It is said that we realize the value of water when the wells start running dry. Similarly, if numbers are to be believed, then the current pandemic has made people realize the value of health and health insurance for their loved ones. Is this merely an increase in awareness, or can we expect to see better penetration of health insurance in the country? Let us find out.

Awareness of Health Insurance

A situation like the COVID-19 pandemic forced people to stay indoors and follow personal hygiene norms like washing hands regularly and keeping a healthy distance from others. It also forced them to think about foods that can help boost their immune system to prevent getting infected. In other words, from a career-centric society, we almost immediately shifted to a health-centric one.

As the number of cases grew and details about the treatment procedure came to light, people started looking at the average treatment costs for the virus to prepare themselves for exigencies. The average cost of treatment at a private hospital for a patient is ₹5-6 lakhs if he/she does not require ventilator support. For severe cases, where ventilators and other life-saving equipment are needed, the hospital bills can go up to ₹10-12 lakhs. This meant that for a family of four, the medical emergency fund needed at least ₹20+ lakhs.

With the lockdown bringing businesses to a halt and most people living out of their savings, this was a huge amount. Hence, people started looking towards health insurance and realizing what the insurers have been warning them about.

India has one of the lowest penetrations of health insurance in the world. In fact, Indians are the sixth-largest out-of-pocket spenders for medical treatments. In simpler terms, people in India spend a lot of money on hospitalization and medical costs while that can easily be managed via health insurance.

Better penetration of health insurance in India

With the current health crisis, most people have realized the importance of buying comprehensive health insurance plans for their families. This is evident by the increase in the number of inquiries lodged with major health insurers like Tata AIG. However, has it also resulted in an equivalent increase in the number of sales? Will this increased awareness result in better penetration of health insurance in India?

The first thing to consider is the shortage of funds in the hands of people. With businesses just beginning to resume operations, people will try to curb their expenses for a few months. Hence, we can expect a drop in the number of new policies and/or renewals. The small and medium enterprise group insurance segment will probably lie low too.

Further, with an expected increase in claims due to coronavirus, health insurers will probably see a surge in loss ratios in the near future.Also, the economy has a low-interest-rate outlook that will make it exceedingly difficult to reinvest maturing assets.Currently, people are using technology to look for policies, compare, and buy or renew them online. Hence, insurers need to ensure that they develop technology-driven processes that are cost-efficient and enhance productivity.

Insurers can look at automating the renewal process to ensure that insurance policies remain in force. They can extend a grace period for policyholders to make the payment and implement efficient approval processes for new policies and/or claims.

How will the pandemic impact the penetration rates?

Once we manage to overcome the pandemic, health insurance will be a primary area of focus for insurance companies, as well as, customers. There can be some new product or service innovations based on what people expect then.

During a crisis, most people try their best to ensure the financial security of their families. Also, when it comes to health, the increasing costs of medical treatment can cause a huge dent in the savings of any individual. Hence, many people might start seeing health insurance as a necessity, as opposed to a liability. Historically, any epidemic or health hazard tends to push people towards seeking financial protection against treatment costs. Hence, the pandemic is likely to help improve the penetration of health insurance in the country regardless of the social status of the individual.

Summing Up

The pandemic has caused an increased concern regarding health and life. Also, the pandemic has caused the economy to regress, making it important for insurance companies to step up and create innovative products that are cost-efficient and effective. While most people are using online channels to research and explore policies available to them, insurance companies also need digital sales experts to reach out to such prospects and help them purchase the policy they want.

Post-pandemic, while there will be an increased thrust to bring the economy back on its feet, people will also ensure that they have a better insurance policy for their families to manage treatment costs in the future.

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