Insuring India's missing middle: How the IRDAI and General insurers are plugging health insurance gaps using technology & innovation

As India sets it aim on growing into a $10 trillion economy by 2030, protecting its rich demographic dividend by ensuring greater financial protection against a variety of health risks is extremely important. This is because low financial protection often leads to higher out-of-pocket expenditure (OOPE), in turn putting the country’s burgeoning population at risk of depleting their savings in the event of a health emergency. While health insurance is a vital risk protection tool against inordinate medical expenses in such scenarios, at least 30% of India’s population or 40 crore individuals- also called the ‘missing middle’- remain uninsured even today. If coverage gaps in central and state sponsored health insurance schemes are to be factored, the number of unprotected individuals in our country would be much higher.

Recognizing the fact that improving health insurance penetration across different segments of the missing middle can address the issue of low financial protection, the Insurance Regulatory Development Authority of India (IRDAI) and the general insurance industry have been making concerted efforts towards this end.

Launching an affordable general insurance solution for the masses

India’s missing middle consists of multiple demographic groups spread across both rural and urban areas; with the self-employed class in rural areas and a broader range of occupations in urban areas making up the bulk of this segment. Making matters worse is the fact that most health insurance products are designed to cater to high-income groups, making them unaffordable for the country’s missing middle. What’s more, ensuring wider coverage for various diseases/treatments and providing out-patient benefits is critical to deliver better health outcomes, underscoring the need for a standard yet comprehensive general insurance product.

Taking up the challenge of providing comprehensive health coverage at affordable premiums, the IRDAI facilitated Bima Vistaar insurance product, pricing it at just Rs1,500/ policy with a sum assured of Rs 2 Lac. This product provides the policyholder with life, health, property and personal accident coverage; with an option to extend the same coverage to all family members for an additional sum of Rs 900/annum. Considering the fact that most segments of the missing middle can afford to pay Rs 4,000 to Rs. 6,000 per family per year for hospitalization insurance. This Bima Vistaar product should enjoy increasing uptake across rural and urban areas, ultimately meaning to greater insurance penetration.

Rise of InsurTech fostering greater production innovation

With the increasing integration of advanced digital technologies like Machine Learning (ML), Internet of Things (IoT), Blockchain and Artificial Intelligence (AI), the general insurance space in India is witnessing tremendous product innovations. These have been brought about due to the development of new business models, improved processes and ingenious technology applications- encouraging more insurers to ramp up their technology investments and stay relevant. From an operations standpoint, Big Data analytics and AI-powered predictive models are helping insurers and policyholders alike to understand the insurance risks; resulting in more informed choices being made at the time of purchasing health or other forms of general insurance. Critical tasks like policy underwriting too have been made less cumbersome by AI & ML, with general insurers leveraging the use of wearables and other data sources to protect even those that were previously uninsured. What’s more, insurers are leveraging IoT and AI to improve fraud detection and make insurance delivery more efficient. This has translated into the design of better insurance products with greater coverage, ultimately benefiting the end use with enhanced insurance protection and lower premium expenses.

Ensuring customer centricity through pivotal changes to insurance regulatory framework

In a bid to simplify general insurance products and procedures, IRDAI has introduced sweeping reforms that are intended to boost consumer convenience and improve the claims settlement experience for millions of policyholders in the country. As a result of these measures, customers can now opt for personalized health insurance policies with flexible payment tenures, helping individuals tweak policy inclusions and schedules as per their nuanced requirements. Insurers are also required to settle all claims within seven days, even as IRDAI has directed insurers to ensure that no claims are rejected for want of documents. From a consumer perspective, policyholders can cancel their insurance policies at any time without incurring any penalties, with the insurer expected to refund the applicable premium corresponding to the unexpired policy period.

It can be surmised that the IRDAI and general insurance fraternity in India are working towards protecting India’s missing middle by introducing hyper personalized health insurance products and by making insurance products more accessible. While emerging technologies will undoubtedly play a central role in increasing insurance penetration by facilitating relentless product innovation and eliminating process redundancies, general insurers will have to strategically deploy them to ensure sustainable business growth while ushering in a new era of customer convenience.

The author is Managing Director & Chief Executive Officer, Universal Sompo General Insurance Company. Views are personal.