The health insurance industry is expected to grow at a CAGR of over 20% till 2020, estimates ICICI Lombard General Insurance.
A rough estimation by ICICI Lomard shows that the total premium collection in health insurance segment will reach close to Rs. 60,000 by March 2020. General insurers, including standalone health insurers, have collected close to Rs. 28,000 crore in FY 2015-16.
Sanjay Datta, Chief – Underwriting, Reinsurance and Claims, ICICI Lombard General Insurance said that this growth will be driven by increased awareness about health insurance policies, rising hospitalization expenses and realizing the need of having adequate sum insured. “The health insurance industry is expecting a premium growth of more than 20% in 2016-17. Many people have realized the importance of having health insurance with a high sum insured due to rising cost of medicines and treatment. Also, Prime Minister Narendra Modi has given a fillip to the health insurance industry by promoting health insurance through various social security schemes,” said Sanjay Datta.
When asked about the huge losses incurred by health insurance segment, Sanjay Datta said that insurance companies generally incur losses in group health insurance policies due to low premium and high claim ratio. “The incurred claim ratio is better in retail health insurance policies. The incurred claim ratio could be reduced once the penetration of health insurance increases,” said Sanjay Datta.
Incurred claim ratio is net incurred claims to net premium. Simply put, it is claims received for the premium paid towards insurance policies in a year; hence, a low incurred ratio indicates healthy growth prospects and higher profitability in non-life business. Typically, a ratio of less than 100 indicates that insurers are making money from a segment.
Typically, health insurance segment is a cause of concern for general insurers since the segment recorded high incurred claim ratio. In fact, in FY 2014-15, the industry has recorded 97% incurred claim ratio. Such a high incurred ratio indicates that non-life insurers incurred hefty losses in this segment which affected their growth.