning Commission has suggested a government funded health insurance plan, covering all the citizens of India, by We hope you continue to find the newsletter interesting and informative, and welcome your comments and feedback. Towers Watson Risk Consulting, India Copyright 2012 Towers Watson. All rights reserved. towerswatson.com 1

2 Industry statistics April to September 2011 According to latest statistics released by the IRDA, total health insurance premiums written by non-life insurance companies and standalone health insurance companies increased to Rs672 billion in the first half of FY , as compared to Rs554 billion in the same period in the previous financial year. Comparison of health gross written premiums by non-life insurers and standalone health insurers New India United India National ICICI Lombard Oriental Star Health & Allied Insurance Bajaj Allianz General HDFC ERGO Apollo Munich Royal Sundaram Reliance General Chola MS General IFFCO Tokio Bharti Axa General Future Generali General TATA-AIG General Max Bupa Health Insurance Universal Sompo SBI General L&T Source: IRDA 0 1,500 3,000 4,500 6,000 7,500 9,000 10,500 12,000 in Rs millions April 2010 to Sep 2010 April 2011 to Sep 2011 Notes: The total health premium figure includes domestic and overseas medical insurance. The health insurance market continues to be dominated by the four state-owned non-life insurers. The four Public Sector Undertakings (PSUs) operating in the non-life sector still have the lion's share of 60 per cent, while the private players have the balance 40 per cent. Among the PSUs, United India Insurance and National Insurance each registered a strong growth rate of over 32 per cent year on year. Among private players, ICICI Lombard occupied the top position with a market share of 11.4 per cent and growth close to 2 per cent, followed by Star Health & Allied Insurance (Star Health) with market share of 8.9 per cent and growth of 9 per cent. With the exception of Reliance General, all the other companies recorded a growth in health insurance premiums in the first half of FY as compared to the first half of FY Market update New entrants Cigna (US major) and TTK Group have formed a joint venture to sell a range of health, wellness and insurance products across India. The company has initiated the process of seeking approval from the IRDA and plans to submit a comprehensive filing early They expect to obtain the full operating license by Religare Finvest, a subsidiary of Religare Group, is awaiting final approval from the IRDA to launch products under the health insurance portfolio. The company is currently present in the health care industry under the brand Fortis. It lends to small and medium entities, apart from other group entities. Company news National Insurance Company Ltd plans to revise the rates of its health insurance products subject to IRDA approval as it incurred losses in the segment. Health Insurance, which accounts for 26.4 per cent of the company's total business has been making losses due to the higher medical costs and operating expenses. Oriental Bank of Commerce entered into a Memorandum of Understanding (MoU) with Oriental Insurance Co Ltd for selling Mediclaim policies to the bank's customers through its pan- India network. Oriental Bank Mediclaim policy is a cashless family floater covering the members of the beneficiary's family. Star Health Insurance has bagged the health insurance contract of Rs65 billion and has emerged as the lowest bidder for the Tamil Nadu health insurance scheme. The final premium after negotiations amounts to Rs508 per family. The scheme provides a multi-year policy and covers 950 types of medical treatments in the Kalaignar scheme. Other market developments The Central Information Commission has ordered that public sector health insurance companies must provide names of hospitals that do not feature in the Preferred Provider Network (PPN) for cashless services to an applicant under the Right to Information Act. The Commission has also directed insurance companies to provide reasons for taking the hospitals off the list. Apollo Hospitals, Chennai, has joined the Preferred Provider Network' of public-sector general insurance companies to provide treatment under rates stipulated by it to beneficiaries of the policy. Copyright 2012 Towers Watson. All rights reserved. towerswatson.com 2

3 Regulatory updates Health Insurance Portability The IRDA has issued the final guidelines on health insurance portability to all non-life insurers. This means, a policyholder can switch from one health insurer to another without losing any benefits he/she has earned on his existing health cover. Portability will allow policyholders, dissatisfied with their insurer s services, to migrate to another insurer without losing the credit gained for pre-existing disease cover and no-claims bonuses. A few key features as outlined in the guidelines are as follows: A policyholder will have to approach an insurer 45 days before his policy with the old insurer expires, to enable the new company to consider his application. In a circular, the IRDA said that the acquiring insurer would verify the claims, based on the experience data from the previous insurer. The acquirer will decide whether to accept the proposal and at what price in accordance with the underwriting policy filed with the IRDA. Individual members, including the family members covered under any group health insurance policy of a nonlife insurance company shall have the right to migrate from such a group policy to an individual health insurance policy or a family floater policy with the same insurer. Others The Third Party Administrators (TPAs) in health insurance will now have to confine their services only to an insurance company and can no longer render health scheme services - promoted, sponsored or approved by a non-insurance body. The IRDA has withdrawn permission given to TPAs in 2005 to offer their services to bodies other than insurance companies, such as central, state and local governments, firms, corporates etc. The IRDA urged insurance companies to reconsider the reasons for the exclusion of HIV+ patients from getting a health cover. The IRDA believes that the HIV positive (AIDS) patients should not be denied insurance cover for other diseases. The IRDA has issued a circular for insurance companies which prohibit them from rejecting policyholders claims merely based on technical grounds of delay in intimation of claims or delay in submission of policy documents, particularly if the delay is due to unavoidable circumstances. The insurers should also incorporate this effect in the policy contract. The regulation was in response to the rising number of consumer complaints in this regard. The move is reported to restore policyholder confidence in the industry, thus bringing down the associated litigation expenses. Hospital bills managed by TPAs could go up after a recent Delhi High Court judgment. The court ruled that payment made by TPAs to hospitals is in the nature of professional services covered under Section 194J of the Income-Tax Act, Accordingly, the petitioner was under an obligation to withhold tax while making payments to hospitals. The High Court, however, set aside a Central Board of Direct Taxes circular to the extent it provides for levying of penalty under Section 271C of the Act in case of failure to withhold tax under Section 194J of the Act. Products New / planned launches SBI Life Insurance launched a health insurance plan Hospital Cash. The plan provides fixed daily allowance to the insured for each day of hospitalisation irrespective of the hospital bill amount. Daily Hospitalisation Cash Benefit (DHCB) is a 100 per cent fixed payout from the first day of hospitalisation without any deductible. If admitted to an ICU, the amount receivable by the policyholder is twice that of the DHCB. Oriental Insurance has partnered with Kerala-based private lender Federal Bank to launch a mediclaim policy, 'Fed Oriental Pravasi Insurance' for the NRI community. The scheme will offer NRIs a cover for normal hospital expenses and unforeseen events such as repatriation and accidents. The policy includes a legal/litigation, hospitalisation, personal accident and a medical floater cover for family members, besides maternity benefits. L&T General Insurance has recently launched a health insurance plan called the my: Health Medisure Prime Insurance. A key feature of the plan is its zone-based differential pricing as the company says that the real estate plays a big role in health insurance costs. The policy has a maximum entry age of 65 years and can be renewed for a lifetime. The company would now be settling the claims inhouse which would improve the response time. Max Bupa Health Insurance is planning to introduce disease specific insurance products next year. The company is carrying out disease management programmes and the product will cover treatment of specific diseases, mostly linked to lifestyle. First Life Insurance after LIC, ICICI Prudential Life Insurance and Birla Sun Life Insurance, has launched a ULIP plan called the Money Back Health Plan. The plan allows a maximum claim of five times the total sum assured during the entire term. Copyright 2012 Towers Watson. All rights reserved. towerswatson.com 3

4 Life Insurance Corporation is launching a unit-linked health insurance product Health Protection Plus. The plan offers a health insurance cover for the entire family. It also offers hospital cash benefit and major surgical benefit along with a ULIP component that is specifically designed to meet domiciliary treatment benefit and outpatient department expenses for the insured members. Bharti-AXA Life recently announced the launch of triple benefit critical illness plan - Bharti AXA Life Triple Health Insurance Plan. The plan offers, a maximum of three times the sum assured and covers 13 critical illnesses that have been classified into three groups. The claims can be to the extent of 100 per cent sum assured for all the three illnesses, provided they do not fall in the same group as listed by the policy. Cholamandalam MS General Insurance has announced the launch of its Chola critical health line policy. The plan provides for a lump sum amount on being diagnosed with any of the named critical illnesses. Private insurance companies are working out modalities to rollout insurance cover for people visiting the out patients' department (OPD) at hospitals and at specified clinics. At present, insurance cover is provided to only those who are hospitalised or suffering from critical illnesses. Private insurers such as Bajaj Allianz General Insurance and Future Generali are also in talks with third party administrators (TPA) to outline the contours of daycare insurance. with cashless health services. The insured will not only be able to avail health services other than those offered by ESICowned hospitals and dispensaries but also be saved from running for reimbursements. Other Other industry updates Since the launch of Medical insurance portability, only a few requests for change of insurers have started to trickle in. Insurers say that they have received lower than expected portability requests due to lack of awareness among policyholders. ICICI Lombard General Insurance and MaxBupa Health Insurance have received close to 100 inward portability requests. Bajaj Allianz, Iffco-Tokio and Bharti Axa General Insurance have each received around such requests. Apollo Munich Health Insurance, which was allowing portability since January 2008, even before the IRDA order, has received around 2,000 portability requests. Declining sales of ULIPs and pension products are forcing life insurance companies to sell their cover along with health insurance policies. Life insurers aim to tap their existing vast distribution network to offer health insurance along with life insurance. A few such products have already hit the market. LIC Jeevan Arogya, SBI Life Hospital Cash, IndiaFirst Life ULIP plan are examples of the above. Government health schemes The government has decided to bring auto and taxi drivers under the Rashtriya Swasthya Bima Yojana (RSBY) scheme with the aim to bring everyone in the unorganised sector under the flagship of RSBY program. The health cover scheme was earlier extended to domestic, beedi workers and porters. The Assam government would soon extend the RSBY, a health insurance scheme for below poverty line (BPL) families, to 18 districts of the state. The scheme was successfully implemented in five districts Kamrup, Lakhimpur, Jorhat, Dibrugarh and Kokrajhar where it was introduced two years ago under the National Rural Health Mission, Assam. The government will soon allow private trusts to enroll themselves in the RSBY if they pay their own premium. The proposal, if approved, would add a huge number of people to the scheme, which already offers health insurance to 2.5 crore families. Insurance companies feel that expanding this scheme would ensure more business. Employees State Insurance Corporation (ESIC) has signed a MoU with Punjab Health Systems, to provide its beneficiaries Copyright 2012 Towers Watson. All rights reserved. towerswatson.com 4

5 Contact details Towers Watson's Risk Consulting team covers the length and breadth of India with 70 associates based in Mumbai and Gurgaon. Vikas Newatia Director & Practice Leader - General Insurance, India Ron Kozlowski - Director & Head of General Insurance Practice, Asia Pacific Dr Rajeshree Parekh Asia Pacific Director, Health and Corporate Wellness R Krishnamurthy Managing Director - Products, Distribution and Markets, India s: vikas.newatia@towerswatson.com ron.kozlowski@towerswatson.com rajeshree.parekh@towerswatson.com rajagopalan.krishnamurthy@towerswatson.com Gurgaon Redshift, , Tower B Unitech Cyber Park, Sector - 39 Gurgaon Tel: 91 (124) Fax: 91 (124) Mumbai 511/512, Solitaire Corporate Park Andheri-Kurla Road, Andheri East Mumbai Tel: 91 (22) Fax: 91 (22) The Indian Market Health Insurance Update has been prepared by Towers Watson for general information purposes only and does not constitute professional advice. The information, opinions and projections contained in this Newsletter are derived from various sources and have not been independently verified by Towers Watson. If you require professional advice or require any further information please contact any of the above named individuals. ABOUT TOWERS WATSON Towers Watson is a leading global professional services company that helps organisations improve performance through effective people, risk, and financial management. With 14,000 associates around the world, we offer solutions in the areas of employee benefits, talent management, rewards, and risk and capital management. Towers Watson covers the length and breadth of India and operates from five offices in four cities. For more information, please visit Copyright 2012 Towers Watson. All rights reserved. towerswatson.com 5